Employment Laws In Peru Every Foreign Investor Must Know
What Are The Employment Laws In Peru?
Peru has a population of about 32 million people, making it the fourth populous country in South America, after Brazil, Colombia and Argentina. They allow 20 million of the population to work legally in the country. The population is between the ages of 15 years and 64 years old. People who are between 15 and 18 years old must have approval from the Ministry of Labour as well as parental permission to work. It is part of the employment laws in Peru.
Following the several free trade agreements, the rate of poverty in Peru has decreased from 58% to just 21.8%. It majorly attributes to President Pedro Pablo’s sharp focus on creating economic reforms and free-market policies. It is to boost and attract more investments in Peru. The country is becoming an attractive emerging market for both expats and foreign investors because of the president’s effort. It is imperative to have a good understanding of the labour laws in Peru before starting a business or apply for a working visa. Furthermore, the Peruvian government takes top concern about the rights of the local employees. Every foreign investor needs to have a good grasp of all the restrictions that come with hiring foreign employees.
General Rules For Employment Law In Peru
Here are some of the essential regulations you should know as far as employment laws in Peru are concerned:
- The minimum wage as of 2017 in PEN850
- The allowed maximum working days per week is six days, with either eight working hours per day, or 48 hours per week.
- An employee has an entitlement to a minimum of 45 minutes of lunch break
- Overtime: The agreed amount must remain between the employer and the employee. However, an employer cannot pay less than 25% of the total remuneration of the employee on the first two hours of overtime. Every extra hour after the early two hours will attract a surcharge of not less than 35% per hour.
- Weekly rest: An employee has an entitlement to a 24-hour rest every week. It is usually on Sundays for more employers. However, an employee is free to work on Sunday and take rest on any other day of the week. In case the employer goes to work for seven days a week, he is entitled to one day’s full salary on an extra day worked.
- Night shift: Night shift officially begins at 10.00pm and ends at 6.00am. The employee’s pay for night shift cannot be less than their monthly minimum wage, and they are entitled to a surcharge of 35%.
- Trial time: They allow a 3-month trial for regular staff. It also extends to another three months. During this period, it does not entitle the employee to any rights of arbitrary dismissal. The employer may give contracts the qualified or trusted employees on trial of between six and twelve months for management positions.
- Part-time employment: Part-time employees work for less than four hours a day. For six days a week, such an employee can work for up to 24 hours a week. In the case of five working days, part-time employees must work for less than 20 hours a week.
- Pension System: The employment laws in Peru gives every employee the right to join the National Pension Scheme or the Private Pension System. The applicable rate for both systems is 13%, and this is usually paid by the employer and deducted directly from the employee’s salary and deposited directly to the scheme.
Laws Favouring Employees In Peru
Every employee has an entitlement to 30 calendar days of paid vacation leave every year. The wage during this period is the same as the monthly salary. For employees working for small and micro companies, has entitlement to fifteen calendar days of paid vacation every year.
Employees have entitlement to two bonuses every year – Christmas and Independence Day of Peru on every 1st July.
According to the employment laws in Peru, Employees, as well as their families, have entitlement to the public health service – ESSALUD, by them being statutory affiliates. For health insurance, every employer contributes 9% of the employee’s monthly wage to the public healthcare system.
Compensation For Time Services
They design this social benefits law to protect the existence of the employee following the termination of the employment contract. The amount accumulates over time, right from the first day of work. It requires the employer to deposit twice to CTS on 15th of May and November to employee’s account. It is to ensure that the amount for compensation is available. For every completed calendar month, the law requires that one-twelfth of the wage will deposit into the bank account. Consequently, at the end of every year, the collected total amount should be equal to one monthly salary. For an employee to benefit from the CTS, they must be in employment for at least one full month
Every employee with one or more child under the age of eighteen has entitlement to additional monthly payments of 10% of the monthly minimum wage. It also includes children above 18 years old but below 24 years old who may still be pursuing higher education.
Fields Of Profit-Sharing
It is a legal requirement that every company with more than 20 employees share their yearly pre-tax profits with the employees.
- Telecommunication, manufacturing and mining companies share 10% of their pre-tax profits
- Wholesale entities, retail businesses, restaurants and mining companies share 8% of their pre-tax profits, and
- The entities that don’t fall into any of these categories share 5% of their profits with their employees.
All profits shared by employees are a deductible tax expense.
The total length for maternity leave is 98 days: 49 days for prenatal and postnatal leave. The employer may give the employees an exception when the new child has a disability, or an additional child is born during that time. In either of these cases, the postnatal leave can extend up to 30 calendar days. Lactation period begins once the official 98 days are over, and until the baby reaches one year old. The mother is entitled to one hour every day to be away from the work environment to breastfeed the child.
Reasons For Dismissal In Peru
The employment laws in Peru demands that there has to be a lawful reason which the employer must be in a position to prove to end an employment contract. For example, the inability of the employee to complete his tasks or incompetence when it comes to productivity. Behaviour may be another reason that could lead to lawful dismissal. Some of the reasons for termination may include:
- Repeatedly going to work under the influence of drugs or alcohol
- Deliberate damage of employer’s goods or services
- Acts of violence, insults, severe breaches of discipline against the employer or fellow staff either at the workplace or outside the workplace.
- Any misconduct on the part of the employee, including:
- Failure to fulfil obligations contained in the employment contract
- Refusing to take work-related orders
- Refusal to comply with work rules and regulations
- Spreading false information to the employer to gain benefits or cause damage of whatever nature.
- Criminal convictions
- Not reporting to the workplace for more than three consecutive days, or being absent for more than five working days without a valid or legal reason within 30 calendar days or being illegally absent from work for more than 15 days within 180 calendar days.
- Continuously reporting late for work after being informed by the employer, and even disciplinary actions are given, such as warning letters and suspensions.
Foreign Employee Laws in Peru
Foreign employees have a maximum of three years for their working contract. Though they can extend for another three years. It is a legal requirement that the Ministry of Labour approves such a contract. They are entitled to similar rights and benefits as the local employees upon hiring.
If you are planning to open a business in Peru, keep in mind that the number of foreign employees in your company must not be more than 20% of your total workforce. In the same manner, the salaries offered to foreign employees must never be more than 30% of the total payroll.
However, there may be exemptions in instances of higher salaries for managerial positions or technical employees. Again, the working visa for foreign workers is valid for one year. But it can always be extended upon expiry every year. The foreign workers may also lose their immigration status if they stay out of the country for more than 183 days in a year.
The Peruvian labour laws are fair to both employers and employees. Though the restrictions for foreign workers may not be the best in the world, take note that every law comes with exemptions.
If you are interested in knowing more about the employment laws in Peru or you want to form a company as a foreign investor in Peru, feel free to contact us at [email protected] We have a team of local and international experts offering a wide range of back-office services. It gives you all the help you need to start a company in Peru successfully.