Getting payroll right in Paraguay Getting payroll right in Paraguay

Getting payroll right in Paraguay
14 Nov 2018

Paraguay has become an attractive destination for foreign investment due to various tax incentives, but it has also become an increasingly popular South American country to do business in.

Like everywhere though, there are a number of challenges that must be overcome if you want to set up shop here - and one of the most important relates the regulations around how you pay your employees. 

Paying staff

The legislation that guides how employees are paid consists of the Labour Code and Law 213/93, which was modified and partially updated by Law 496/95. The Labour Procedural Code, Law 742/61 and other special regulations also apply. These laws cover all matters related to the workforce and the relationship between employers and their employees.

But it is also worth bearing in mind that paying staff correctly also depends on the type of economic activity that a given company is involved in as there are more than 70 specific laws and regulatory decrees that influence the situation.

The standard working week in Paraguay is 48 hours per day and 42 hours if employees do night shifts, which are paid 30% more than daytime work. Overtime is paid at a rate of 50% during the day, 100% at night and 100% during public holidays.

Workers are paid in the country’s official currency: the Paraguayan guaraní (PYG). The national minimum wage is 2.11 million guaraníes per month (US$352) and wage growth is typically slow for most employees.

Staff who are terminated without cause are entitled to 15 days’ wages for each year worked. Employees who have worked for 10 years with the same employer are deemed to have tenure and cannot be dismissed for unjust reasons. 

Social security 

Employees contribute 9% of their gross salary each month to a social security fund (‘IPS’ in Spanish), while their employers put in 16.5%. The IPS covers social security, medical services, which include work/occupational illnesses, accidents and death, as well as retirement and pension provision. Medical services, which include medicine, hospitals and specialised care, also include cover for an employee’s family.

Paid leave 

Vacation days are earned after staff have worked for an employer for a total of one year. Employees are entitled to 12 days if they have worked from one to five years, 18 days for five to 10 years, and 30 days for 10 years or more. They also have the right to 12 national holidays per year. 

In terms of sick leave, workers that have a justified illness are entitled to take medical leave, with 50% of their salary paid by the government.

Paraguay also offers both maternity and paternity leave. Maternity leave lasts for 18 weeks and IPS pays the women concerned 100% of their salary. Paternity leave may be taken for two weeks after the baby’s delivery date, and the father’s salary is paid by his employer.

Bonuses

According to Law 213/93, Article 243, employees are paid a complementary, annual compensation or thirteenth salary in December. It is equivalent to one month’s salary.

Marcelo Gul

Marcelo Gul has been client services director for the TMF Group’s Paraguay office since 2014. He formerly worked for a number of multinational companies and holds a degree as a Public Accountant from the Universidad de la República in Uruguay. Marcelo also completed postgraduate studies on the Preparation and Evaluation of Investment Projects from the Universidad de Chile.

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Paraguay has become an attractive destination for foreign investment due to various tax incentives, but it has also become an increasingly popular South American country to do business in.

Like everywhere though, there are a number of challenges that must be overcome if you want to set up shop here - and one of the most important relates the regulations around how you pay your employees. 

Paying staff

The legislation that guides how employees are paid consists of the Labour Code and Law 213/93, which was modified and partially updated by Law 496/95. The Labour Procedural Code, Law 742/61 and other special regulations also apply. These laws cover all matters related to the workforce and the relationship between employers and their employees.

But it is also worth bearing in mind that paying staff correctly also depends on the type of economic activity that a given company is involved in as there are more than 70 specific laws and regulatory decrees that influence the situation.

The standard working week in Paraguay is 48 hours per day and 42 hours if employees do night shifts, which are paid 30% more than daytime work. Overtime is paid at a rate of 50% during the day, 100% at night and 100% during public holidays.

Workers are paid in the country’s official currency: the Paraguayan guaraní (PYG). The national minimum wage is 2.11 million guaraníes per month (US$352) and wage growth is typically slow for most employees.

Staff who are terminated without cause are entitled to 15 days’ wages for each year worked. Employees who have worked for 10 years with the same employer are deemed to have tenure and cannot be dismissed for unjust reasons. 

Social security 

Employees contribute 9% of their gross salary each month to a social security fund (‘IPS’ in Spanish), while their employers put in 16.5%. The IPS covers social security, medical services, which include work/occupational illnesses, accidents and death, as well as retirement and pension provision. Medical services, which include medicine, hospitals and specialised care, also include cover for an employee’s family.

Paid leave 

Vacation days are earned after staff have worked for an employer for a total of one year. Employees are entitled to 12 days if they have worked from one to five years, 18 days for five to 10 years, and 30 days for 10 years or more. They also have the right to 12 national holidays per year. 

In terms of sick leave, workers that have a justified illness are entitled to take medical leave, with 50% of their salary paid by the government.

Paraguay also offers both maternity and paternity leave. Maternity leave lasts for 18 weeks and IPS pays the women concerned 100% of their salary. Paternity leave may be taken for two weeks after the baby’s delivery date, and the father’s salary is paid by his employer.

Bonuses

According to Law 213/93, Article 243, employees are paid a complementary, annual compensation or thirteenth salary in December. It is equivalent to one month’s salary.

Marcelo Gul

Marcelo Gul has been client services director for the TMF Group’s Paraguay office since 2014. He formerly worked for a number of multinational companies and holds a degree as a Public Accountant from the Universidad de la República in Uruguay. Marcelo also completed postgraduate studies on the Preparation and Evaluation of Investment Projects from the Universidad de Chile.

OTHER ARTICLES THAT MAY INTEREST YOU

Minding your manners in Chile

A brief guide to Argentina's labour laws

A brief guide to Brazil's labour laws

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