El Salvador presents many compelling reasons for engaging in business. For those looking to move operations to the region, a Professional Employer Organization in El Salvador (PEO firm) can help your business achieve compliance and help streamline operations. This article will outline why a PEO firm in El Salvador can be strategic and helpful for your company.
Several of the most popular reasons for investing in El Salvador are listed below: – El Salvador has an important group of young people who are active in the labor market. PEO El Salvador Growing Economy: El Salvador’s economy has shown resilience and growth. In 2021, the country’s GDP grew by 6% in the third quarter compared to the same period in 2020. A Professional Employer Organization in El Salvador can help your company mitigate risks and complications in regions that may fluctuate economically. Investment-Friendly Environment: El Salvador has implemented measures to attract foreign investment. It has established the “Proesa” agency, which focuses on promoting exports and attracting investment to the country. El Salvador ranked 96th out of 190 countries in the World Bank’s Ease of Doing Business Index 2020, showcasing improvements in the business environment (source: World Bank). Skilled Workforce: El Salvador has a young and talented workforce. The country has invested in education and vocational training programs to develop skilled professionals. El Salvador is known for its expertise in industries such as information technology and services, manufacturing, and textiles. A quality Professional Employer Organization in El Salvador can help your business tap into the highly-skilled talent pool the region has to offer. Strategic Location: El Salvador’s geographical location offers advantages for businesses. It is situated in Central America, providing access to regional markets and being part of the CAFTA-DR free trade agreement with the United States, offering preferential access to the largest consumer market in the world. Digital Transformation: El Salvador has been actively promoting digital transformation initiatives. The country has a strong focus on technology and innovation, with government programs supporting startups and technology-driven businesses. El Salvador is becoming a hub for fintech and digital entrepreneurship. A Professional Employer Organization in El Salvador will be able to keep your company updated with changes in the technology sector. Renewable Energy Potential: El Salvador has embraced renewable energy sources. The country has significant geothermal, solar, and wind energy potential. It aims to generate 100% of its energy from renewable sources by 2025, attracting investments in the renewable energy sector.
These factors, supported by reliable sources, demonstrate why El Salvador offers opportunities for business growth, investment, skilled workforce, strategic location, digital transformation, and renewable energy.
Considering the range of attractive commercial opportunities available in the region, many willing investors are looking to expand their commercial operations to El Salvador. However, before setting up a local company in El Salvador or a branch office, many companies like to ‘test’ the local market. A local Professional Employer Organization in El Salvador (PEO) solution is a great way to do this.
What is a Professional Employer Organization (PEO) / Employer of Record in El Salvador? A Professional Employer Organization in El Salvador (PEO), otherwise known as an ‘Employer of Record’ is an organization that provides and supports companies with their HR functions – from the very first stages of recruitment to the payments of taxes and benefits. PEOs undertake the fundamental but time-consuming HR tasks, allowing companies to focus their attention on the growth and success of their business. The services of a Professional Employer Organization in El Salvador are particularly useful when companies are seeking to hire a local workforce but either do not want to or aren’t able to set up a local legal entity.
Benefits of Using a PEO in El Salvador A Professional Employer Organization in El Salvador will enable your company to maintain your focus on your business’ development while the HR burdens are outsourced to the PEO. Cost-effective – Reduces recruitment and administrative expenses and saves you money if you want to hire local staff but do not have a fully incorporated company. Recruitment – Assists you in finding the most suitable and qualified staff for your company. Limited Liability – Limits your level of liability with respect to tax and labor obligations. Time-effective – Removes the need for you undertaking the time-consuming but fundamental tasks of processing payrolls, payment of employee benefits and other HR administration. Local expertise – A Professional Employer Organization in El Salvador will ensure that you are in compliance with all El Salvadorian employment laws and regulations, due to their expertise of local laws and regulations. Foreign nationals who have the intention of registering a business in El Salvador must first take into account the fundamental employment laws and regulations. Companies must ensure 100% compliance with the legal requirements before entering into an employment relationship in El Salvador. This is made easier with the help of a quality Professional Employer Organization in El Salvador.
How to Use a Professional Employer Organization in El Salvador to Hire Staff All companies thinking about hiring staff in El Salvador must take into account compliance with regards to the following labor obligations: Each legal requirement mentioned below can be completed by a Professional Employer Organization in El Salvador. Work contracts – It is the obligation of every employer that every employee must formalize with them an employment contract, which can be for an indefinite or fixed term. Foreign employees –The hiring of foreign personnel in El Salvador is allowed, however, this type of contract has its limitations; within the company, foreign employment cannot exceed 10% and that of the total salaries paid to foreigners cannot exceed 15%. These rules do not apply if the foreign person holds the positions of Director, Administrator or Manager. The person’s position must be registered in the Commercial Registry and may have up to 4 foreign employees under this type of position. Social Security – All the employees that you have under your payroll must be registered in the Salvadoran Social Security Institute (ISSS). Pension Fund – This applies the same as the ISSS; all employees under payroll must be registered with a Pension Fund Association (AFP). The labor regulations through the region can be complicated to navigate without the help of a Professional Employer Organization in El Salvador. They will be able to ensure your company is compliant and operating within the legal framework in the country. Recruit and attract the best talent for your company. If you are looking for entrepreneurship in Latin America, Biz Latin Hub is your ally to hire the human talent you need.
Common FAQs when hiring through an Employer of Record (EOR) in El Salvador Based on our experience these are the common questions and doubts of our clients. 1. How to hire employees in El Salvador? You can hire an employee by incorporating your own legal entity in El Salvador, and then using your own entity to hire employees or you can hire through an Employer of Record (EOR), which is a third party organization that allows you to hire employees in El Salvador by acting as the legal employer. Meaning you do not need a Salvadoran legal entity to hire local employees.
2.What is in a standard employment contract in El Salvador? A standard Salvadoran employment contract should be written in the Spanish (and can also be in English) and contain the following information: -Name, ID, Tax ID, social benefits numbers of the employee, address of the employer and employee -City and Date -Job Title -Work Hours -Location where the service will be provided -Salary and payment frequency -Social benefits -Probation period (Has a maximum of 30 days) -Specific agreements with the employer
3. What are the mandatory employment benefits in El Salvador? The mandatory employment benefits in El Salvador are the following: -Social Security and Pensions contributions -Vacation -Aguinaldo (13th Month Bonus) -Severance Pay* Only applies if the employee’s contract is terminated without just cause.
For more information on mandatory employment benefits read our recent article on Employment laws in El Salvador. 4. What is the total cost for an employer to hire an employee in El Salvador? The total cost for an employer to hire an employee in El Salvador can vary depending on the salary; however, as a rough estimate, the employer’s cost for mandatory employment benefits typically ranges from 25% to 35% of the gross employee salary. This is in addition to the employee’s gross salary. Please use our Payroll Calculator to calculate employment costs. The graphic above highlights when it is…
