Understanding Guatemala’s Labor Code is essential when looking to expand in the country and hire local staff. The Central American country has experienced progressive economic stability in the last 4 years, with economic growth of 3.1% in 2019. Currently, Guatemala is considered one of the largest economies in Central America with a promising outlook for foreign investment.
Understand Guatemala’s Labor Code to hire staff in the country.
Guatemala’s labor code
When hiring an employee in Guatemala, companies must issue an employment contract. Even if the employee doesn’t sign a formal contract, the existence of it is presumed and therefore the worker is granted all legal protections and rights. Thus, employers doing business in the country should issue a contract to avoid misunderstandings regarding job tasks and conditions.
Furthermore, employers hiring staff in Guatemala must always have an Internal Work Policy. Note that this document must provide a detailed description of the employees’ responsibilities.
How to set salaries in Guatemala
Guatemala’s labor code’s provisions are fairly standard and similar to other countries in Central America. As stated in Guatemala’s Labor Code, employees must work a maximum workweek of 45 hours, allowing for 10 hours of overtime. Note that overtime pay is 1.5 times the normal hourly wage.
In addition to a limited workday, there is also the obligation to give employees one day off a week. Furthermore, there is an obligation to give employees one day off a week and a 15-days’ vacation time for every year of work. Every employee is entitled to a 15-day vacation period for each year worked. Vacation days begin to accrue from the first day of work.
According to Guatemala’s labor code, companies in Guatemala must pay salaries in legal currency and it cannot be less than the minimum salary. Likewise, the payment cycle cannot exceed 30 days. The law establishes 3 types of activities whose salary must not be less than the minimum salary. These include:
1. Urban Labor.
2. Agricultural Labor.
3. Labour in the special export regime.
Employers doing business in the country can visit the website of the Ministry of Labor in Guatemala to find out about the current minimum salary for a particular sector. Note that social security contributions are 12.67 % of a base salary. Furthermore, employers must know that Guatemala’s Labour code establishes the payment of 14 monthly salaries per year. Moreover, there are two additional salaries in June and December.
Termination of an employment contract
In case of resignment, the employee has the right to the accrued salary for the ongoing period, plus the monetary equivalent of vacation days accrued but not taken and the accrued portions of the 2 additional yearly salaries. If the employee’s contract is terminated without fair cause, in addition to the previously mentioned payments, the employee also has the right to a severance payment that is equivalent to one month’s salary for every year worked.
To avoid potential problems with your employees when doing business in Guatemala, you must engage with a trusted local expert able to ensure that your company remains in full compliance with local regulations when hiring staff in the country,
Understand Guatemala’s Labor Code with the advice of an expert
Foreign businesses incorporating into the Guatemalan market must hire employees in compliance with Guatemala’s Labor Code. When hiring local staff, you must engage with a trusted, experienced employment expert to avoid undesirable penalties from Guatemalan authorities.
At Biz Latin Hub, our multilingual team of local and expatriate professionals is equipped to help you hire local staff in Guatemala while ensuring the good health of your business. With our full suite of market-entry and back-office services, we are your single point of contact for employment and recruitment services in Guatemala and Latin America.
Get in touch with us now to start your business in Guatemala.
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