Payroll Outsourcing in El Salvador Can Save Time & Money

Payroll outsourcing in El Salvador is a good option to consider if you are interested in doing business in the Central American country or already active there and are keen to streamline your operations. Because by outsourcing your company’s payroll, you will eliminate a heavy administration job while potentially saving money in the process, providing you with more time and resources to focus on other aspects of your business.

Map of El Salvador and its main cities
Map of El Salvador and its main cities. Payroll outsourcing in El Salvador.

You can outsource payroll in El Salvador via a locally-based accounting firm. However, for an enhanced service that includes the potential to hire local staff without establishing a legal entity in the country, you will need to seek out a professional employer organization (PEO), which can also be known as an employer of record (EOR). Because a PEO in El Salvador will not only be equipped to manage your payroll, but it will also be able to use its established recruitment network to find and hire your ideal staff, as well as to draw up legal documentation related to their employment, and provide ongoing expert advice based on the latest regulations.

El Salvador has experienced consistent economic and political stability in recent decades, reaching a gross domestic product (GDP) of $27.03 billion in 2019 (all figures in USD). That same year, gross national income (GNI) reached $4,000 per capita, seeing the country enter the ranks of “upper-middle income” nations for the first time, based on standards established by the World Bank. The country also reported positive foreign direct investment (FDI) inflows of $724.8 million in 2019, highlighting its potential as an attractive destination for foreign investment in Central America.

The Central American nation is a party to the Central American Common Market (CACM), which also includes Costa Rica, Guatemala, Honduras, and Nicaragua, and has important free trade agreements (FTAs) with key markets, including the Central America-Dominican Republic FTA (CAFTA-DR), which provides local companies preferential access to major markets in the United States and the Dominican Republic. El Salvador’s main exports include sugar, garments, and electrical devices, with the top destinations for its goods including its CACM partners and the United States.

Whether you are already doing business in El Salvador or planning to expand into this market, read on to find out about the benefits of payroll outsourcing in El Salvador. Or go ahead and reach out to us now to discuss your business alternatives.

Understanding payroll outsourcing in El Salvador

Payroll outsourcing in El Salvador at its most basic involves handing over responsibility for processing salaries, including all relevant calculations based on tax requirements and statutory benefits, for all or part of your workforce. This can be particularly attractive to foreign companies who are new to the market, or who simply wish to streamline operations and avoid having to hire an in-house team for this function.

Where a company keen on payroll outsourcing would like the provider to also assist in finding and hiring those staff, the service will be managed by a PEO. One of the key advantages of working with a PEO is that they are set up to be able to hire staff on your behalf without you having a legal entity established in the country.

So if you are in the process of a market entry but wish to start working right away, or have a limited-scale or shorter-term operation that doesn’t warrant going through company formation, you can hire staff via a PEO. While those staff will officially work for the PEO firm, your company will have full control over their workload and responsibilities.

Such an arrangement means you are also able to exit the market in only as long as it takes for those staff to serve their statutory notice period, rather than having to liquidate a legal entity. As such, in many cases the PEO fee that you will have to pay the provider to hire and maintain staff on your behalf will likely be significantly lower than the costs involved in forming and disbanding a company.

Regardless of the type of organization you choose for payroll outsourcing in El Salvador, some of the main functions they will perform include:

  • Estimation of salaries
  • Control of salary receipts
  • Deposits of wages and benefits
  • Withholding of income taxes, social security, and pension contributions
  • Development of management reports
  • Completion and submission of essential government reports
El Salvador's market snapshot
When doing business in this market be sure to understand the labor law. Payroll outsourcing in El Salvador

Main benefits of working with a payroll services provider

Some of the main benefits of payroll outsourcing in El Salvador include:

Reduced administration: By outsourcing the management of your payroll, you will be able to reduce your administrative burden and avoid complex tasks such as filling out forms and submitting documents to Salvadoran authorities.

Guaranteed compliance: An experienced payroll services provider will guarantee full compliance with local regulations, avoiding sanctions or fines that can severely affect your business operations or affect your good standing in the eyes of local authorities.

Specialist advice: by choosing payroll outsourcing in El Salvador, you will be able to access specialist advice that will keep you informed about the most recent labor and accounting laws or other corporate requirements established by the government.

Remote oversight: A dependable payroll services provider will use the latest software to manage your company’s payroll, often providing you remote access to the records it is keeping and processes it is, offering you the sort of open and easy oversight to give you peace of mind that everything is in order.

How to use a payroll calculator: 5 key steps

An example of a calculation that could help you to understand payroll outsourcing in El Salvador.
Use the Biz Latin Hub payroll calculatorPayroll outsourcing in El Salvador

If you are thinking of expanding your commercial presence to Central America and you want to have an idea of the costs of outsourcing your payroll in El Salvador, a payroll calculator can give you a good indication of the costs you can expect to incur. You can find a payroll calculator on the recruitment and PEO service page of the Biz Latin Hub website.

By using our payroll calculator, you will be able to estimate the cost of outsourcing payroll in El Salvador, and compare those costs to outsourcing in any of the other 15 other countries around Latin America and the Caribbean where we have a presence.

To use our payroll calculator, you will need to follow these five steps:

Step 1: Select the country

Use the drop-down box to choose the country where you are currently operating or planning to expand.

Step 2: Select the currency you wish to deal in

Choose between US dollars (USD), British Sterling (GBP), and Euros, as well as the local currency of the country where you plan to operate. Note that El Salvador dollarized its economy in 2001, so the the official currency is USD. That is also the case in Ecuador and Panama, which dollarized in 2000 and 1904 respectively.

Step 3: Designate an employee’s monthly income

Indicate the expected salary you will be paying to an employee, in the currency of your preference.

Step 4: Calculate your estimated costs

Based on all of the information you provided in the previous steps, you will obtain results indicating your estimated costs. This will include a breakdown of expected labor benefits you can be liable for.

Step 5: Compare your costs to other markets

Once you obtain an estimate of how much it would cost to hire staff in El Salvador, you can use the Biz Latin Hub payroll calculator to compare this cost with that of other markets in the region.

Biz Latin Hub can help you with payroll outsourcing in El Salvador

At Biz Latin Hub, our multilingual team of accounting & taxation specialists is fully equipped to help foreign companies manage their payroll in El Salvador, as well as to assist in recruitment and hiring through our high-quality PEO services. With our full suite of back-office services, including commercial representation, legal services, and tax advisory, we can be your single point of contact for corporate support while doing business in El Salvador, or any of the other 15 countries across Latin America and the Caribbean where we are present.

Contact us now for personalized assistance or a free quote.

Or learn more about our team of expert authors.

Graphic that explains when to use PEO services or establish a legal entity in El Salvador, useful for those considering payroll outsourcing in El Salvador.
Learn when to use PEO services or establish a legal entity in El Salvador. Payroll outsourcing in El Salvador

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