Employment Law in Paraguay: a Guide

For anyone looking to register a business in Paraguay or already doing business there, understanding and complying with local employment law will be important to maintaining the good standing of your company and giving it the best possible chance of success.

Employment law in Paraguay is overseen by the Ministry of Work, Employment, and Social Security, and while it shares a number of similarities with other countries in the region, it also includes many distinct features.

For anyone planning a shorter-term or more limited-scale engagement with the Paraguayan market — or who only needs to employ a small number of executives locally — hiring through an employer of record (EOR) could be a good option. Because when you hire via an EOR in Paraguay, you avoid the need to form a local entity, while the provider guarantees your compliance with every aspect of compliance related to those staff.  

Below, a basic guide to employment law in Paraguay is provided, including standard working hours, the most common types of employment contracts used by investors, details on statutory leave allowances, and the contributions and deductions an employer must oversee.  

If you would like to hear more about how we can help you negotiate employment law in Paraguay, or otherwise support you doing business in this South American market, contact us today. 

Working hours under employment law in Paraguay

According to employment law in Paraguay, a standard working week is 48 hours long for daytime work and 48 hours per week for nighttime work. 

For daytime work, each working day should be a maximum of eight hours long, while for night work it is seven hours, and employees should receive at least one rest day per week. 

Any supplementary hours worked on top of those hours must be paid in proportion to the employee’s standard rate of pay plus a supplementary addition based on the time of the additional hours. Extra hours worked overnight or during public holidays are paid double. Those extra hours cannot exceed of three per day and nine per week.

Note that there are generally between nine and 14 national holidays that fall on weekdays per calendar year in Paraguay.

Employment law in Paraguay: common employment contracts

There are three main types of contract allowed under employment law in Paraguay that are used by foreign investors:

1. Indefinite-term employment contracts are the most common type of contract and run until both the employer and the employee mutually agree to the termination, or until one party has the right to act unilaterally — such as in the event of the employee resigning or engaging in behavior that constitutes misconduct and justifies their removal under the terms of the contract.
   
2. Fixed-term employment contracts can only be used when the circumstances warrant it, such as when employing someone for a particular task or project with a clear completion date. The period of employment must be explicitly stated within the contract.
   
3. Learning contracts are intended for an employee or employees to learn skills relevant to a specific job and are generally issued to individuals between the ages of 16 and 18 years old. A learning contract should involve working for no more than 24 hours per week and must include a salary of at least 60% of the minimum wage. 

Termination and severance

An employee can have their contract terminated without notice during their probation period — which will generally last for between one and three months depending on the type of role but can sometimes last for four months in the case of highly-qualified employees. 

Outside of the probation period, and in the absence of conduct warranting dismissal (such as gross misconduct as set out in the contract), employers must provide an employee with notice of dismissal, which will range from 30 to 90 days, depending on the employee’s length of service. 

A severance payment totaling 15 days of pay for each year of service must be paid to an employee who is dismissed under such conditions.

Note that an employee can resign from their position with a single day of notice under employment law in Paraguay.

Vacations, leave, and other absences under Paraguayan law

After completing one year of employment with the same employer, an employee is entitled to 12 days of paid leave. This is extended to 18 days of leave after five years of service, and to 45 days after ten years of service.

Note that, once an employee has completed ten years of service. under employment law in Paraguay, they cannot be removed from their role without proper justification.

Maternity and paternity leave
New mothers are entitled to maternity leave totaling 18 weeks, which can be extended by six weeks in the event of illness during the pregnancy or complications during the delivery. New fathers, meanwhile, are entitled to 14 days of paid paternity leave.

Note that, in the event of an adoption, where the child is below six months of age, new adoptive mothers are entitled to 18 weeks of maternity leave, while for children above six months old, the allowance totals 12 weeks of paid leave.

Sick leave
Employees are entitled to be paid in the event of missing work through illness, however, they must present a document signed by a registered doctor. The cost of paid sick leave is covered by the government social security fund.

Bereavement leave
In the event of the death of an immediate family member — including a parent, sibling, spouse or partner, child, or grandchild —  an employee is entitled to three days of bereavement leave. 

Statutory contributions under employment law in Paraguay

A total of 9.5% of an employee’s salary is deducted to go towards social security and the pension system, which is managed by the Social Security Fund, known by the acronym IPS. Employers must also contribute an amount equivalent to 16.5% of an employee’s salary to the IPS for the same purpose.

Annual bonus 
Like in many countries in Latin America, under employment law in Paraguay, employees are entitled to an annual bonus equivalent to one full month of pay, which is paid in December.

Frequently Asked Questions about Labor Laws in Paraguay

In our experience, these are the common questions and doubtful points of our Clients.

Biz Latin Hub can assist you doing business in Paraguay

At Biz Latin Hub, our bilingual team of corporate support specialists is on hand to assist you in navigating employment law in Paraguay, or any other aspect of entering and doing business in the country.

We offer a comprehensive portfolio of back-office services, including company formation, accounting & taxation, corporate legal services, visa processing, and hiring & PEO, meaning that we can provide tailored packages of integrated support to suit every need.

We have teams in place in 16 markets around Latin America and the Caribbean, and trusted partners that take our coverage to almost every corner of the region, meaning that wherever you are doing business, we can help you, and we specialise in multi-jurisdiction market entry.

Contact us today  to receive more information about how we can support you doing business in Paraguay.

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