How to Hire Remote Employees In 

Paraguay

The Basics

Currency
Paraguayan Guaraní (PYG)
Employer Taxes
16.5%
Payroll Frequency
Monthly
Official Language
Spanish

Employment in 

Paraguay

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 

Paraguay

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 Paraguay can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in Paraguay, 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 Paraguay.

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 Paraguay is not the same as paying workers in your own country. Employees have to be paid using Paraguay’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.

Paraguay

 Specific Information

Working Hours

The standard full-time workweek is 48 hours.

For employees who work nights, the workweek is 42 hours.

For employees who work night hours, they are compensated at 130% of the regular pay rate.

Overtime

Overtime is paid at different rates:

  • 150% of the regular pay rate for overtime during daytime hours.
  • 200% of the regular pay for overtime during night hours and public holidays.

Payroll Tax

Employer

Employer

  • Social security

Minimum Wage

The monthly minimum wage in Paraguay is 2,192,839.00 PYG.

Payroll

Pay Cycle

The pay date depends on the payroll frequency. Can be weekly, bi-weekly, or monthly, however, employees must be paid at least once a month.

13th Salary

An additional 13th salary equivalent to one months’ salary is paid out in December (but must be before Christmas). 

Leave

Paid Time Off (PTO)

PTO is calculated by the:

      Annual leave allowance depends on how long an employee has been employed:

  • 1 year of employment- 12 days of leave.
  • At least 5 years of employment- 18 days of leave.
  • At least 10 years of employment- 30 days of leave.

Public Holidays

There are 13 public holidays.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

  • If an employee is ill, they are entitled to sick leave and are paid 50% of their regular pay by social security (IPS); and
  • The other 50% is paid by the employer.

Maternity Leave

In Paraguay, maternity lasts for 18 weeks and is paid at a rate of 100% of the gross salary by IPS.

In the event of multiple births, the woman receives an additional 30 days per child.

Paternity Leave

A new father can take 2 weeks paid paternity leave after the delivery of the child. Paternity leave is also paid out by IPS at the rate of 100% of the gross salary.

Parental Leave

No statutory law for parental leave.

Other Leave

None.

Marriage Leave

None.

Bereavement Leave

For the death of an immediate family member, an employee is entitled to 3 days of leave.  

Termination

Termination Process

In Paraguay, a notice of termination must be delivered to the employee in writing.

For an employee who has been employed for over 10 years cannot be terminated for unjust reasons, they must be terminated for a just cause.

Notice Period

The notice period in Paraguay is:

Mandatory notice period is 1 day.

Severance Pay

If the cause for termination is justified (misconduct or poor performance), the employee is not entitled to severance pay.

It is important to note, though, that if the employee feels that they were unjustly terminated under the reason for just cause or misconduct on the part of the employer and the employer is not able to prove the reason for dismissal in a labor court, the employee is entitled to severance pay (15 days of wages for every year worked or up to half a year’s wages) as well as back pay from the date of dismissal to the date of the court ruling.

An employee who is terminated without cause is entitled to 15 days of severance pay for every year of service.

For an employee who has over 10 years of employment with a company- If an employer is not able to prove a just cause to a labor court, the employee might either be reinstated or would have the right to double the regular severance pay.

Probation Period

The probationary period is 30 days for unqualified employees or domestic workers and 60 days for qualified workers or apprentices.