Asunción Paraguay

Do You Need a PEO / EOR Payroll Company in Paraguay?

Finding the right personnel is crucial for any organization, as it can significantly impact its success. This is especially true when entering a new market like Paraguay. For companies with a limited-scale or short-term operation, partnering with a reliable professional employer organization (PEO) or payroll company in Paraguay can provide the necessary confidence when hiring new employees and save valuable time on HR-related tasks.

A PEO payroll company in Paraguay, also known as an employer of record (EOR) or a payroll outsourcing company, offers essential services for businesses expanding into Paraguay.

According to Paraguay’s Minister of Economy and Finance, Carlos Valdovinos, in response to the challenges posed by the COVID-19 pandemic, Paraguay has sought to attract foreign investment through low tax rates and laws that guarantee tax exemptions to companies settling in the country. Additionally, Valdovinos has emphasized improvements in migration processes, facilitating the acquisition of Paraguayan residency for investors. However, these processes can be time-consuming, which is why many companies choose to use a PEO payroll company when expanding into Paraguay.

Paraguay, often referred to as “the heart of South America,” has experienced consistent growth in recent years and is actively working to create an investment-friendly environment. Free trade zones, including Zona Franca Internacional and Zona Franca Global del Paraguay in Ciudad del Este, offer attractive tax incentives.

The country maintains strong trade ties with major Latin American economies such as Brazil and Argentina, contributing to its robust and growing economy. In 2022, Paraguay’s GDP reached 41.7 billion (USD). The nation has also attracted significant foreign direct investment, totaling $207,095,460 in 2022. In the same year the country has had 0% inflation.

If you are considering doing business in Paraguay, read on to discover how a PEO payroll company in Paraguay can assist your company in recruiting qualified personnel, ensuring the success of your commercial operations in this vibrant country.

Recruit and attract the best talent for your company. If you are looking for entrepreneurship in Latin America, Biz Latin Hub is your ally to hire the human talent you need.
Recruit and attract the best talent for your company. If you are looking for entrepreneurship in Latin America, Biz Latin Hub is your ally to hire the human talent you need. PEO Payroll Company in Paraguay.

PEO / EOR Payroll Company in Paraguay: What Does it Do?

A PEO payroll company in Paraguay is capable of handling various HR tasks, such as recruitment, hiring, benefits, and payroll management. It acts as the official employer, allowing you to hire without forming a separate legal entity.

With extensive knowledge of local labor and tax regulations, a PEO payroll company ensures compliance with Paraguayan authorities and streamlines administrative processes, freeing up your time for core business activities.

The payroll company also handles compensation for resignations, retirements, accrued vacations, and other required payments.

Moreover, it will also share the responsibility for the safety and health of the employees in the work environment and carry out the procedures and updates required before Paraguay’s Ministry of Labor.

What Are the Main Advantages of Hiring Staff Through a PEO / EOR?

Some of the main advantages of hiring staff through a PEO payroll company in Paraguay include:

Profitability: Employing local personnel through a PEO / EOR helps save costs and avoids additional expenses.

Risk Management: A PEO / EOR ensures full compliance with local regulations and protects your organization’s interests in legal matters.

Time-Saving: Outsourcing payroll and HR tasks allows you to focus on critical aspects of your business while benefiting from PEO / EOR assistance.

Employee recruitment: A PEO payroll company in Paraguay can efficiently perform recruitment processes to identify and hire the most suitable and qualified personnel to maximize your company’s possibility of success.

Legal advice: A PEO firm will provide legal advice on labor, tax, and civil legislation in case you require it.

Get to know the market: When you hire staff through a PEO payroll company in Paraguay, you have the opportunity to gain a better understanding of the market before considering a larger-scale expansion. The PEO payroll company can hire staff on your behalf in just a few days and make it easy to exit the market. This gives you the opportunity to evaluate whether your future business plans require deeper involvement, such as company formation or branch registration.

The graphic above highlights when it is best to use a professional employer organization in Paraguay, or in any other country. PEO Payroll Company in Paraguay.
The graphic above highlights when it is best to use a professional employer organization in Paraguay, or in any other country. PEO Payroll Company in Paraguay.

How to Use a Payroll Calculator

If you want to get an idea of the possible costs involved in payroll outsourcing in Paraguay, using a payroll calculator is one way to get a good estimate.

Use Biz Latin Hub Payroll Calculator for PEO in Paraguay.
Use Biz Latin Hub Payroll Calculator for PEO in Paraguay.

Although a payroll calculator won’t be completely accurate, it will give you the opportunity to evaluate options while varying the salary, the number of employees, the country you want to enter, and the currency you wish to work in. As such, you will be able to understand your likely costs across a range of salaries, while also being able to compare other countries as potential alternative destinations. 

You can find the BLH payroll calculator at the bottom of our Hiring & PEO Services page. The calculator will allow you to make good estimations of the costs involved in hiring in Latin America and the Caribbean based on country, currency, and salary, with the calculator factoring in local statutory deductions.

To use the BLH payroll calculator, you will need to undertake the following steps:

Step 1: Select the country

Choose the country where you are doing business, or planning to launch. This feature will be useful when it comes to comparing potential alternative markets.

Step 2: Select the currency you wish to deal in

You can choose between US dollars (USD), British Sterling (GBP) and Euros, as well as the local currency for the country you are looking at, compared to what is most convenient for you. Note that for Ecuador, El Salvador, and Panama, the local currency is also USD, as they have dollarized economies.

Step 3: Indicate an employees monthly income

Here you can indicate the expected salary you will be paying an employee, in the currency of your choice.

Step 4: Calculate your estimated costs

Based on all of the information you have provided, you will receive results indicating your estimated costs, including a breakdown for estimated statutory benefits you will be liable for.

Step 5: Compare your costs to other options

With a good estimate at hand of how much your staff in Paraguay would be, if you are flexible about your expansion into Latin America and the Caribbean, you can use the BLH payroll calculator to compare those costs to other jurisdictions.

Common FAQs on Hiring Through an Employer of Record (EOR) in Paraguay

Based on our extensive experience, these are the common questions and doubts of our clients on hiring through an EOR in Paraguay:

1. How does one hire employees in Paraguay?

You have the option to employ someone in Paraguay either by establishing your own legal entity within the country and utilizing it for hiring purposes, or by engaging an employer of record (EOR). An EOR, a third-party entity, enables you to recruit employees in Paraguay by serving as the legal employer. When using an EOR, you do not need a Paraguayan local entity to hire employees.

2. What is in a standard employment contract in Paraguay?

A standard Paraguayan employment contract should be written in Spanish (and can also be in English) and include  the following information:

– ID and address of the employer and employee.
– City and date.
– Service location. .
– Description of tasks to be performed.
– Remuneration and bonifications/commissions (if applicable).
– Frequency and method of payment. .
– Duration of the contract.
– Probationary period.
– Working hours.
– Additional benefits (if applicable).

3. What are the mandatory employment benefits in Paraguay?

The mandatory employment benefits in Paraguay are the following:

– Working tools necessary to carry out the work (if applicable).
– Payment of social security contributions (health, pension, and labor risks).
– Social benefits (service premium, severance pay, and interest on severance pay).
– Paid time-off (vacation and Sunday rest).
– Disabilities (common or labor origin).
– Transportation allowance (if applicable).
– Overtime and surcharges (if applicable).

For more information on mandatory employment benefits read our recent article on employment laws in Paraguay.

4. What is the total cost for an employer to hire an employee in Paraguay?

The total cost for an employer to hire an employee in Paraguay can vary based on the salary structure. This is because the employer is responsible for covering 16.5% of the social security contributions, and the employee’s salary is subject to a 9.5% retention for social security purposes. The specific amount will depend on the employee’s earnings and work hours.

Please use our Payroll Calculator to calculate employment costs.

5. How does the process of forming a legal entity differ from hiring through an EOR?

Forming a legal entity is different to hiring an EOR in the following ways:

– It is more time-consuming.
– Creates a permanent presence in the country.
– Expenses are deductible through a local entity.
– Enables the ability to execute contracts and agreements locally.
– Facilitates invoicing through a local entity.
– Requires compliance support.
– Empowers direct hiring of employees.

6. What sets apart a PEO from an EOR?

While a PEO functions as co-employer, an EOR assumes the role of the formal employer for your staff. Typically, an EOR provides a wider array of services compared to a PEO.

Biz Latin Hub Can Be Your PEO / EOR Payroll Company in Paraguay

At Biz Latin Hub, our multilingual recruitment and employment experts have broad experience helping foreign companies get established in Paraguay, as well as elsewhere in Latin America and the Caribbean. With our full portfolio of legal, accounting, and back-office services, we can be your single point of contact to help you enter the Paraguayan market in the shortest possible time.

Contact us now to discuss your expansion options. 

Learn more about our team and expert authors.

Paraguay employment law snapshot

Working hours:
According to employment law in Paraguay, a standard working week is 48 hours long for daytime work and 42 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.

Types of Employment Contract:
There are three main types of employment contract in Paraguay:
Indefinite-term employment contract: An indefinite term employment contract is the most common type of contract in Paraguay and will run until both the employer and employee agree to termination, or one party has the right to terminate it unilaterally according to the terms of the contract.
Fixed-term employment contract: A fixed-term employment contract can only be used when warranted, such as in the case of a project or task with a fixed period of duration before completion. That period must be clearly defined in the contract. 
Learning contract: A learning contract is generally given to an employee between the age of 16 and 18 and provides for them to learn skills related to a particular job or profession. Such a contract is essentially part-time, as it can only include a maximum of four hours of work per day and 24 hours per week. The salary must be at least approximately 60% of a minimum salary. In 2021, the minimum salary stood at approximately $265 per month, meaning a minimum learning contract salary stood at approximately $159 per month.

Statutory contributions:

Employee Deductions:

Employees are deducted a total of 9.5% of their salary, which contributes to the state social security and pension systems.

Employer Contributions:

Employers must contribute the equivalent of 16.5% of an employee’s salary, which goes towards the state social security and pension systems.

Vacations, leave, and other absences:
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 30 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:  Female employees are entitled to paid maternity leave of 18 weeks, while male employees are entitled to 14 days of paid paternity leave.

Sick leave: Employees are entitled to paid sick leave as long as it is authorized by a registered doctor. The cost of paid sick leave is covered by the social security system.

Bereavement: For the death of an immediate family member, an employee is entitled to three days of paid leave.

Termination and severance:
Employees in Paraguay can resign from their post with a minimum of one day of notice. 

When an employee resigns (or their contract is terminated during probation), the employer is liable for payment of salary owed and benefits accrued until their last working day.

If an employee is terminated with legal cause, the company would be liable for payment of salary owed and benefits accrued until the date of termination.

If an employee is terminated without cause (and not during probation) then the company would be liable for payment of salary owed, benefits accrued and a severance.

Note that probation will generally last one to three months, but can be up to six months. 

In cases of termination without cause, an employer must provide between 30 and 90 days of notice to the employee, based on their length of service, and 15 days of severance pay for each year of service with the company.
Snapshot of the employment law in Paraguay. PEO Payroll Company in Paraguay

The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
Legal Team Paraguay
Legal Team Paraguay

Legal Team Paraguay is the Biz Latin Hub leading experts on doing business in Paraguay The Team writes on the news, doing business, law, and changing regulations. The team are experts in corporate law, Administrative law, Employment law, Immigration law and legal advisory services. Read more about them here. You can contact Legal Team Paraguay via our "contact us page".

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