Peru is an economy known for its young, highly diverse, skilled, educated, and dynamic workforce in the services, manufacturing, and tourism industries.
It also boasts a skilled and educated workforce of commodity exporters contributing to the growing demand for global companies.
With such a vibrant labor market, Peruvian employees have been in demand for global businesses and foreign investors to hire and grow their teams.
If you want to grow your team and hire employees in Peru, knowing everything about the recruitment and selection process and the compliance aspects of hiring is essential.
This article aims to cover everything you need to know about the hiring process in Peru.
Things to Know Before Hiring in Peru
When hiring Peruvian employees, you must familiarize yourself with factors such as taxes, social contributions, compliance with necessary labor laws, and other important aspects mandated by the Peruvian laws.
Below are a few essential aspects when starting the hiring process in Peru:
Working hours
The standard working hours in Peru are 8 hours a day, spread across 48 hours a week.
Any additional hours are considered overtime and are regulated by the employment contract or collective bargaining agreements. However, an employer must offer overtime pay at 35% for every additional hour of overtime.
Minimum wages
The national minimum wage in Peru is 1,025 Peruvian Sol (PEN) per month. Employers must ensure they offer compensation to their Peruvian employees above the national minimum wage.
Additionally, Peruvian employees are entitled to 13th and 14th-month pay. The 13th and 14th-month pay must be offered semi-annually—July (during Peruvian Independence Day) and December (during Christmas).
Employment contracts
Businesses must offer employment through a written employment contract. All Peruvian employees must receive an employment contract in their local language and English (the employment contract must be bilingual).
Employment contracts in Peru are of two types:
Fixed-term contracts
A fixed-term contract is when employment is offered for a fixed period with the start date and an end date clearly outlined. Employers hiring Peruvian workers through a fixed-term contract can extend the employment for up to five years. Fixed-term employment contracts in such cases must be offered in writing and registered with the Peruvian Labor Ministry.
Indefinite-term contracts
An indefinite contract has a start date when employment commences but does not outline an end date. In cases where businesses offer employment through an indefinite contract, it is important to outline a notice period and severance pay.
Employers in Peru commonly follow an indefinite-term employment contract.
Additionally, the employment contract should contain all relevant information, as below:
- Employer and employee’s name
- Position
- Annual compensation and payroll cycle
- Leaves
- Social contribution
- Place of employment
- Job Responsibilities
- Termination clauses and notice period
- Probation period
- Severance pay
- 13th and 14th-month pay and any other monetary compensation such as bonuses
Payroll and taxes
Employers must deduct employee income tax from their gross salaries based on the income tax rate. The income taxes in Peru include
Taxable Income (UIT) | Income Tax Rates (%) |
Up to 5 UIT | 8% |
Between 6 UIT to 20 UIT | 14% |
Between 21 UIT to 35 UIT | 17% |
Between 36 UIT to 45 UIT | 20% |
Above 45 UIT | 30% |
All employees and employers must contribute to Peruvian social security. Employers must deduct employee contributions as a part of the payroll cycle.
Social Security Fund | Employer Contributions | Employee Contributions |
Pension Fund | 9% | Employees contributing to National Pension System (or Circa): 13% Employees contributing to the Private Pension System: 12.50% |
Severance pay and profit sharing
Severance pay is mandatory in cases where an employee is terminated without a reasonable cause. The severance pay entitlement in Peru is up to one year.
Employers must offer a share of the profits if they have more than twenty employees. Ideally, the profit share ranges between 5% –10% of a business’s pre-tax income.
When hiring Peruvian workers, it is important to consider profit sharing and severance costs.
Paid leaves
Offering paid leaves is mandatory for all employees in Peru. Employers must know the number of leaves a Peruvian employee is entitled to. The paid leaves include
- Annual leaves or paid time off
- Public holidays
- Sick leaves
- Maternity leaves and childcare leave
- Paternity leaves
The Cost of Hiring an Employee in Peru
Hiring employees in Peru might not seem relatively expensive initially, considering a relatively lower national minimum wage, an affordable cost of living, and employment-friendly regulations.
However, it is important to consider all hidden expenses you may incur when you start the hiring process. A few expenses when hiring Peruvian workers include
- Salaries
- 13th and 14th-month pay
- Employee benefits
- Job advertisements
- Income taxes
- Time spent on recruitment and selection in Peru
- Cost of setting up a legal entity
An employer will also incur insurance costs when looking to hire employees in Peru. However, the insurance costs vary based on the industry you are hiring in. The Peruvian government provides insurance to their citizens through National Health Insurance, although employers commonly offer additional private insurance as a part of an employee benefit plan.
Supplementary employee benefits become mandatory when employed in hazardous industries, especially health insurance.
What Does a Company Need to Hire Employees in Peru?
Recruitment and selection in Peru can be a relatively complex process. This happens due to factors such as keeping up with changing Peruvian labor laws and the requirement of setting up a legal entity when hiring Peruvian workers.
Setting up a legal entity in Peru can be lengthy due to the time taken to register a new business and the costs incurred to set it up. Setting up a legal entity in Peru also requires you to complete the following aspects:
- Registering your legal entity with the Peruvian Public Registry. After registering with the Peruvian Public Registry, you will receive a Certificate of Registration.
- Opening a bank account for your business and ensuring that you deposit appropriate capital contributions.
- Notarizing your accounting books and deeds at the Portal Servicios Ciudadano y Empresas.
- Obtaining a tax ID number when you register your business. A tax ID number helps you compliantly pay your Peruvian employees.
- Appointing shareholders and board of directors
Partnering and working with a global EOR such as Multiplier will make your hiring process in Peru more efficient. This is often a more convenient option as a global EOR platform will have an established entity that helps you legally and compliantly onboard employees, process employee payroll, and ensure your employees have world-class employee benefits.
Expediting the hiring process in Peru is made easy when working with Multiplier.
Various options for Hiring Employees in Peru?
There are three recognized options for international employers to hire staff in Peru:
Hiring employees by setting up a legal entity
The employment legislations mandate all employers to establish an entity to hire employees in Peru. Employers must be mindful of the time and costs associated with establishing an entity.
Hiring employees in Peru as independent contractors
Businesses can also employ independent contractors in Peru. Hiring employees as freelancers or independent contractors means they are not a part of your company’s payroll. Therefore, freelancers and independent contractors work according to their time zone and schedule and will have different payment schedules, unlike full-time employees.
Hiring Peruvian employees through a PEO
A great option for expanding into new markets, such as Peru, is outsourcing your hiring needs to PEOs.
Professional employer organizations (PEOs) are registered third-party companies that act as your employees’ Employer of Record (EOR). They help expedite hiring a foreign workforce without establishing a business entity in Peru or worrying about the payroll process.
While you will have complete control and autonomy over employees’ duties and responsibilities, a global EOR such as Multiplier will compliantly handle your employees’ payroll and benefits package on your behalf.
The Steps to Hiring in Peru
The hiring process in Peru is relatively easy and similar to the process followed in other countries.
However, creating an effective hiring process involves several factors, including identifying an organization’s requirements, assessing candidates, and hiring the most qualified candidates.
The steps to hiring in Peru are:
1. Identify the organizational hiring requirements
Your company’s requirements could vary based on several factors. A few examples could be to fill a vacant position, better manage the workload, or expand organizational tasks. Therefore, it is essential to identify and clearly define the hiring requirements.
2. Develop a recruitment plan
Once you have identified the hiring need, the next step is to outline and devise a recruitment plan. A recruitment plan can also include best practices that recruiters can use when hiring or necessary policies to make hiring employees in Peru more efficient.
3. Write a job description
The next step is to generate a job description. A job description must outline eligibility, the job requirements, experience, required qualifications, and details on benefits and compensation.
4. Advertise the position
The hiring process can be of two types:
- Internal, where you assess and identify all qualified employees within your organization. You can notify them of the opening through an email or an internal notification system.
- External, where you advertise the position through different media platforms such as social media, company website, job portals, job fairs, etc. Advertising the job position on such platforms notifies potential candidates about open positions in your company.
5. Review the applications
In the next step, you must review the applications you received through the job advertisements, application tracking systems, email, etc.
6. Conduct interviews
Once you have reviewed all candidates, you will have a few candidates that meet your criteria and requirements outlined in the job description. You must conduct one or more interview sessions based on the number of shortlisted candidates.
Conducting interviews will help you better understand the candidate and assess whether the candidate can fit the organizational culture and requirements.
7. Conduct background checks
Background checks are an important aspect of the hiring process in Peru. A background check involves verifying the details provided by the candidates, such as reviewing the candidates’ educational records, criminal records, employment history, eligibility, etc.
8. Identify the top choice
After you conduct interviews and background checks, you have to identify the candidates you want to extend an initial employment offer to. This step can also involve talking to the candidate and explaining the onboarding process and company policies.
9. Hire and onboard the candidate
After negotiations about different aspects in the offer letter, such as employee benefits and compensation, you can hire and onboard the selected candidate. Employers must ensure that the candidate accepts the job offer in writing.
A key factor in the steps mentioned is that the hiring process can differ based on company policies and organizational requirements.
Let Multiplier be Your EOR Platform in Peru
Hiring new employees for your business can be relatively complex, especially in Peru. This is because, when hiring employees in Peru, an employer must note several factors, such as changing labor laws, types of employee benefits, lengthy hiring process, etc.
You can now offload all these HR responsibilities and compliance to a global Employer Of Record (EOR).
Multiplier’s SaaS-based global EOR solution can help you compliantly employ Peruvian talent without the hassle of setting up a legal entity. You can now test new markets and employ international talent at lower costs.
Want to hire Peruvian employees? Talk to our professionals to learn more!