How to Hire Remote Employees In 

Peru

The Basics

Currency
Peruvian Sol (PEN)
Employer Taxes
9%
Payroll Frequency
Monthly
Official Language
Spanish

Employment in 

Peru

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 

Peru

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

To set up a subsidiary in Peru, 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 Peru.

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

Peru

 Specific Information

Working Hours

Full-time employment is 8 hours per day and 48 hours per week.

Overtime

The compensation for overtime hours should be agreed upon by the employer and the employee.

However, the first 2 hours cannot be compensated with less than 25% of the total remuneration of the employee.

For every additional hour, the surcharge cannot be less than 35% per hour.

Payroll Tax

Employer

Employer

  • Health Insurance

Minimum Wage

The minimum wage is 930 PEN per month.

Payroll

Pay Cycle

Employees are paid monthly.

13th Salary

The 13th and 14th salaries are paid in July and December.

Leave

Paid Time Off (PTO)

PTO is calculated by the:

  • Employees are entitled to 30 days per year. A minimum of 15 days must be taken and the other 15 can be cashed out.

Public Holidays

There are 12 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:

  • The first 20 days are paid by the employer, the following days are paid by the state (ESSALUD).

Maternity Leave

Mothers are entitled to 98 days of fully paid leave paid by ESSALUD through the company.

Paternity Leave

10 days paid by the employer.

Parental Leave

Not required.

Other Leave

None.

Marriage Leave

None.

Bereavement Leave

None.

Termination

Termination Process

Employees may be terminated on objective grounds or for cause, with documentation. 

In general, employees should get a minimum of six calendar days of written notice so that the employee can respond in writing or 30 calendar days to prove his/her capability.

The dismissal decision and reason should also be provided in writing to the trade union and the employee. Employees which are dismissed without cause are generally entitled to severance pay for up to 12 months.

  • Temporary employment termination must be according to the expiration of the contract.
  • Permanent employment termination must either be voluntary resignation or dismissal for a justified cause.

Notice Period

When resigning employees must give at least 30 days’ notice.

Generally, an employer must provide an employee a minimum of six calendar days of notice so that the employee can present a written defense to any charges against him or her, or 30 calendar days to prove the employee’s performance capability or to correct any error. 

There is no need for notice if the employee has exhibited serious misconduct under which it would be unreasonable to require the employer to continue the employment relationship.

Severance Pay

  • Generally, severance is not required in cases of separation due to their conduct or capacity.
  • An employee terminated without cause is generally entitled to severance payments for a period of up to twelve months, depending upon the circumstances of the former worker’s employment history.
  • There is no specific redundancy pay required under Peruvian law.
  • If a court determines a dismissal to be unlawful because the employer has not provided a valid reason to the worker, or the reason cannot be legally substantiated, the employee usually will be entitled to a payment equal to the average monthly compensation for each year of service, up to a maximum of twelve months

Probation Period

The probationary period may last three months. 

When the work requires training and adaptation or when the nature of the work requires it, an extension may be granted. Such extensions must be done in writing and may not exceed:

  • six months in total for skilled workers and employees in positions of trust;
  • one year for managerial roles.