How to Hire Remote Employees In 

El Salvador

The Basics

Currency
United States Dollar (USD)
Employer Taxes
15.25%
Payroll Frequency
Monthly
Official Language
Spanish

Employment in 

El Salvador

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

El Salvador

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in El Salvador can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in El Salvador, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for El Salvador.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in El Salvador is not the same as paying workers in your own country. Employees have to be paid using El Salvador’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

El Salvador

 Specific Information

Working Hours

In El Salvador, a full work week is 44 hours or 6 hours per day. 

Overtime

Overtime is paid at the rate of 200% of the regular pay.

Payroll Tax

Employer

  • 15.25% - Employer Contributions

Minimum Wage

The monthly minimum wage varies depending on the industry, with the lowest being 202.82 USD in the agricultural sector and the highest being 304.2 USD in the commerce and service sector.

Payroll

Pay Cycle

The payroll cycle can be weekly, biweekly, or monthly. Payment should be made no later than one business day after the end of the work cycle.

13th Salary

In the form of a Christmas bonus and based on years of service.

Leave

Paid Time Off (PTO)

If an employee has been employed for at least 1 year, they are entitled to 15 days of paid annual leave. Annual leave is calculated from December 12-December 12. Unused vacation days cannot be paid out, the employee must enjoy all of their vacation days within the year.

Public Holidays

There are 11 public holidays in El Salvador.

Sick Days

The amount of pay and leave depends on the total time an employee has worked for the employer.

  • 1 year or more – 75% of the basic salary for 60 days
  • 5 months but less than a year – 75% of the basic salary for 40 days
  • 1 month but less than 5 months – 75% of the basic salary for 20 days

Maternity Leave

In El Salvador, a woman is entitled to a total of 16 weeks of paid maternity leave at the rate of 75% and is paid by social security. 6 of the weeks can be taken before the expected due date and 10 weeks after the birth of the child.   

If the mother becomes temporarily disabled due to the pregnancy, she may be entitled to 100% of the regular pay. This is granted by social security to those who paid their contributions.  

In addition, if the woman experience complications during the pregnancy, the woman may be entitled to additional rest. After the 4th month of pregnancy, the woman cannot be assigned to physical work.  

Lastly, the woman must present medical documentation to their employer stating their pregnancy status and expected due date.  

Paternity Leave

Fathers receive 3 days of paternity leave paid at 100% of the regular pay and can be used within the first 15 days of the birth of the child.

Parental Leave

There are no provisions in the law.

Other Leave

None.

Marriage Leave

None.

Bereavement Leave

None.

Termination

Termination Process

For individual dismissals, an employer must provide a written termination letter stating the reason for the dismissal. Otherwise, the dismissal is considered void.

Notice Period

Notice period is not required by law.

Severance Pay

Compensation is only required when an unjustified dismissal occurs.  For cases in which a labor court deems a dismissal unfair, the employee is entitled to pay from the date of the dismissal as well as severance pay.  Severance pay is 30 days’ salary for each year worked.

Probation Period

Probation cannot be more than 30 days.