LABOR CONTRACTS BETWEEN SALVADOREANS AND FOREIGNERS
I am a foreigner and am interested in setting up a company in the country, what labor legal regulations would rule my business activity?
Pertaining labor relationships the salvadorean labor legislation would be applicable, which comprises, basically, the Constitution of the Republic, International Treaties (mostly OIT or International Labor Office Treaties) executed and ratified by El Salvador, the Labor Code, laws relating to Social Security, workers' protection an special benefits, laws regulating the organization and administration of the labor sector, laws relating to specific or particular activities and the applicable by-laws of subordinate laws.
Can I hire foreign workers in my company to perform their services in the country?
Yes, you can, as long as the number of foreign workers does not exceed 10% of the total workers in your company. This percentage does not include foreigners who perform management positions (directors, managers, administrators, up to a number of 4), and original Central Americans are not considered as foreigners.
When the nature of the work would prevent hiring domestic help with the required knowledge to perform a position, you can, with the prior authorization from the Ministry of Labor and Social Welfare, hire more than 10% of foreigners but only for a term of 5 years, during which term you must train salvadorean personnel. The total of salaries earned by salvadorean personnel in your company must be equivalent to 85% of the total salaries paid.
ABOUT HIRING WORKERS
Is the existence of a written labor agreement, mandatory? What implications are there for me as the employer?
As an employer, you have the legal duty to execute a written labor agreement with your employees. If an employee refuses to sign the agreement you must notify the Labor General Direction. The written agreement is the ideal evidence of the labor relationship. But, if such written document does not exist, the agreement whereby you hired the worker can be proven by any other means, or only by evidencing that the employee has worked for you for more than two consecutive days. If subordination is proven, the labor agreement is assumed even if it is for a smaller period of time. The party most interested in proving the labor agreement will surely be your employee.
There are two exceptions wherein you are not compelled to produce a written agreement:
When the agreement is with a farm workers with whom the labor agreement can be done verbally. Now, if they ask to produce a written document where the labor relationship is evidenced you are committed to provide them with a written proof thereof every 15 days.
When the agreement is with domestic work, the labor agreement can be by word of mouth. Similarly, if they ask you for any written evidence thereof you are committed to provide them with a written confirmation every 30 days.
What are the differences between a labor agreement and a professional services agreement? Are my employment duties different in one case or the other? Can I freely choose which option to use?
In a labor agreement a subordination relationship of the employee to the employer, exists, meaning that you have full authority over your subordinates. Differently, in the professional services agreement there is no legal subordination upon the professional individual that provides services to you. In such case, you are a contracting party, not an employer. Therefore, you cannot exercise authority over the professional individual. This is eminently a commercial or civil agreement.
The compensation paid to a worker is called salary which is freely established between the employer and employee but there is an established minimum that cannot be reduced, and must be paid periodically, in full and in legal currency (colones or dollars). Moreover, the worker is entitled to other additional privileges. The compensation paid to a professional individual is called fee or price and is freely established between the contracting party and the professional individual who delivers the service. I could be agreed upon in any currency and payments can be in full or through installments. A professional individual cannot demand more than what was agreed upon in the professional services agreement.
You cannot freely choose an option: if you hire someone to deliver a service or perform a job under your full authority, even if you want to call it otherwise, it inevitably is a labor agreement or labor relationship.
Can I hire a worker for a given term? Am I authorized to extend the agreement several times?
If the work for which you are to hire a worker is of a permanent nature, the term of the labor agreement is, by law, regarded as indefinite.
The following are the sole cases whereby a worker can be hired for a fix term:
- When you hire a worker to perform transitory, eventual or temporary works.
- When, in the hiring process you took into account circumstances or events that would cause the full or partial termination of the works.
- You can extend the agreement as long as the expressed circumstances still exist, and as long the work is not deemed to be of a permanent nature, since when that occurs, the agreement will switch to a definite agreement.
Can I amend the working conditions of my employees even if they do not agree therewith? In which cases?
No, you cannot amend the working conditions of the agreement without the consent of your employees.
The only cases of exception are:
You can reduce the daily or weekly work hour system originally agreed upon in the labor agreement in the event of force majeure (such as lack of raw materials, moving cause or similar events) which can imply a reduction of the salary payment according with the work hours effectively worked.
If you need to modify the work schedule but your workers do not agree with your decision, you can appear before the offices of the Labor General Direction for them to authorize the modification.
ABOUT THE TRIAL PERIOD.
I need to hire a new employee. How long can the employee be in the trial period and what rights must I recognize the employee during that period?
The trial period is 30 days. During this period you must respect all the rights as you would have to for the rest of the labor relationship. For example: social security, occupational hazard, the right to enjoy work breaks, days off, etc. The only benefit is that when the trial period comes to an end and in the event that you think that the employee does not have the necessary skills to perform the work, you can terminate the relationship with no responsibility, that is to say, that you do not have to pay the employee any indemnification or other types of benefits except the agreed upon salary accrued during those 30 days of the trial period.
CAN I MODIFY THE WORK SCHEDULE OF MY EMPLOYESS WITHOUT THEIR CONSENT?
What is the work day or work week (in hours)? As an employer can I modify the day work or work week (in hours) without their consent?
The work schedule is a period of time during which the employee is committed to personally perform his duties to the benefit of the employer, subject to the subordination and in exchange of a compensation.
You cannot modify the work schedule if your employees do not agree thereupon.
You can reduce the daily or weekly work hours in the event of force majeure (such as lack of raw materials, moving cause or similar events). Section 24 Labor Code.
If you need to change the work schedule but if your employees do not agree thereupon, you can appear before the Labor General Direction for them to authorize the modification.
OVERTIME, A RIGHT OR AN OBLIGATION OF EMPLOYEES?
If I need from my employees to work overtime, how must I pay that overtime? Do I pay the same whether overtime is during the day or during the night?
If overtime is worked during the day, you must pay double of what the employee earns during ordinary hourly time. For example: if employee earns the minimum monthly salary($158.40) and his work hours are 8 daily hours, the salary per ordinary hour is $0.67. Therefore, for each overtime daily hour you must pay $1.34.
If overtime is worked during the night, you must pay double of what the employee earns during ordinary hourly time, plus an overcharge of 25% for night work. Example: if employee earns the minimum monthly salary ($158.40) and his work hours are eight daily hours, the salary per ordinary hour is $0.67. Therefore, for each overtime nightly hour you must pay $1.68. This amount is the result of adding the 25% of the $1.34, which is $0.34 that goes to $1.34.
ALL YOU HAVE TO KNOW ABOUT THE WEEKLY PERIOD OF REST.
Can I switch the weekly rest period to my employees?
Ordinarily, the weekly rest period must be on Sundays. However, if your company operates continually, or performs a public service or due to the type of activity it ordinarily works during Sundays, you can switch Sundays and move the weekly rest period to any other day of the week. If your company is not under the aforementioned conditions, you cannot change Sundays to any other given day during the week, unless the Labor General Direction authorizes it.
How do I pay my employees that have worked during the weekly day rest? Am I required to allow them a compensatory and remunerated rest day?
Besides the regular salary of that day, you have to pay them an overcharge of 50% on their salaries for each hour worked and, in addition, you have to grant them a compensatory rest day with regular salary during the same or the following week. Example: if an employee earns the minimum monthly salary $158.40) and the work schedule is 8 hours per day, the salary for the worked day rest(8 hours) would be $7.92, then to figure out the hourly overtime you have to take as the base salary $0.99 per hour (which is $7.92 divided by 8).
SOME CONSIDERATIONS ON DAYS OFF.
Am I required to grant my employees the days off ordered by law?
Yes, you are required to grant the days off to your employees according with the law, save for the following exceptions:
- When, by mutual agreement with your employees, they decide to work during days off.
- Your employees are required to work during a day off, if you so decide, in the following situations:
a) If your company provides public or essential services to the community.
b) If your company is a commercial business that deals with amusement activities, hotels, restaurants or entertainment.
c) If your company deals with the sale of fundamental needs (requirement to work in this case goes up to 12:oo m).
d) If the work interruption could cause grave damage to the interest of the public health.
e) If the work requires its continuity based upon technical or practical reasons, or when interruption of work could cause that the raw material which is been worked on could decompose the or create other similar consequences.
If my employee has worked during a day off, how do I pay it?
You have to pay the ordinary salary for that day plus an equivalent amount.
For example, if your employee earns the minimum monthly salary ($158.40), the employee's daily salary would be $5.28. Then, if during a month the employee worked one day off, during that particular month you have to pay the employee $168.96. This means that this worked day off will be remunerated with a salary of $10.56. If, in addition, during that day off the employee had to work overtime, the overcharge for overtime (which is 100%), will figured out over that salary, that is, according with the example, over $10.56.
If a rest period coincides with a day off, what do I pay my employees?
If they take the rest period without working during it, you pay the regular salary, that is, it is included as any rest period or any day off, for purposes of the salary.
If the employees work during that particular day, you must grant the compensatory rest period to which they are entitled by working on their weekly rest and, additionally, you have to pay them pursuant to the rules of the worked day off.
CAN I SET OFF VACATION TIME WITH PAYMENT? CAN I GRANT IT IN A FRACTIONED MANNER?
Can I agree with my employee to work during vacation time in exchange of a payment?
No, it is expressly forbidden by law to compensate vacation time by way of a payment. You are required to grant vacation time to your employees and employees cannot waive that right. Except if employees do not work for you anymore, you may compensate them with money for the vacation period the employees had not yet enjoyed.
Can I fraction vacation time of my employees?
No, it is forbidden by law to fraction vacation periods, unless you agree with a majority of the employees of your company or business concern. In such case, vacation time may be fractioned in two or more periods of time within the work year, but you will be faced with increasing the number of vacation days:
- If fractioned by three, each of such 3 periods must last, at least, seven days, which implies that the vacation days during a year will be at least 21 days.
- If fractioned by two, each of such two periods must last at least 10 days, meaning that the vacation days during the year will be at least 20 days.
- If vacation time is fractioned in more than three segments, the minimum of each period must always be 7 days.
ABOUT THE SALARY
What is the minimum salary I can pay my employees and what are the consequences I may contend with, as an employer, if I pay them less than the minimum salary?
Currently, the minimum salary for business concerns and services is $158.40 per month; for industrial concerns is $154.80 per month and for the farming/stockbreeding industry is $ 74.05 per month. The minimum salary is revised every three years.
If you do not pay the minimum salaries to your employees, they can appear to the Labor Inspection General Office to file their relevant claim. In addition to paying the amounts unpaid to your employees you will also be subject to sanctions, for example: fines.
My employee's salary must always be paid in cash or can I make payments in kind?
The salary must always be paid in cash in the legal currency (dollars or colones).
In the event of work disability of an employee, must I pay the salary?
Only during the first three days you have to pay, at least, the equivalent of 75% of the employee's base salary. From day four, the social security system is committed to provide an equivalent of 75% of the employee's salary during the time the disability lasts.
ABOUT MY PREGNANT EMPLOYEE
My employee is pregnant. How long a time do I have to grant her for maternity leave and how do I have to pay her?
You are required to grant her a twelve-week period of maternity leave. Of this twelve-week period, half must be mandatorily taken after delivery. The medical doctor must issue a pregnancy certificate stating the probable date of birth and this date is the starting point to take the license. If delivery happens after the probable date stated by the doctor, the time that had been programmed after delivery shall not be reduced; such period of time shall be as of the date of delivery. Example: the probable date of delivery, according with the doctor's assessment, is June 30. Options thereto:
The employee may take her maternity leave as of May 19 and must be back to her post by August 12. According with this assumption, she would be taking six weeks prior to delivery and six weeks thereafter.
If the employee only wishes to enjoy a two-week rest period before delivery, she may take her license as of June 16th. Therefore she would have an accumulative four-week period and would be required to be back to her job by September 9.
If employee takes her license as of June 30, the delivery date, she gets back to her position by September 23.
If delivery did not happen in June 30, as was expected, but did until July 10, in the event of case a) whereby the employee took a rest period since May 19, she will be back to her job by August 23; in the event of case b) during which she had a rest period since June 16, she would be back to her job by September 20; and in the event of case c) when she left the same date of delivery, she would be back to her job by October 4.
Regarding the payment for maternity leave, the employee is entitled to 75% of her salary for those twelve licensed weeks. This benefit is paid by the ISSS and, unless you did not insure the employee thereto, you will have to directly assume payment thereof as her employer.
SOME INSIGHTS REGARDING DISSMISAL OR RESIGNATION OF EMPLOYEES.
If I fire an employee, am I legally subject to pay the employee vacation time and year-end bonus?
If the dismissal is factual or involving your responsibility, yes, but only in a proportional manner to the period of time that the employee has worked, as follows:
Proportional Year-End Bonus: you must pay employee the corresponding proportional amount due to employee for year-end bonus to December 12, times the last calendar year worked. As an example, if you fire employee in June 30, you must pay employee 50% of employee's right to year-end bonus.
Proportional Vacation-time Payment: you must pay employee the corresponding amount for the fraction of the previous year worked. The year is determined as of the date the employee started working or as of the immediately previous year worked by employee
Remuneration for vacation time is the salary corresponding to 15 days´ work plus a 30% overcharge on that amount. This is what is taken into account as a base to figure out the corresponding fraction. If, at the time of the employee's dismissal employee had already served a year on the job and had not taken vacation time, employee is entitled to full remuneration.
The sole compensation to which the employee is entitled if dismissed with just cause, is the full vacation compensation if, at the time of dismissal employee had reached one year in the job and had not taken any vacation time.
Likewise, you must keep in mind that when dealing with an indefinite-term labor relationships, if you dismiss an employee without just cause thereto, you must additionally pay employee a dismissal indemnification.
If my employee resigns, what am I supposed to pay?
The employee's vacation remuneration provided employee has worked for a period of one year and has not taken vacation time therewith.
WHAT SHOULD I BE AWARE OF REGARDING LEGAL PRIVILEGES OF LABOR UNIONS AND LABOR STRIKES?
As an employer, can I oppose the formation of a labor union in my company?
No, you cannot oppose the formation of a labor union in your company. If you do oppose, you could even be accused of committing a criminal act.
I have foreign workers performing work in my company; do they have the right to form a labor union?
Yes, foreign workers can belong to a labor union. What they are prevented from is to become directors of that union since only Salvadorian-born individuals can exercise such position.
As an employer, do I have the authority to disrupt a labor union? Can I dismiss employees for such purpose?
No, you cannot disrupt a labor union in your company, much less can you dismiss employees for such purpose. If you did that you would be committing a crime.
AM I REQUIRED TO EXECUTE COLLECTIVE BARGAINING AGREEMENTS?
As an employer, am I required to execute collective bargaining agreements?
If 51% of your employees are part of a labor union (or have been part of a labor union within the last 60 days) and this union requests from you the creation of a collective bargaining agreement, you are then required by law to negotiate and execute a collective bargaining agreement.
If you have in your company two or more labor unions that all together represent 51% of all your employees and all unions join together and request it from you, then you are also legally required to negotiate and execute a collective bargaining agreement.
If such percentage is not complied with, you are not legally required to act toward that end.