Peru is becoming an increasingly popular destination for businesses seeking to expand their technology talent pool. With a growing number of skilled software engineers and a relatively low cost of living, Peru offers attractive opportunities for US companies looking to hire remote workers. However, navigating the legal and regulatory landscape of a foreign country can be complex.
This comprehensive guide provides US companies with the essential information they need to navigate Peruvian employment laws and best practices when hiring remote software engineers in 2025, including:
- Employment laws: Overview of the Law of Telework, including key provisions for remote work arrangements.
- Minimum wage: Updated minimum wage requirements as of January 1, 2025.
- Employment contracts: Types of contracts, key elements, and important considerations for US employers.
- Working hours and overtime: Standard working hours, overtime regulations, and rest day requirements.
- Public holidays: List of public holidays in Peru for 2025.
- Leave entitlements: Vacation, sick leave, maternity, and paternity leave provisions.
- Severance and terminations: Notice periods, severance pay, and grounds for termination.
- Taxation: Employee income tax, employer social security contributions, and other tax obligations.
- Compensation and benefits: Salary expectations, common benefits, and 13th and 14th-month payments.
- Other considerations: Work permits, foreign worker limits, and background checks.
Employment Laws
Peruvian law provides a framework for remote work arrangements. Law No. 31572, also known as the Law of Telework, came into effect on April 28, 2023, and governs various aspects of telework. This law defines telework as a subordinate work scheme where employees carry out their duties outside the traditional office setting, utilizing information and communication technologies (ICT) provided by the employer or acquired with the employer's support.
It's important to highlight that when engaging remote software engineers in Peru, US employers might not be subject to all Peruvian employment laws. Since there is no direct employment relationship with a Peruvian company, certain regulations, such as those concerning health and safety, might not apply. However, it's crucial to consult with legal professionals to determine the specific obligations in each case.
Key Provisions of the Law of Telework
- Written Agreement: A written telework agreement is essential, outlining the terms and conditions of the remote work arrangement, including work schedule, equipment provision, performance monitoring, and other relevant details.
- Health and Safety: While general health and safety regulations might not apply, employers should still prioritize the well-being of their remote workers. This includes promoting ergonomic practices, ensuring a safe working environment, and addressing any potential risks associated with remote work.
- Right to Disconnect: Employees have the right to disconnect from work outside of working hours, ensuring a healthy work-life balance and preventing overwork.
- Data Protection: Employers must comply with the Personal Data Protection Law (Law No. 29733), implementing appropriate security measures to protect employee data and obtaining informed consent before processing any personal information.
Visa Requirements for Remote Workers
Peru offers a Digital Nomad Visa specifically designed for remote workers. This visa allows individuals to stay in Peru for up to 365 days, with the possibility of renewal. This provides a convenient option for US employers hiring software engineers who wish to work remotely from Peru.
Minimum Wage
As of January 1, 2025, the minimum wage in Peru is 1,130 Peruvian soles (PEN) per month, equivalent to approximately US$302. This represents a 10% increase from the previous minimum wage of 1,025 PEN, implemented to boost spending power among lower-income segments of the population. The increase was enacted by President Dina Boluarte after the National Labor Council failed to reach a consensus on the matter . It's important to remember that this minimum wage applies to all workers in Peru, regardless of their age, occupation, or industry.
Employment Contracts
In Peru, there are two primary types of employment contracts:
- Indefinite-Term Employment Contract: This is the most common type of employment contract in Peru . It has a start date but no predetermined end date, offering employees greater job security. While this type of contract can be established verbally, a written agreement is strongly recommended for clarity and to protect the interests of both parties involved.
- Fixed-Term Contract: This type of contract has a defined start and end date for the employment relationship . It can only be used in specific situations and must be documented in writing. The maximum duration for a fixed-term contract is five years, and any extensions beyond this period automatically convert it into an indefinite-term contract.
Key Considerations for Employment Contracts
- Written Form: While permanent employment agreements are not always required to be in writing, written form is mandatory for part-time and fixed-term contracts.
- Essential Details: Employment contracts should clearly outline important details such as the nature of the job, salary, working hours, and duration of the contract (if applicable).
- Language: When hiring employees in Peru, it's crucial for businesses to provide a written employment contract in both Spanish and English to ensure clarity and understanding for all parties.
- Probationary Period: It's common practice in Peru to include a probationary period in employment contracts. The standard probationary period is three months, during which the employer can assess the employee's suitability for the role.
- Contractor Misclassification: US employers should be cautious about misclassifying employees as independent contractors. This can create a risk of "permanent establishment" in Peru, potentially leading to tax liabilities and legal complications.
Working Hours and Overtime
The standard working hours in Peru are 8 hours per day and 48 hours per week. Any work that exceeds these limits is classified as overtime and requires appropriate compensation.
Overtime Regulations
- Overtime Pay: Employees working overtime are entitled to a minimum of 25% above their regular hourly rate for the first two hours of overtime. If they work more than two hours of overtime, they earn at least 35% on top of their hourly rate for each additional hour worked.
- Rest Day: Peruvian employees have the right to at least 24 consecutive hours of rest per week, which usually falls on a Sunday . Any work performed on this weekly rest day is considered overtime and must be compensated accordingly.
Public Holidays
Peru observes 12 public holidays each year. These holidays are:
Vacation, Sick Leave, and Parental Leave
Vacation
Employees in Peru are entitled to 30 calendar days of paid vacation leave annually after completing one full year of continuous service with the same employer . Of these 30 days, a minimum of 15 days must be used as vacation time, while the remaining 15 days can be cashed out .
Sick Leave
Employees in Peru have the right to up to 365 days of partially paid sick leave . The first 20 days of sick leave are fully paid by the employer. For any sick leave beyond 20 days, social security (ESSALUD) coverage comes into effect .
Maternity Leave
Female employees are entitled to 98 days of fully paid maternity leave, which is typically split into 49 days before childbirth and 49 days after childbirth .
Paternity Leave
Fathers of newborns are entitled to 10 consecutive working days of paternity leave . This leave is extended in certain circumstances, such as premature birth, multiple births, birth-related complications for the child, or maternal disability. In these cases, paternity leave can be extended to up to 30 calendar days .
Severance and Terminations
Notice Period
When terminating an employee, employers in Peru are required to provide a notice period ranging from 6 to 30 days, depending on the reason for dismissal . On the other hand, employees who wish to terminate their contract must provide their employer with a minimum of 30 days' notice .
Severance Pay
In situations where an employee is dismissed without a justifiable cause, they are generally entitled to severance pay. This severance pay is calculated based on their length of service, typically around 1.5 months' salary for each year of service, with a maximum limit of one year's salary .
Grounds for Termination
It's important to note that employers in Peru must have a valid reason for terminating an employee's contract. Acceptable reasons for termination include misconduct, breach of contract, or redundancy .
Taxation
Employee Income Tax
Peru uses a progressive income tax system, meaning the tax rate increases as income levels rise. The income tax rates range from 8% to 30%, depending on the employee's earnings .
Employer Social Security Contributions
Employers in Peru are responsible for contributing 9% of the employee's salary to the Peruvian Health Social Security System (EsSalud) . This contribution helps fund healthcare and other social security benefits for employees.
Employer Taxes
In addition to social security contributions, US employers hiring remote workers in Peru may be subject to other tax obligations. These include:
- Corporate Income Tax: Levied at a rate of 29.5% .
- Value-Added Tax (VAT): Applied at a rate of 18% of gross income .
It's crucial for US employers to carefully assess their tax liabilities and ensure compliance with all relevant Peruvian tax laws.
Compensation and Benefits
Salary
The average annual salary for software engineers in Peru can vary significantly based on factors such as experience, skills, and location. Generally, the salary range falls between approximately US$23,184 and US$87,130 . It's worth noting that there is a significant wage gap between software engineers in Peru and their global counterparts, making Peru an attractive option for US companies seeking cost-effective talent .
Benefits
In addition to salary, it's common for software engineers in Peru to receive various benefits. These benefits often include health insurance, retirement plans, and paid time off .
13th and 14th-Month Payments
A unique aspect of compensation in Peru is the mandatory provision of 13th and 14th-month payments. Employees receive an extra month's salary twice a year: in July, around Peru's Independence Day, and at the end of the year, around Christmas .
Other Legal and Regulatory Considerations
Work Permits
Foreign nationals who are hired to work in Peru under an employment contract must obtain both a residence permit and a work permit . This ensures they have the legal right to live and work in the country.
Foreign Worker Limits
Peruvian law sets limits on the number of foreign workers a company can employ. Employers are generally not allowed to hire more than 20% foreign workers relative to their total workforce. Additionally, the total remuneration paid to foreign personnel cannot exceed 30% of the total remuneration paid to all employees . However, there are special cases and international agreements that may provide exceptions to these limits, making it easier for companies to hire foreign workers under specific circumstances .
Background Checks
When conducting background checks on potential employees in Peru, it's essential to obtain the worker's consent before processing any of their personal information . This is in line with Peru's data protection laws and ensures that employee privacy is respected.
Conclusion
Hiring remote software engineers in Peru offers a valuable opportunity for US employers to access a skilled and cost-effective workforce. By understanding and complying with Peruvian employment laws and regulations, US companies can establish successful and mutually beneficial working relationships with their remote employees in Peru.
To ensure a smooth and compliant hiring process, US employers should prioritize the following:
- Establish a detailed written telework agreement that outlines the terms and conditions of employment, including working hours, equipment provision, performance expectations, and data protection measures.
- Understand and fulfill their tax obligations, including employee income tax withholding, employer social security contributions, corporate income tax, and VAT.
- Comply with all legal requirements related to work permits, foreign worker limits, and background checks.
- Stay informed about any changes or updates to Peruvian labor laws to maintain ongoing compliance.
While this guide provides a comprehensive overview of the key considerations, seeking professional legal advice is crucial to ensure full compliance with all applicable laws and regulations and to address any specific circumstances related to your hiring needs.
Revelo Makes it Easy To Find, Hire, and Pay Peruvian Software Engineers and Developers
Navigating the intricacies of Peruvian employment law can be a daunting task for US companies. From understanding the nuances of the telework to setting up a local entity and managing tax compliance, the process can be time-consuming and resource-intensive.
Revelo offers a streamlined solution that simplifies hiring remote Peruvian software engineers. By partnering with Revelo, US companies can:
- Bypass the complexities of Peruvian employment law: Revelo handles all legal and regulatory requirements, including employment contracts, payroll, benefits, and tax compliance.
- Access a pre-vetted talent pool: Revelo's rigorous vetting process ensures that you have access to highly skilled and qualified software engineers.
- Scale your team quickly and efficiently: Revelo's on-demand scalability allows you to adjust your team size as needed, without the hassle of traditional hiring processes.
- Focus on your core business: Revelo takes care of all HR and administrative tasks, allowing you to focus on your core business objectives.
- Reduce costs and risks: Revelo's comprehensive services can help you reduce hiring costs and mitigate the risks associated with non-compliance with Peruvian labor laws.
With Revelo, you can confidently tap into Peru's vibrant tech talent pool without the complexities of navigating the legal and regulatory landscape on your own. Schedule a call today to learn more.
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