If you are interested in starting a business in Guatemala, or are already active in Central America’s largest economy, adherence to local employment law will be essential to the smooth running of your company and the maintenance of your good standing with local authorities.
Employment law in Guatemala is overseen by the Ministry of Labor and Social Welfare, and although Guatemalan employment regulations share many similarities with those found in other jurisdictions, there are also considerable particularities to take into account.
For anyone looking to hire a small team on a temporary basis, or who needs a local executive, such as a regional representative or sales manager, a popular alternative to actually starting a business is to hire staff through an employer of record (EOR) in Guatemala.
Because an EOR will hire staff on your behalf and manage their payroll, meaning that not only does it allow you to avoid going through company formation and get to work in the market as soon as the right team members are found, but it also comes with the guarantee of compliance with local labor law.
Below, an overview of employment law in Guatemala is provided, covering standard working hours, common contract types, terminations and severance, leave and other absences, and the salary-based contributions that employers must oversee.
At the end of the guide, a free-to-download infographic covering these key aspects of employment law in Guatemala is also included.
If you need assistance with market entry or are doing business in Guatemala and could use some back-office support, contact us today to find out more about how we can assist you.
Employment law in Guatemala: working hours
Statutory working hours under employment law in Guatemala differ based on whether an employee is a daytime, nighttime, or mixed-shift worker.
For daytime workers, who are defined as those whose regular working hours fall between 06:00 and 18:00 on a given day, the working week is a maximum of 44 hours long, based on eight-hour working days, meaning that a standard working week consists of five and a half working days.
For nighttime workers, who are defined as those whose regular working hours fall between 18:00 and 06:00 the next day, the working week is a maximum of 36 hours long, based on 6-hour working days, meaning that a standard working week consists of five working days.
Mixed-shift workers have a regular schedule that involves both daytime and nighttime working hours as earlier defined. Usually, a given shift should include no more than three hours of nighttime hours and should be a maximum of seven hours long. A mixed-shift worker should work no more than 42 hours per week, meaning that a standard working week consists of a maximum of six working days.
Note that, there are generally between eight and ten public holidays that fall on weekdays each year, as well as an additional public holiday observed in capital Guatemala City which can fall on a weekday.
Common contracts under employment law in Guatemala
There are three types of individual labor contracts used under employment law in Guatemala, consisting of:
Indefinite-term contracts are the most widely used type of contract in Guatemala. They have no definite termination date and only end based on the mutual agreement of the employer and employee or under circumstances when one party can act unilaterally. Such instances include an employee resigning from their role, or an employer being allowed to terminate the contract due to the employee’s malpractice.
Fixed-term contracts run for a set period specified within the contract itself.
Specific work contracts are used for the completion of a particular task or project, for which parameters and benchmarks, including what conclusion of the task entails, must be clearly stated within the contract.
Termination & severance
Under employment law in Guatemala, employees are obliged to provide notice of their decision to terminate a contract based on their length of service with the employer, set out as follows:
- Less than six weeks of service = one week of notice
- Between six and 12 months of service = 10 days of notice
- Between one and five years of service = two weeks of notice
- More than five years of service = one month of notice
In the event that the employer wishes to unilaterally terminate an employee’s contract without just cause, the employee will be entitled to:
- Any payment owed for hours worked
- Compensation for unused vacation and public holiday allowance
- A proportion of the two annual bonuses (the thirteenth and fourteenth salary) based on the proportion of the year they have worked
- A severance payment equal to one month of salary for each year of service
An employee can only have their contract terminated without the right to compensation when they are found guilty of misconduct, as laid out in Article 77 of the Guatemalan Labor Code.
Vacations, leave, & other absences under Guatemalan law
Employment law in Guatemala establishes that employees who have served at least one year with the same employer are entitled to a vacation period that must last at least 15 working days.
Maternity and paternity leave:
Guatemalan employment law dictates that expectant mothers are entitled a maximum of twelve weeks (84 consecutive days) of maternity leave. That is generally made up of 30 days before the due date and 54 days after the birth. New fathers are entitled to a total of two days of paternity leave.
Any employer registered with the national social security program (IGSS) must provide sick leave permission to employees, and will be liable for a portion on their payment, based on factors including:
- type of sickness
- length of service with the company
- internal social security regulations
If the employer is not registered with the IGSS is obliged to provide sick leave permission to the employee until they make a full recovery, as well as a portion of their salary during the first three months of their leave, with that portion based on their length of service.
Note that an employer is obliged to register with the IGSS if the company employs three or more permanent employees.
In the event of the death of an employee’s spouse or common-law partner, parent, or child, they are entitled to three days of bereavement leave.
An employee is granted five days of leave when they get married.
Any employee summoned to court is entitled to paid leave for the duration of the period that they must attend the court.
Any employee who is a member of the executive committee of a union is entitled to up to six days of leave per calendar month in order to carry out their duties.
Employment law in Guatemala: statutory contributions
A total of 4.83% of an employee’s salary is deducted by the employer and provided to the IGSS.
Employers must make contributions totalling 13.67% of the value of a given employees salary. Those contributions go to the IGSS, the Institute of Recreation of Workers of the Private Company of Guatemala (IRTRA), and the Guatemalan Technical Training Institute (Intecap), with each contribution equivalent totalling:
- IGSS: 10.67% of the employees salary
- IRTRA: 1% of the employee’s salary
- INTECAP: 1% of the employee’s salary
Biz Latin Hub can assist you doing business in Guatemala
Biz Latin Hub is a professional services company providing integrated market entry and back office services throughout Latin America and the Caribbean.
As well as in Guatemala City, we have offices in 15 other jurisdictions in the region, meaning we are ideally placed to support multi-jurisdiction market entries and cross-border operations.
We are committed to compliance everywhere we operate, so working with us comes with the guarantee that your company will fully adhere to employment law in Guatemala, or any other market where we assist you.
Contact us today to find out more about how we can support you doing business in Guatemala.
Or learn more about our team and expert authors.
Download Biz Latin Hub’s guide to employment law in Guatemala infographic here: