Honduras is nestled between Guatemala and El Salvador in Central America. The Pacific Ocean makes up its southern border while the Gulf of Honduras forms its northern border. Recently, Honduras has been a leader among Central American countries for economic growth. Its gross domestic product (GDP) growth of 2.7 percent in 2019 puts it well above the average in the region. Honduras only trails Panama when it comes to GDP growth.
Several factors make Honduras an attractive location for companies that wish to expand internationally. It has a young and growing population, an ideal location, and is working to grow its industrial base. The country also aims to diversify its exports. If expanding into the Central American country appeals to your company, here’s how to hire in Honduras and everything you need to know to hire new employees in Honduras.
What to know before hiring in Honduras
Before you begin to hire employees in Honduras, you should have a basic knowledge of the country’s job market and labor laws. Understanding the people you might hire can also help you bring on the candidates who would be the best fit for the roles your company has available.
1. Education in Honduras
Honduras has a four-tier education system. The first tier is pre-primary education, followed by the elementary education tier, which includes primary school and lower-secondary school. The secondary tier consists of the last three years of high school. The post-secondary tier is university-level and beyond. The last year of pre-primary, elementary, and secondary education are compulsory in the country, totaling 13 years of school.
Despite the compulsory education requirement, Honduras does have a high drop-out rate. Many students also need to repeat grades. Nearly 83 percent of children continue to attend school through the last year of primary. In each year of primary school, 3.5 percent of children are repeating the grade. Additionally, many students who complete secondary schooling do not continue their studies. Fewer than 7 percent of eligible students enroll in a university program.
Although the country does have a higher drop-out rate than elsewhere, its literacy rates are improving. While 61.4 percent of Honduran adults over age 65 are literate, 96.5 percent of people aged 15-24 are.
2. The Honduran job market
The unemployment rate in Honduras was 5.4 percent as of 2021. Two-thirds of the country’s population is working age, between 15 and 64. But only about one out of every two working-age people works. The country’s job market also seems to be dominated by men. For every 10 men in the job market, there are only 5.5 women. If the country were to employ more women, it could increase its earning potential and grow economically.
There are several reasons why Honduran women might be hesitant to participate in the job market. One reason is a perceived lack of job opportunities. When Honduran women do work, they typically earn more than men. Employed young women in Honduras have salaries that are 12 percent higher than employed young men. Young women in Honduras are also more likely to have completed some post-secondary education than young men. They are also more likely to have completed primary schooling compared to boys.
One explanation for the rates of female participation in the job market is that women might be more selective about the type of work they take on. If they have achieved an education, they are more likely to look for work that pays well and that aligns with their skills. When hiring in Honduras, it’s worth keeping the potential of its younger workers in mind and creating positions that will attract well-educated, ambitious candidates.
3. Taxes and payroll in Honduras
Honduras requires employers to contribute a percentage of employees’ earnings to social security. The employer social security contribution is 2.5 percent for sickness and maternity leave; 2.5 percent for old age, invalidity, and death; and 0.2 percent for professional risk. Employers also need to contribute 4 percent toward unemployment insurance.
A person who spends at least 90 days in Honduras out of the year is considered a resident of the country and needs to pay income tax on all sources of income. Nonresidents pay income tax only on Honduran sources of income.
The country’s income tax is a progressive tax, meaning the rate individuals pay increases as their income increases. People who earn less than HNL 172,117.89 are exempt from the tax. Those who earn between HNL 172,117.90 and HNL 262,449.27 pay a tax rate of 15 percent, and those who earn between HNL 262,449.28 and HNL 610,347.16 pay 20 percent. People with income above HNL 610,347.17 pay 25 percent as income tax. There’s also a municipal income tax, withheld every year, of up to 5.25 percent. Companies with more than five employees are responsible for withholding the municipal income tax.
4. Wages and time off in Honduras
Honduras does have a minimum wage. However, the minimum wage varies based on industry and the size of the company. In 2020, the country increased the minimum wage. As of January 1, 2020, the monthly minimum wage ranged from HNL 6,762 to HNL 12,357. The wage increase ranged from 5 percent for the smallest employers with fewer than 10 employees to 7 percent for companies with more than 151 employees.
Employees in Honduras are entitled to bonus pay in the form of 13th- and 14th-month paychecks. Many countries use a 13th-month pay bonus system. Essentially, an employee receives an extra month’s worth of salary, often at the end of the year. If a country also has 14-month pay, the employee receives a second full month’s pay as an additional bonus. The 14th-month bonus might arrive in the middle of the year. Employers in Honduras must pay employees a 13th-month bonus and may elect to give them 14th-month pay.
The workweek in Honduras is 44 hours. Most employees can only work eight hours a day and a maximum of six days a week. Employees are entitled to higher wages if they work overtime, on a rest day, or overnight. Night work needs to pay 125 percent of the regular pay rate while overtime pay is 137.5 percent of the regular pay. If employees have to work on a rest day, they receive double their usual rate.
Workers also receive time off, ranging from 10 to 20 days per year, based on how long they have been with a company.
5. Languages of Honduras
Spanish is the official language of Honduras and is used in government and education. However, the people of Honduras speak many languages. Five of these are indigenous languages:
Honduras is also home to immigrants who speak Arabic, Armenian, Creole English, Turkish, and Yue Chinese, among other languages.
Most businesses transactions use Spanish, but it’s best to make sure employment contracts are in a language employees understand.
The cost of hiring an employee in Honduras
How much it costs to hire employees in Honduras depends on several factors. If your company is not already established in the country, you will need to set up a subsidiary or establish a branch of an international company. Both options have advantages and disadvantages, based on your company’s overall goals. When setting up a company in Honduras, you and your partners will need to have at least HNL 25,000 — about USD 1,050 or EUR 890 — in founding capital. Honduran corporations need to pay a flat-rate income tax of 25 percent.
In addition to the costs of establishing a company in Honduras, there are the direct costs involved in hiring employees and expanding your team. The minimum wage you need to pay will depend largely on the size of your company and industry. If your company is large, wage costs in Honduras can add up. When developing a budget, also keep in mind the 13th-month bonuses you’ll need to pay and the cost of time off, sick leave, and overtime compensation. In addition to income tax, you’ll also have to pay social security and unemployment taxes of around 9.5 percent per employee.
Hiring practices in Honduras
The Labor Code of Honduras protects workers from discrimination on the basis of sex, race, political stance, religion, and economic status. However, the code doesn’t forbid discrimination on the basis of sexuality or gender identity. While the labor code doesn’t forbid gender discrimination, it does stipulate special rules for women who are pregnant. Employers can’t ask pregnant employees to perform strenuous tasks or have pregnant employees work more than five hours during a night shift.
When you hire new employees, you typically have a trial period of 60 days. The trial allows you and your employees to evaluate the working relationship and determine if it is one that you want to continue.
A labor contract is required in Honduras and should be in writing. It’s common practice to provide a copy of the contract and any amendments to it to all parties involved in the hiring process. While the government doesn’t outline requirements for onboarding employees, it’s a good practice to review the contract with employees on or just before their first day. Reviewing the contract together allows you to clear up any confusion or address any concerns new employees might have.
What does a company need to hire employees in Honduras?
Honduras prefers that companies based in the country hire Honduran residents. At least 90 percent of your company’s workforce in Honduras needs to be Honduran nationals. Additionally, at least 85 percent of your payroll needs to go toward Honduran nationals.
If you decide to set up a branch office of your company in Honduras rather than a subsidiary, you’ll need approval from the Ministry of Industry and Commerce. If your branch is approved, you will need to have a permanent representative in Honduras who will be responsible for the company. You’ll also need HNL 25,000 to serve as working capital and swear to abide by the country’s laws.
A more streamlined way to start hiring new employees in Honduras is to partner with an Employer of Record like Globalization Partners. We ensure your company complies with Honduran labor laws. Working with us means you can start hiring in the country in just a few days rather than weeks or months. Our global employment platform streamlines the process of onboarding Honduran team members and processing payroll.
Hiring remote employees in Honduras
Your company might be ready to hire people in Honduras, but you might not have a physical location yet. Maybe you plan on keeping your workforce in the country fully remote. In either case, you’ll want to follow some tips for hiring remotely in Honduras.
Since so much of a remote employee’s ability to do their job depends on them having a robust internet connection and stellar technology at home, you’ll want to test and verify their technological skill before hiring. One way to do that is to conduct the interview using videoconferencing software rather than over the phone.
You likely won’t get to meet candidates in person, so it’s a good idea to have them complete a few skills tests. Ideally, you might have the candidates complete these tests before they get to the interview stage. For instance, you can ask them questions to gauge their ability to think critically and work independently during the application process. Specific questions will tell you more about a candidate than a basic resumé and cover letter will.
If the job will involve using a specific technology or language, have candidates complete a test using the software program or language. You can invite candidates who pass the tests to a video interview. Use the time in the interview wisely, and ensure that your technology is fully working before the interview starts.
Once you’ve found the people you’d like to hire, Globalization Partners can step in and take over the onboarding process, collecting the information needed and having the employees sign their contracts.
Globalization Partners can help your company grow in Honduras
If you’re looking to get a foothold in Central America, Honduras can be an excellent place to start. Globalization Partners can help you start hiring in the country quickly. Our global employment platform will help you manage all the steps to hiring in Honduras, from the employee onboarding process to payroll, so your company can focus on its growth goals while complying with local labor laws. To learn more, contact us today for a quote.