Compensation and benefits are arguably the two most critical areas for your employees. You’ll need to meet or exceed the statutory minimums if you want to bring in the best talent. Plus, if you are found noncompliant, you could face fines or even a business shutdown.
Globalization Partners simplifies the process with our Peru compensation and benefit outsourcing services. We hire employees on your behalf and add them to our payroll, so they get paid the correct amount at the right time. Our Peru benefit management service helps source the best benefits for your employees and dole them out as necessary.
Peru Compensation Laws
In 2018, Peru’s compensation laws outlined a minimum wage of 930 Peruvian soles per month. This rate is still in effect as of 2021 and is currently approximately $245 in US currency. Employees are allowed to work a maximum of six days per week at either eight hours a day or 48 hours per week. Employers must provide a minimum 45-minute lunch break.
If employees work over these hours, they could be subject to overtime. The first two hours of overtime must be at least 25% of the employee’s total remuneration. For every hour afterward, the surcharge cannot be less than 35% an hour.
Guaranteed bonuses are another part of Peru compensation laws. Employees generally get two bonuses — one in July and one in December — that equal one month of salary. They are also entitled to receive an extraordinary bonus of 9% of those two bonuses.
One bonus unique to Peru is the Compensation for Length of Services (CTS). This benefit usually equals 1.16 of an employee’s monthly salary. Employers typically pay half in May and half in November. Employers with more than 20 employees have to share profits among those employees.
Guaranteed Benefits in Peru
As part of your Peru benefit management plan, you’ll need to give guaranteed benefits to all your employees. Start by determining the amount of paid time off to provide. Peru has 12 national holidays, but employees receive 13 paid days off for these holidays since Peruvian Independence Day is a two-day holiday. Employees typically get one month of paid leave each year, but you can offer more time off depending on the employee’s position.
Employers must provide maternity and paternity leave based on the statutory minimums. Female employees receive 14 total weeks of paid leave, during which time they can take seven weeks off before birth and seven after. Fathers get 10 consecutive days of paternity leave.
Peru Benefits Management
It’s best to build in additional benefits to your Peru benefit management solution. While the law may not require these benefits, employees may expect them when they work for your company. In Peru, employers often provide supplemental health insurance and life insurance after an employee completes four years of service.
Restrictions for Benefits and Compensation
Although not common in Peru, keep in mind trade unions or collective bargaining agreements (CBAs) could stipulate different compensation or benefits laws. Any additional requirements and restrictions need to be included in the written employment contract to ensure you and the employee understand the terms of employment.
Peru Competitive Benefits
If you are growing your business in South America, designing Peru employee benefit plans is critical in moving your operations forward. When you offer competitive benefits, you’ll be able to recruit leading professionals and provide trusted support for your in-country workers.
Peru Employee Benefits Plans
A competitive benefits program that meets market standards, complies with national labor laws, and meets employee needs can help your business stand out in hiring and employee retention. When you balance these critical factors, you can create a successful strategy that will further your business growth.
As an employer, you have a legal and social responsibility to meet specific requirements for your employees. Offering the required benefits will keep your company compliant. Any fringe benefits you provide will show your employees that you appreciate their contributions and want them to succeed.
You can offer a range of benefits to best provide for your workers. From practical assistance, such as a company phone or car, to coverage in a crisis, you can demonstrate that your company truly values your employees. These benefits are not mandatory, but they can deepen employee engagement and help build your company’s reputation in the region. Consider offering supplemental benefits in the form of:
- Employee assistance programs
- Private medical insurance offerings
- Life assurance
- Employer-sponsored retirement savings
- Critical illness insurance
- Long-term disability income protection
Requirements for Employee Benefits in Peru
National labor laws require that you provide these mandatory benefits for all your employees:
- 30 days of paid vacation
- Two annual bonuses, equal to a month’s salary, on Peru’s Independence Day and Christmas Day
- Compensation for Time of Service (CTS)
- Maternity leave
- Family allowance
- Employee profit sharing
How to Design Your Employee Benefits Program
While every country has a unique set of benefits requirements and expectations, the fundamentals of creating a successful plan will remain the same. Keep some best practices in mind as you design a plan for Peruvian hires.
1. Determine Your Business’s Goals and Budget
To effectively determine the scope of your benefits program, you need to know your business’s priorities and available resources. Discuss requirements with stakeholders, evaluate your yearly spending allocations, and identify opportunities for business growth.
2. Complete a Needs Assessment
Identify the top considerations of your regional employees with a comprehensive needs assessment. You might consider sending out questionnaires on key benefits issues or sitting down to interview some local employees.
3. Build an Employee Compensation and Benefits Plan
After evaluating key benefits requirements and gathering data on market standards, use your research to develop a custom benefit plan. As you calculate total costs, remember to include employee contributions, cost containment features, and any outsourcing requirements in your budget.
Average Cost of Benefits Per Employee
Your administrations and benefits expenses will depend primarily on how you build your program. Because benefits plans can vary so widely, the average cost countrywide may not be a helpful metric for your company. Instead, focus on your budget.
You’ll want to ensure you’re developing a competitive plan that is also sustainable long-term. Leave room for growth as your business continues to develop globally by setting a percentage of revenue to support your program. This number will scale with your growth.
How to Calculate Employee Benefits
National labor laws stipulate calculation rates for several key benefits:
- CTS: Set aside a secured sum each year to equal approximately a monthly salary in case of employment termination.
- Family assistance: Employees with one or more children under 18 are eligible for additional monthly payments equivalent to 10 percent of a month’s minimum wage.
- Employee profit sharing: Companies with over 20 employees are responsible for sharing 8 to 10 percent of annual earnings before taxes with workers. The appropriate rates depend on the industry.
To calculate the rates of supplemental benefits, complete local market research to identify industry standards and competitive offerings.
How Are Employee Benefits Taxed in Peru?
Employers must pay a contribution of 9 percent of employee income for public health system services. Other supplemental benefits may be taxable, but employee profit sharing contributions are deductible as a tax expense. You must withhold eligible taxes on a Pay As You Earn (PAYE) basis.
Employee Health Benefits Plans
The state-sponsored public health service (EsSalud) is compulsory for all employees and provides health insurance coverage. However, you may also elect to provide private health insurance plans to supplement your employees’ coverage.
Choose Globalization Partners Today
Globalization Partners offers support as you grow your business in a new region. For more information on what we have to offer, reach out today to request a proposal.