If you’re planning to expand to El Salvador, G-P can assure compliance throughout the payroll setup and management process. Instead of establishing your own El Salvador payroll, we’ll pay your employees on time and accurately in accordance to the country’s payroll laws.
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 internationally is subject to a 1.75% tax, and VAT is set at 13%.
El Salvador payroll options for companies
You have 3 different El Salvador payroll options, including:
- Internal: You can use an internal payroll team 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.
- 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.
- Employer of Record (EOR): Finally, you can opt for partnering with a EOR like G-P in El Salvador. G-P backs its platform with the largest team of HR and legal experts to ensure your payroll setup and management is compliant and accurate. That means you can focus on growing your global teams.
How to set up a payroll in El Salvador
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 all employment 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 an El Salvador EOR like G-P to start working immediately. As the Employer of Record, we eliminate the need to set up a subsidiary in the country before you can begin operations, saving invaluable time and costs.
Entitlement/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.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading global employment platform. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.