Guatemala Labor Law

Guatemala is among the most populous Central American countries. The country has roughly one-half the Gross Domestic Product (GDP) per capita size of Brazil, Argentina, and Chile and is predominantly an agrarian economy. With a GDP growth of 8% in 2021 and growth potential in the manufacturing & services sector, Guatemala is fast becoming a competitive market in Central America for business expansion. The young and skilled demography with a median age under 23 may complement any business expansion in Guatemala. Any employer will find it easier to hire employees in Guatemala with or without registering a local entity. Moreover, entrepreneurs or international companies must comply with labor act rules in Guatemala and the Guatemalan employment rules to avoid legal disputes while hiring local talent. Guatemala’s labor laws uphold the employee-employer rights and duties while ensuring a decent workplace and wages in the country. While the employment regulations share similarities with other jurisdictions in the region, the most relevant minimum labor rights in Guatemala are:

• Minimum legal wage (approx. $390 as on January 1, 2022)
• 15 working days of annual vacation leave
• A maximum of 44 hours of work per week
• 12 weeks of maternity leave in Guatemala for foreigners and nationals

Furthermore, employers hiring staff in Guatemala are obliged to have an Internal Work Policy. Continue to read this page on employment law in Guatemala to know all the essential labor code practices, including working hours, minimum wages, statutory employer contributions, payroll tax obligations, and more.

Who is Covered by the Employment Act?

Guatemalan labor & employment law applies to all employment relationships and contracts concluded in the country. It covers all employees regardless of their nationality. Individuals who offer their services under the direct supervision (dirección y dependencia) of another are subjected to the Guatemalan labor act rules. On the other hand, independent contractors or self-employed are mainly outside the ambit of the labor code in Guatemala. Certain benefits under Guatemalan employment law are also not applicable to high-level employees (trabajadores de confianza), like limits on working hours or the right to form a union. Further, Guatemalan nationals working abroad are not covered under the act. However, the Guatemalan labor code (Código de Trabajo, Decree 1441) obliges the employer to get approval from the National Labor Ministry if recruitment occurs in the country.

Employment Contract

The general practice under the Guatemalan employment rules is that contracts run for an indefinite period and fixed-term employment contracts are an exception. The first two months in an indefinite-term contract are considered a trial period. During this period, employers can terminate the agreement without a justified reason. All written employment contracts under Guatemala labor law are executed in Spanish. The contract must clearly define:

• The term of the contract
• Working hours
• The conditions of the work
• Termination/dismissal clause
• Salary details, payment schedule, and other benefits
• Identity & signatures of the contracting parties

The same procedure applies to executing an employment contract for remote working. Additionally, the employment contract for remote working must establish:

• The definition of work to be performed
• How to perform the work
• The method of communication between the employer and employee

Further, the employment act in Guatemala guides employers to register the written contract to the Labor minister within 15 days of execution.

Key Provisions of the Act

The employee-employer rights and duties in Guatemala arise from the following statutory sources:

• The Constitution of the Republic of Guatemala
• All legislation passed to enforce the ratified conventions under the International Labor Organization
• The Guatemalan Labor Code (Código de Trabajo)
• The Guatemalan social security plan
• Various judicial and administrative decisions

The following sections deal with the labor regulations in Guatemala or the Guatemala employment rules which enforce the act.

Working hours

• Working hours in Guatemala labor law are fixed per:

1. 1. Standard daytime: working hours capped at 44 hours a week or eight hours per day
   2. Standard night-time: working hours capped at 36 hours a week or six hours per day
   3. Standard mixed-time: working hours capped at 42 hours a week or seven hours per day

• Generally, those who work without immediate superior supervision (like managers, administrators, or trusted employees) are not subject to working time limits.
• But Guatemala’s labor law obliges employers not to make employees work more than 12 hours per day.

Holiday entitlements

1. Legal holidays established by Guatemala labor law account for up to 10 days per year.
2. Official public holidays in Guatemala include:
   • New Year’s Day – 1 January
   • Christian Holy Week (Easter) – Maundy Thursday, Good Friday, and Black Saturday
   • May Day and International Workers’ Day – 1 May 
   • Day of the Guatemalan Army, the commemoration of the Revolution of 1871 – 30 June
   • Independence Day – 15 September
   • Commemoration of the Revolution of 1944 – 20 October
   • All Saints’ Day – 1 November
   • Christmas Day – 25 December
3. Special holidays in Guatemala for specific occupations include:
   • Secretaries’ Day: for secretaries only – 26 April
   • Social Workers’ Day: for social workers only – 2 May
   • Mothers’ Day: for mothers only – 10 May
   • Bank Workers’ Day: for bank workers only – 1 July
   • Journalists’ Day: for journalists only – 30 November
   • Each town’s local feast day

However, Guatemala labor law mandates employers to move the public holiday of 30 June and the special holidays to the nearest Friday or Monday so that employees get a long weekend.

Leave schemes

Maternity leaves

• Guatemala’s employment law mandates paid maternity leave for 84 days (12 weeks), usually divided into 30 days before childbirth and 54 days post-natal.
• Any alteration in the maternity leave period in Guatemala requires a medical prescription.

Paternity leaves

• Guatemala employment law mandates two days of paid leave for male employees whose spouse has given birth.
• Shared paternity leaves in Guatemala are applicable in the unfortunate event of a mother’s death during childbirth.

Annual leave (vacation) 

• Employees who have worked for at least one year in a workplace are entitled to annual leaves.
• Employees get 15 days of annual paid leave.
• National, weekly, and public holidays that coincide with annual leave do not count as paid annual leave.
• Upon the termination of the employment agreement, the labor code in Guatemala entitles employees to receive compensation in cash for vacations missed up to the last five years.

Other leaves

Nursing leave

• There are special employment rules in Guatemala for post-natal employees.
• The nursing female employee is entitled to accrue two half-hour breaks per day from the day of resuming work and ten months afterward.

Child Adoption

• Guatemala paid maternity leave of up to 54 days applies to female employees when adopting a minor.

Marriage leaves

• Guatemala labor law mandates employers to give their employees five days of paid leave for their marriage.

Sick leave 

• Guatemala labor regulations link sick pay compensation from the employer to the relevant employee’s length of continuous service:

1. 1. 2-6 months: half the usual salary for up to one month
   2. 6-9 months: half the typical wage for up to two months
   3. More than nine months: half the usual salary for up to three months

• The recovery or sick leaves are treated separately and not a part of paid annual leave.

Bereavement leaves 

• Labor act rules in Guatemala mandate employers to provide three days of paid leave in the event of the death of the employee’s family members such as mother, father, spouse, brother, sister, and child.

Minimum wage

• The employment law in Guatemala guides employers to set salaries per two categories of activity:

1. 1. General or non-agricultural activities
   2. Agricultural activities

• The minimum wage in Guatemala in the year 2022 is

1. 1. GTQ2,959.24per month for general or non-agricultural activities
   2. GTQ2,872.55 per month for agricultural activities

Overtime compensation

• Overtime working hours in Guatemala labor law (including standard work time) are capped at 12 hours per day and 44 hours per week.
• Compensation for each hour of overtime shall be 150% of the employee’s standard hourly rate.

Payroll tax & other obligations

• Guatemala labor law obliges employers to calculate payroll obligations based on the following:

1. 1. Gross Salary
   2. Income Tax
   3. Social Security Premium Employee’s Share
   4. Cost of living allowance
   5. Life insurance premiums = Net Salary

• Employers in Guatemala must withhold income taxes for wage payments.
• Tax on wage income is progressive and varies between 5 to 7%.
• Employers must file withheld taxes to the department at the end of the fiscal year.
• Social Security Premiums are paid jointly by the employee and employer and calculated over monthly wages.
• Employers contribute up to 12.67%, and employees contribute 4.83% towards social security premiums.
• Labor act rules in Guatemala mandate employers to pay an annual bonus (bono 14) equal to a month’s salary, mainly in July.

Payslip

• The employment rules in Guatemala prescribe employee payslips to include base salary, overtime payment, withheld taxes, and bonuses, per the standard practices.
• Employers in Guatemala can provide online payslips upon written approval from the employee.

Dismissal rules

• Employers need a valid reason for the termination or dismissal of employees.
• Under the employment rules in Guatemala, the statutory notice period for an indefinite-term employment contract depends on the employment duration. It varies from one week to one month.
• The statutory notice period is not binding on the employees under the Guatemala labor law unless explicitly mentioned in the employment contract.
• Guatemala’s labor code obliges employers to receive prior judicial approval for dismissal or termination relating to

1. 1. Pregnant or nursing employees
   2. Participating in the formation of a workers’ union
   3. Union leaders (members of the union’s executive committee)

Severance payments

• The Guatemala labor law mandates severance pay for damages, equivalent to one month’s salary for each year of continuous service upon unjust dismissal.
• The monthly salary is estimated based on the employee’s last six months’ pay.
• Guatemalan labor law introduces a legal concept known as “economic advantages” (ventajas económicas), also for severance payments.  It includes all non-cash employer benefits, estimated at 30% of the total salary (such as health or life insurance, company vehicles and mobile phones, cafeteria or other food services, and so on).
• The Guatemala employment law, upon termination, obliges this additional payment of 30% of salary as part of the severance payment.

Health & safety obligations

• Under the Guatemala labor code, the employers are expected to have both Health and Safety Committee and Health and Safety Plan and Policy in place.
• While the committee is under the regulation of the Labor Ministry, the policy is supervised and designed by a government-approved medical practitioner.

Data protection and employee privacy

In the absence of dedicated privacy and data protection laws, employers in Guatemala can take reference from the Public Information Access Law to process the sensitive personal data of prospects & employees responsibly. Employers dependent on background checks (even via a third party) must get written consent from prospects and their employees to ensure data privacy. Further, the Guatemalan constitution limits the use of criminal records or police verification records to interfere with the candidates’ right to work. On the other hand, the Guatemala labor act rules prohibit any form of discrimination that affects access to work, like medical records of pregnancy or HIV checks, financial history, or indebtedness.

Penalties

The employer is liable to compensate the employee upon unjustified dismissal of the employee or termination of the employment contract after the probationary period. The employee compensation is equivalent to one month’s salary in proportion to the time worked, i.e., for each year of continuous services or services that do not reach one year. Further, the labor act rules in Guatemala give the employee the right to sue their former employers before a labor court and demand:

• Any other outstanding salary, bonus, or benefit still due
• Severance payment (if applicable)
• Litigation costs
• Additional salary (amounting up to 12 months) to cover the earning loss during litigation

Additionally, a verbal employment contract may act against the employer before a labor judge in Guatemala as, in most cases, the terms and conditions argued by the employee will automatically be presumed as fact.

Compliance Strategies for Employers

Here are some popular compliance strategies for entrepreneurs and global firms looking to hire and manage employees under the Guatemala labor act rules.

Recruiting an in-house HR manager:

• Hiring a dedicated Human Resources (HR) manager specializing in Guatemala labor law can supervise employee recruitment, training, payroll obligations, etc., following the Guatemalan employment rules.
• An in-house HR manager has the organization’s confidence to oversee appraisals, reward management, wage compensation, and deal with organizational changes and local industrial relations.
• HR managers often oversee data protection and employee privacy under the Guatemalan labor code while hiring local talents.

Hiring and managing employees based on standard templates:

• Whenever hiring a dedicated HR manager is not viable, employers usually act per the standard templates for drafting employment documents like offer letters, employment records, and termination notices.
• Such templates are readily available from any local legal services.
• Payroll tax & other obligations are taken care of by the owner itself.
• Contemporary SaaS-based payroll providers
• Innovative business solutions like payroll providers (such as Multiplier) can help global employers hire local talent from Guatemala without establishing a local business entity.
• Partnering with such payroll providers helps employers to remain compliant with Guatemalan labor law and follow all best practices for hiring & managing local talents.
• SaaS-based payroll providers offer contract drafting and management, mandatory benefits under labor act rules in Guatemala, and salary payment with just the click of a button.

How Can Multiplier Help?

Guatemalan labor law enlists employee-employer rights and duties in an employment relationship within the country. It is inspired by various sources like the Constitution of the Republic of Guatemala, ILO conventions, and miscellaneous judicial and administrative decisions. For instance,

• 90% of the labor force must be Guatemalan and collect 85% of the total payroll.
• Participation in social security payroll benefits is mandatory for employers with three or more employees.
• Employees are entitled to mandatory yearly incentive bonuses, while profit sharing is optional.

An in-house team of HR experts can ensure compliance with the labor code in Guatemala, but it is costly and time-consuming. It would also require entrepreneurs and global companies to register a local entity to hire in Guatemala. Flexible solutions like Employer of Record (EOR) or Professional Employer Organization (PEO) platforms help businesses with automated employment contract generation. These provide compliant expansion with Guatemala labor and employment laws with/without the registration of a local legal entity. Multiplier is a leading provider of PEO solutions for employers with a registered entity in Guatemala. Working with Multiplier ensures 100% compliance for employers and international firms during the hiring process or during payroll management – taxes, social contributions, and more, per Guatemala employment law. While registering a company in Guatemala is simple, global employers or international firms can partner with Multiplier EOR without registering a local entity and still manage newly hired local talents. We can draft multilingual contracts (including Spanish) to help your local employees understand the employment terms better. Our presence in 150+ countries makes us an even more comprehensive solution for your global expansion.