Bolivia’s labor laws are updated regularly, and are wide-ranging and complex. Companies need to keep in mind all the legal advice provided by experts in accordance with the law when hiring employees in Bolivia.
As an expanding company, executives should consider engaging with a Professional Employer Organization (PEO) to hire staff and minimize risk of non-compliance with labor legislation.
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Overview of Bolivia’s labor laws
Labor General Law of 1942 regulates labor relationships. Relationships between employers and employees are complex, and Bolivia’s regulations are regularly updated so companies can adapt to modern labor conditions.an
A labor relationship will be regulated by the Ministry of Labor as the entity that controls all Bolivia’s labor laws be accomplished for employers and employees. Some of the most important things to take into account in labor law are:
- In 2020, National Minimum Wage is US$305
- There are 13 salaries to be paid in a year (12 salaries + December Christmas bonus)
- Standard working hours are 8 per day
- An employee is entitled to 15 days vacation each year.
Types of labor relationships in Bolivia
In Bolivia, labor contracts can be both oral and written. According to Bolivia’s labor laws, a labor relationship contains the following requirements:
- Provision of service on a specific schedule
- Subordination and dependency
- Receiving a remuneration (salary).
If these three conditions are fulfilled, it will be automatically considered as labor relationship.
Indefinite labor contract
This type of contract is the most used and appropriate to regulate labor relationships in Bolivia. Each written and oral labor contract will be considered indefinite. This is the only contract that can establish a trial period of 90 days for the employee. During this period, the employer may terminate the relationship without obligation to compensate for the termination and employees can use this period to settle in to the company.
Fixed period contract
A fixed period contract is the one that due to its conditions establishes a determined period of validity. The fixed period contract must be written and must state the duration period of employment. According to Bolivia’s labor laws, this type of contract can apply in the following conditions:
- Workers with a fixed period contract cannot perform direct company activities. This type of contract can be used only for persons who support activities not related to the main activity of the company
- If a regular employee of the company is temporarily unable to work, companies can hire a temporary worker with this type of contract until the employee can return to their contracted activities. The employer cannot hire the same worker more than once using this mechanism
- If a company needs extra support and resources during a certain period of the year, it may hire fixed-term workers for that surge period to cover all company needs. If the company requires additional human resources in the long term following this period, they must hire through an indefinite labor contract
- An employee can only be hired with this type of contract two times. Otherwise, a third fixed period contract will be automatically considered as indefinite
- Each fixed period contract has a maximum length of one year
- According to Bolivia’s labor laws, a fixed period contract requires the approval of the Ministry of Labor to be validated; if this requirement is not fulfilled by the employer, the contract will be considered as indefinite.
In both types of contract, employees have rights and obligations of the employment relationship, including the contributions to social security made by the employer.
What are the labor contributions in Bolivia?
The contributions established by Bolivia’s labor laws will be calculated from each employee’s salary as follows:
|Contributions to be covered by the employer||Contributions to be covered by the employee|
|Health insurance: 10%|
Contribution pro: 2%
Professional risk: 1.71%
Employer contribution: 3%
|Social security: 10%|
Common risk: 1.71%
Insured contribution: 0.5%
Pension fund fee: 0.5%
|Total: 16.71%||Total: 12.71%|
Additionally, Bolivia applies a further tax known as the RC- IVA or RC- VAT. This is calculated by the salary amount received by the employee after the 12.71% contribution mentioned above, if the salary is higher than 4 times the National Minimum Wage.
Concluding the labor relationship
Bolivia’s labor laws regulate the ways to conclude a labor relationship in different scenarios and conditions. Labor General Law of 1942 gives the following guidelines for concluding a labor relationship:
Employee voluntary resignation
If an employee decides to resign from their position, the employer must pay the pending salarIes and the indemnities for the period worked in the company until the day of the resignation. Indemnities are the equivalent of 1 month’s salary for each year worked.
Severance pay without just cause
If a company decides to fire an employee, all pending wages must be paid and be included in the time for services. Indemnification includes 3 extra wages as severance payment for termination without just cause.
Each case must be analyzed individually to determine precisely if this legal figure can apply for the case since the justified termination must be proven to the Ministry of Labor in order for the employer to pay the pending salary without severance.
Use PEO services to comply with labor laws in Bolivia
A PEO will help companies recruit, hire, and manage their staff in Bolivia administrating and managing payroll processes each month so companies can focus on developing their business. Through a co-employment model, PEOs will hire staff on behalf of the company and ensure all labor obligations for these employees are met.
At Biz Latin Hub, we provide bilingual PEO and payroll management services with adequate and specific contracts for each employee of a company. We ensure employers meet all relevant labor requirements in Bolivia, reducing risk of non-compliance and enabling companies to expand with the right talent.
Get in touch with us now to continue your operations from abroad with PEO support.
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