Employer Of Record in El Salvador
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How we can help you expand in El Salvador
As your EOR in El Salvador we’d help you expand by hiring employees and running their payroll without establishing a local branch office or subsidiary.
Your candidate is hired by a PEO in El Salvador provider in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. Shortly after, your new employee will be working for you, just like any other member of your team.
Expand to Salvador with Serviap Global
Through our PEO and EOR services, you can hire qualified talent in your industry without the trouble of opening your own legal entity.
In just a few days, you can easily and safely build a presence in El Salvador, being sure that your staff will be hired in compliance with labor and tax regulations
Table of Contents
United States Dollar (USD)
El Salvador Country FactsEl Salvador is the smallest nation in Central America and it’s growing into a big opportunity for companies looking to outsource. Touching the Pacific Ocean in the Central Standard Time Zone El Salvador is an attractive country for foreign business as a high percentage of citizens speak both Spanish and English. It’s a beautiful country home to the dormant Santa Ana volcano, many coffee plantations, Tazumal and Joya de Ceren Mayan ruins.
The EconomyEl Salvador’s economy has one of the strongest growth forecasts in Latin America. According to the UN’s Economic Commission for Latin America and the Caribbean (ECLAC) El Salvador is the second fastest growing economy in Central America, behind Panama. Average wages in El Salvador are very low compared to the United States and many other Central American countries. On average, bilingual Salvadorans can earn around $600 USD per month, nearly double the minimum wage. According to Salary Explorer, a software engineer in El Salvador can expect to earn approximately $19,000 USD per year, or about as much as a doctor or lawyer would expect to earn.
The Importance of Small and Medium-Sized CompaniesThe vast majority of El Salvador’s enterprises can be characterized as micro-, small- or medium-size enterprises. El Salvador has 635,000 SMEs, which support over 855,000 jobs. A recent grant was announced of $10 M to MSMEs owners through FEDECRÉDITO. It is earmarked to support micro-, small- and medium-sized enterprises in El Salvador.
Population Characteristics6.5 million people are citizens of El Salvador. While the national language is Spanish, there is a large number of English-speaking individuals, especially among those with higher levels of education. Part of this is attributable to the shared cultural affinity resulting from physical proximity and the many American television shows that play in El Salvador. Another part of this is the large number of Salvadorans who currently live in the United States or have returned to El Salvador after several years abroad. This cross-border exchange helps carry English deeper into the country.
Economic OpportunitiesWhile agriculture was once El Salvador’s main economic focus that has shifted over time to manufacturing and services, with tech looking to become a major factor in the future. Let’s look at the main sectors of the Salvadoran economy:
- Agriculture: Agriculture remains a big part of the Salvadoran economy, especially cotton, coffee, and sugarcane. El Salvador also produces large amounts of beef and timber for export.
- Manufacturing: A significant amount of El Salvador’s manufacturing involves processing agricultural goods, including food and textiles. However, they also produce pharmaceuticals, chemical products, and some electronics
- Tourism: Salvadoran tourism has increased significantly since the end of the civil war in 1992. Services related to tourism make up a large portion of the economy.
- Service: The largest portion of the Salvadoran economy derives from services, which make up nearly 60% of GDP. These include financial services as well as those related to tourism.
Key Sectors of the National EconomyHuman Talent Since the earliest days of Salvadoran outsourcing, the focus has been developing contact centers for the North American market. There is a strong pool of workers available to staff your outsourced centers because of the number of people who have worked or are currently working in these jobs. With the country’s continued focus on building a workforce with strong technical skills, more companies are looking to El Salvador for other services. Several startups in El Salvador are leveraging this workforce to develop strong coding and programming teams, making it an excellent choice for software engineering and development.
Prominent Cities for BusinessThere are several cities in El Salvador that provide excellent locations for outsourcing. Here are a few of the most important cities to consider:
- San Salvador: The oldest capital in Central America, San Salvador is the clear economic capital of the nation as well. It houses many business headquarters, as well as banking and financial institutions.
- Soyapango: A satellite of San Salvador, Soyapango is a manufacturing hub with a storied history of producing shoes. The other major industry is related to forestry.
- Santa Ana: This second-largest city in El Salvador is home to many manufacturing plants and is also a hub for tourism.
Technological EcosystemEl Salvador is becoming a leader in Central America for technically savvy workforces. Here are some key takeaways:
- Student Connectivity: El Salvador began its Digital Agenda 2020-2030 program this past year, attempting to connect all students digitally within ten years. The goal is to produce workers with the technical skills they need to compete.
- Mature Outsourcing Industry: Outsourcers have worked with Salvadoran companies providing business process outsourcing (BPO) services since the early 2000s. They’re familiar with the process and know how to get the job done.
- Cultural Affinity: Salvadorans are familiar with many aspects of American culture, and there is a large Salvadoran population living in the United States as well.
- Tech-Focused Education: There are several tracks for high school and college students to help them develop the skills tech companies seek.
Facilities for Foreign InvestmentEl Salvador is an excellent place to expand and outsource. More than 200 U.S. companies have established either a permanent commercial presence in El Salvador or work through representative offices in the country. The United States and El Salvador are parties to the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), which aims to facilitate trade and investment by eliminating tariffs, opening markets, reducing barriers to services, and promoting transparency.
Business Culture in Costa RicaBecause many Salvadorans have attended school or worked in America before returning home, the workforce has an attractive ability to adapt to U.S. business expectations. It’s still important to understand how business etiquette in El Salvador. Pack your patience As in many Central American countries, set work hours and business meetings are more of a suggestion than an exact time. Businesses that are successful in outsourcing in this country will do well to adjust company timing to accommodate Salvadoran counterparts or employees. Watch the eye contact Mind you do not maintain eye contact for a prolonged period. It’s considered rude or even aggressive. Food and drink are part of doing business It’s common to move from a meeting to a large meal with all the participants. Also, leaving a large bottle of liquor for the host shows both generosity and your willingness to do business with them.
El Salvador Gastronomy: Regional and Traditional CuisinesEl Salvador foods are a mixture of Spanish and indigenous (mainly Indian) ingredients and flavors. Key ingredients are corn, pork, chicken or seafood. The national dish of El Salvador is called Pupusas. Its handmade tortillas filled with cheese, pork, beans or a local edible flower called Loroco. Tamales are generally served at special events. Cooks in El Salvador may use animal parts in cooking Americans are not used to such as cow foot meat, tripe, tendons and cartilage.
|Num. States / Province||14 Departments|
|Principal Cities||San Salvador Santa Ana San Miguel|
|Local Currency||United States Dollar|
|Thousands Separator Format||999,999,999.99|
|Country Dial Code||+503|
|Time Zone||UTC -6|
|Border Countries||Guatemala and Honduras|
|Continental surface||20,720 Km2|
|Fiscal Year||1 January to 31 December|
|Minimum Wage||There is no single national minimum wage in El Salvador. The sector the employee belongs to determines the minimum wage for that group.|
|Taxpayer Identification Number Name in the country||ITIN|
|Current President||Nayib Armando Bukele Ortez|
Laws and Agencies that regulate labor relationships
|Labor Code||National Congress|
|Tax Code||Ministry of Finance|
|Social Security||PENSIONS For the full pension, the worker must have reached age 60 (55 for women) with at least 25 years of contributions (or any age with 30 years of contributions). The pension is 30% of the base salary for the first three years of contributions plus 1.5% for each additional year. DEPENDENT/SURVIVOR BENEFITS The laws provide for a survivor benefit for dependents including widow, widower, children, or parents. Survivor benefits are 50% of the deceased’s pension for the widow/widower. If there are no children, 60% of the deceased’s pension will be paid. Each eligible child is entitled to receive 25% of the deceased’s pension. Parents are entitled to receive 20% of the pension the deceased received or was entitled to: 30% of the deceased’s pension is paid if there is only one surviving parent. When there are multiple survivors, benefits cannot exceed 100% of the deceased worker’s old-age pension.|
Key Tax and Labor Authorities
|National Congress||The Salvadoran legislature is made up of 84 deputies who are all voted in.|
|Ministry of Finance||Ministerio de Hacienda which began in February 1829|
|Executive decree (82)||Regulation of the Organic Law on Finance Administration of the State.|
|Contracts Article 23||1) Name, surname, sex, age, marital status, profession or trade, domicile, residence and nationality of each contracting party 2) Number, place and date of issue of the personal identity cards of the contracting parties. and when they were not obliged to have it, mention shall be made of any reliable document or the identity shall be proved by means of two witnesses who shall also sign the contract 3) The work to be performed under the employer’s supervision, trying to determine as precisely as possible 4) The term of the contract or the expression that it is for an indefinite period of time; in the first case the circumstance or event that motivates the contract to term must be stated 5) The date on which the work is to commence. When the performance of the services has preceded the written awarding of the contract, the date on which the worker began the provision of services shall be recorded 6) The place or places where the services are to be rendered and where the worker is to live, if the employer undertakes to provide him with accommodation 7) The working hours 8) The salary to be received by the employee for his services 9) Form, period and place of payment 10) The quantity, quality and condition of the tools and materials provided by the employer 11) Name and surname of the persons who are economically dependent on the worker 12) Such other stipulations as may be agreed upon by the parties 13) Place and date of the conclusion of the contract 14) Signature of the contracting parties|
|The International Labor Organization||El Salvador are a part of the ILO|
|Work Hours||The standard working week in El Salvador consists of 44 hours a week, typically 8 hours a day over five and a half days.|
PayrollEl Salvadorian employees can be paid with local or foreign currency. The scheduled payday can be weekly, bi-weekly, or monthly. Payments must be made on the same day of the month each month and no later than one working day following the end of the pay cycle. Legal Benefits in El Salvador
|Minimum Wage||There is no single national minimum wage in El Salvador. The sector the employee belongs to determines the minimum wage for that group.|
|Wages||Average wages in El Salvador are very low compared to the United States and many other Central American countries.On average, bilingual Salvadorans can earn around $600 USD per month, nearly double the minimum wage. According to Salary Explorer, a software engineer in El Salvador can expect to earn approximately $19,000 USD per year, or about as much as a doctor or lawyer would expect to earn.|
|Overtime||All work above the standard weekly working hours is paid as overtime and regulated by the employment contract/collective agreements.|
|Occupational safety and health (Aguinaldo)||The payment is to be made around 20th December, and the amount depends on the years of service. The employer pays 15 days of salary to employees with one to three years of service, 19 days of salary for three to ten years of service, and 21 days for more than ten years of service.|
|Occupational safety and health||ISO 45001 is the new standard.|
|Vacations or PTO||15 days of paid annual leave. The annual leave is calculated from December 12-December 12 Paid time off is paid at a rate of 130.00% of the employee’s regular salary and paid to the employee before their leave. Any unused vacation days cannot be compensated financially and will be lost.|
|Leaves of Absence Employees have the right to paid absences for the following things:||• Sick days: 1-5 months of employment entitles the employee to 75.00% of the basic salary for 20 days • Five months to 1 year of employment service entitles the employee to 75.00% of the basic pay for 40 days • One year or more of employment entitles the employee to 75.00% of the basic pay for 60 days • Maternity Leave: Employees must take at least six weeks of leave before the expected due date and up to 10 weeks after the child is born • The employee can request to extend the maternity leave if there are any pregnancy-related illnesses/complications • Paternity Leave: In El Salvador, Fathers are entitled to three days of paternity leave which the employee must take within the first 15 days of the child’s birth • Bereavement Leave: Employees who have suffered the loss of an immediate family member are entitled to one day of paid leave|
|Over this amount||Not over this amount||Tax % on Excess|
|Taxable Gross Income||Tax % on Excess|
|Under $150,000 USD||25%|
Types of DisabilitiesDISABILITY BENEFITS Law No. 927 establishes disability benefits in case of accident/injury/non-occupational disease resulting in permanent disability. The worker must be assessed with a disability, be under 60 years of age (men) or 55 (women) and have at least 36 months of contributions, including at least 18 months in the 36 months prior to the onset of disability. The disability pension for permanent disability is 70% of a worker’s average salary and 50% for partial disability of 50-65%.
Public HolidaysThe Labor Code provides for public holidays that are observed in X:
|1 January||New Year’s Day|
|1 April||Maundy Thursday|
|In April||Good Friday|
|3 April||Holy Saturday|
|4 April||Easter Sunday|
|1 May||Labour Day|
|10 May||Mother’s Day|
|17 June||Father’s Day|
|6 August||Fiesta de San Salvador|
|15 September||Independence Day|
|24 December||Christmas Eve|
|25 December||Christmas Day|
|31 December||New Year’s Eve|
Termination The Labor Code outlines rules for termination of an employment contract:Guatemala’s Labor Code outlines rules for termination of an employment contract:
|Type of Termination||Brief Description|
|Justified Dismissal||1) If the worker deceived the employer by means of false letters of recommendation or certificates when the contract was concluded. This ground ceases to be operative after the worker has completed 30 day’s employment 2) Due to the worker’s repeated negligence 3) If the employer lost confidence in an employee exercising managerial supervision, surveillance, audit functions, or similar functions – however lack of confidence of employees holding supervising duties is difficult to prove at court. As stated by the Supreme Court of Justice –Sala de lo Civil. Sentencia N° 436- 2002 de 13/08/2002, sufficient objective evidence must be submitted by the employer to convince the Judge that the actions that led to the dismissal for lack of confidence are indubitable 4) If the worker reveals manufacturing secrets or communicates administrative matters to the detriment of the undertaking 5) If the worker commits serious acts of immorality inside the undertaking or while performing work outside the workplace 6) If the worker commits disrespectful acts against the employer or his/ her relatives, except in the case of provocation 7) If the workers commits acts causing serious disruption to the company’s activity|
|Justified Dismissal||8) If the worker (either intentionally or by negligence) seriously endangers the safety or operation of the establishment, or the persons therein safety or activity of the workers, or their health 9) If the worker deliberately damages the plant, machinery, tools, work implements, goods or merchandise 10) If the worker is absent from work without any justification for two consecutive working days, or a total of three days within the same months 11) If the worker, after imprisonment or pre-trial detention, comes back to work, within three days from the date of release, and s/he committed a crime against the employer or his/her relatives, if the worker commits serious breaches of the obligations under the contract of employment 12) In the event of disobedience to the employer (or employer’s representative) 13) If the worker drinks alcohol or takes drugs during working time or if s/he works under the effect of alcohol or drugs 14) If the worker does not fulfill his/her obligations under art 24 LC. In these cases, no severance payment is due|
|Unjustified Dismissal||In case of dismissal without cause (“despido incausado”), the severance payment amounts to 30 days basic salary per each year of service or in proportion for any fraction of year, with a minimum of 15 days basic salary (Article 58 LC). The same severance payment applies to the termination of the employment agreement due to the employer’s breach of its obligations, as defined in article 53 LC (despido de facto).|
|Voluntary Resignation||Art. 54 Resignation shall take effect without the need for acceptance by the employer.|
|Length of Employment||Severance Amount|
|0-30+||30 days salary for each year of service|
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