Do I Need a Local Entity to Hire in Honduras?

In Honduras, a "local entity" refers to a recognized business presence that can act as the employer, such as a subsidiary or branch office. This setup allows your company to be recognized locally and fulfill payroll and employment obligations.

Without a local entity, you generally cannot register as an employer, manage payroll, or comply with local employment laws. An alternative is to use an Employer of Record (EOR), which can hire on your behalf while ensuring compliance with local regulations.

What is Required to Employ Someone in Honduras?

• Local employing entity required to directly employ? Yes (required for direct employment and payroll registration)
• Payroll registration required? Yes (must register with the Dirección General de Ingresos)
• Withholding/tax remittance required? Yes (mandatory for income tax and social security)
• Social contributions required? Yes (employers must contribute to social security)
• Local employment agreement required? Yes (written contracts are mandatory under Honduran law)
• Mandatory benefits to budget? Yes (includes vacation, sick leave, and holiday pay)
• Works council/collective agreements considerations? Usually (depends on the sector and collective agreements in place)

Best Options If You're Hiring in Honduras

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but be cautious about misclassification risks.

Hiring contractors in Honduras is possible without establishing a local entity, but you must ensure that the contractor operates independently. Misclassification can lead to legal issues if the contractor is deemed an employee by authorities.

• Ensure the contractor has multiple clients to demonstrate independence.
• Avoid controlling their work hours or methods to maintain their status as independent.
• Be aware that strong labor protections exist, and misclassification can result in penalties.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Honduras, depending on the type of business and registration requirements.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 10,000–25,000 HNL per month ($400–$1,000)
• Payroll provider: Estimated 1,500–3,500 HNL per employee per month ($60–$140)
• Employer registrations and recurring compliance: Estimated 5,000–10,000 HNL per year ($200–$400)
• Corporate tax filings and annual reporting: Estimated 20,000–50,000 HNL per year ($800–$2,000)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 p/month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions, typically around 7.5% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Honduras

Hiring in Honduras can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Honduras quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.