El Salvador is a Central American country that’s home to more than 6 million people as well as one UNESCO World Heritage Site — Joya de Ceren. The country has plenty of natural resources and connections to other countries and continents. These characteristics make it a great place for companies looking to expand in South America.
Globalization Partners can take the stress of a global expansion off your shoulders and onto our own through El Salvador payroll outsourcing and our global expansion solution. Instead of setting up your own El Salvador payroll, you can use our existing and compliant option. We’ll pay your employees the correct amount every time and take on the responsibility of compliance.
Taxation Rules in El Salvador
Taxes in El Salvador apply to both employers and employees. Required municipal taxes vary by location, but the corporate tax rate remains fixed at 30%. Personal income taxes should be deducted from employees’ paychecks, as the country uses a Pay As You Earn (PAYE) system.
As an employer, you have to pay social security at a rate of 7.5%, while employees owe 3%. All the revenue you make abroad is subject to a 1.75% tax, and VAT is set at 13%.
El Salvador’s Payroll Options
You have four different El Salvador payroll options, including:
- Internal: You can use an internal payroll if you operate a large subsidiary that will exist in El Salvador for years. However, you’ll need a labor law and compliance expert as well as a full HR staff to operate your payroll.
- Remote: If you don’t have the resources for an internal payroll but your parent company operates one, you can add your employees to that remote payroll. However, every employee from a different country will also have different tax requirements.
- El Salvador payroll processing company: Partnering with an El Salvador payroll processing company can promote the local economy and help outsource your payroll. That said, your company will still have to worry about compliance with local labor laws.
- El Salvador payroll outsourcing: Your final option is El Salvador payroll outsourcing with Globalization Partners. When you choose us, you won’t have to worry about your payroll or compliance.
Requirements for Establishing Payroll
The biggest requirement for setting up your El Salvador payroll is establishing a subsidiary first. You need a subsidiary to work in the country and handle any kinds of tasks, from hiring to paying your employees. Depending on where you incorporate and the type of entity you choose, you could spend months or even a year before you can work legally in El Salvador.
Your other option is working with a global PEO such as Globalization Partners. We don’t have the same requirement because you can use our El Salvador PEO to start working immediately. As the Employer of Record, we’ll be responsible for the risks instead of you, so you won’t have to worry about fines or delays.
Know These Entitlement and Termination Terms
Entitlement and termination terms are important, and you should include them in all your employment contracts before you hire an employee. El Salvador does not require any notice before termination, but employees terminated without just cause must receive 30 days of severance pay for every year they worked.
Contact Our Team to Learn More
Globalization Partners will work hard on your behalf to help you make your expansion successful. Contact us today for more information about El Salvador payroll outsourcing.