The Republic of Peru is known for its emerging economy with major industries such as mineral mining, petrochemicals, textiles, tourism, and construction. With a steadily increasing percentage of a young, skilled, and educated working population in these industries, the Peruvian workforce has attracted several foreign businesses to expand their teams.
Due to this, the labor code in Peru offers a relevant legal framework that employers must comply with and certain legal rights that Peruvian employees are entitled to.
Although hiring in Peru is relatively easy, it is essential that employers closely study and understand the local labor laws. This article will cover everything you must know to understand Peruvian labor laws better.
Applicability of the Act
The applicability of the Peruvian labor laws includes:
- The Law of Productivity and Labor Competitiveness
- The Procedural Labor Law
- The Law on Collective Labor Relations
- The Law on Days of Work, Hours, and Overtime
- The Regulations on Safety and Health in the Workplace
Additionally, the Peruvian labor laws apply to the following individuals:
- Citizens of Peru
- Foreign nationals employed in Peru
- Residents, non-residents, and permanent residents employed in Peru
The Peruvian labor laws apply to all types of employees, which include:
- Independent contractors and freelancers
- Part-time employees
- Full-time employees
However, certain types of employees, such as full-time employees, enjoy more benefits than others. Therefore, employers must ensure that they avoid the misclassification of employees.
As laid down in the Peruvian labor laws, an employer can hire Peruvian employees indefinitely or on a fixed-term basis, depending on the duration an employee can work. Such employment contracts can be concluded in writing or verbally, although employers commonly offer a written employment contract.
A fixed-term contract is when a business offers employment for a fixed duration. There is a clear start date and an end date for employment.
Employers must offer a fixed-term contract in writing for a maximum period of five years. It is also mandatory for employers to register a fixed employment contract with the Peruvian Labor Ministry.
Indefinite term contract
An indefinite term contract is when a business offers employment with a predetermined start date and not a defined end date. In cases where employees are hired indefinitely, the employer can request a probationary period between three months to one year. An employee is entitled to all legal rights under the Peruvian labor law for unjust dismissal.
Key Provisions of the Act
When hiring in Peru, employers must be aware of the key provisions of the labor code in Peru.
The minimum employment age in Peru varies based on the industry an employer is hiring in. The minimum age includes:
- Non-industrial agricultural work: 15 years
- Industrial, commercial, and mining industries: 16 years
- Industrial fishing sector: 17 years
Employers can hire and employ children between the ages of 12 and 14. However, businesses can offer employment if employers obtain legal permission from MTPE’s Office of Labor Protection for Minors and have a certificate that the children attend school.
Minimum wage and other compensation
The national minimum wage in Peru is 1,025 PEN (about $271) per month as of May 01, 2022. Employers must ensure that they offer their Peruvian employees a compensation package above the predetermined minimum wage.
13th and 14th-month pay are mandatory in Peru. Employers must offer 13th and 14th-month pay semi-annually (in June and December).
Employees are also required to pay their Peruvian employees overtime pay in addition to their annual compensation.
Working hours and overtime pay
The standard working hours in Peru are 8 hours daily with 48 hours weekly. The work hours for children between the ages of 12 and 14 are not more than 4 hours a day and 20 hours a week.
Any additional work hours requested by employers that exceed the standard working hours must be compensated in the form of overtime pay. Peruvian labor laws on Collective Labor Relations of 2003 regulate overtime hours and pay.
The overtime pay in Peru is:
- For the first two hours – 25% of the total salary offered to an employee for any additional hours of work
- More than two hours – 35% of the total salary offered to an employee for any additional hours of work
As laid down in the Peruvian labor laws, employers must offer a minimum set of leaves to their Peruvian workforce. Statutory leaves must be outlined in the employment contract.
Type of Leaves
All full-time employees are entitled to paid annual leaves.
Employers can offer annual leaves in two parts on a semi-annual basis.
Annual leaves cannot be clubbed with others, such as maternity and sick leave.
All full-time employees are entitled to paid public holidays.
Employees working on public holidays are entitled to overtime pay.
All full-time employees are entitled to paid sick leaves.
Employees must submit a medical certificate from a registered medical practitioner to avail the sickness benefits.
Sick pay for employees is:
All full-time employees are entitled to paid maternity leaves.
An employee is entitled to an additional 30 days in cases of complicated birth and multiple births (such as twins or triplets).
The Private Health System (Entidades Promotoras de Salud or EPS) or the National Health System (EsSalud) is responsible for processing the maternity pay.
However, to qualify for the maternity benefit, an employee
49 days before the childbirth and 49 days after the childbirth
All full-time female employees are entitled to paid maternity leaves.
The Private Health System (Entidades Promotoras de Salud or EPS) or the National Health System (EsSalud) processes the adoption pay.
Adoption leaves can be taken until a child reaches the age of 12 years.
All full-time employees are entitled to paid paternity leaves.
The paternity leave entitlement can be increased up to 20 days in cases of complications in childbirth or multiple births.
The probationary period in Peru must be clearly outlined in the employment contract. A probation period in Peru typically lasts for three months and can be extended to six months for skilled workers and up to one year for employees holding managerial roles.
The legal retirement age in Peru for all individuals is sixty-five years. However, employees can take early retirement at fifty-five with a minimum social security contribution of thirty years for men and twenty-five years for women.
The termination process in Peru is based on the
- Employment agreement (fixed-term or indefinite contract)
- Collective bargaining agreement
- Reason for termination
In cases where an employer wishes to terminate employment, they must offer a minimum of six days’ notice to the employee to prove the employment capability. The termination of employment in such cases must be communicated in writing.
An employee is entitled to severance pay of up to twelve months for dismissal without cause.
Employees who wish to terminate employment with an employer must provide a minimum of thirty days notice period.
There are certain penalties that an employer may face for not complying with the labor act rules in Peru:
- An employer can be penalized for dismissing an employee without a valid reason. The penalty amount is equivalent to the payment of compensation.
- Employment of an individual below the legal minimum age (eighteen years) attracts penalties between five to twelve years of imprisonment.
- Laws prohibiting forced labor and trafficking of children are twelve to twenty years imprisonment.
- The penalty for employers discriminating against employees based on religion, gender, race, and ethnicity is thirty to sixty working days of community service. Employer discrimination is also ineligible for employment in Georgia is three years.
Compliance strategies for Employers
To comply with the labor regulations in Peru, employers can use a few compliance strategies as below:
- The annual, overtime, and vacation pay must be paid on time and should be the same for all employees. This ensures that employers avoid violations of the regulations on discrimination.
- Carefully review the employment contracts when hiring a new candidate or employment contracts of the employees on the payroll. Given that there will be periodic changes in the labor act rules in Peru, the employment contracts ensure that the compensation and employee benefits you offer comply with the regulations.
- Misclassification of the employment type attracts penalties in Peru. Employers must ensure that they clearly outline the type of employment in the employment contract and ensure to make necessary payroll deductions.
It is important for employers to carefully study the Peruvian labor laws to align with changes in policies.
How Can Multiplier Help Businesses Stay Compliant?
Employing in a new economy can be complex due to the changing labor laws. The Peruvian labor laws are comprehensive, and keeping up with the labor laws can get time-consuming.
To help you with compliantly employing in Peru, Multiplier’s intuitive solution helps businesses generate automated employment contracts, process payroll taxes, deduct social contributions, offer the right mix of employee benefits, and process compensation in the local currency (Nuevo Sol). You can now be sure that you comply with local labor and employment laws.
Hire in Peru without any worry. Get in touch with our team to compliantly employ in Peru!