Do I Need a Local Entity to Hire in Paraguay?

In Paraguay, 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 comply with local payroll and employment obligations, ensuring you can manage employee contracts, tax withholdings, and social security contributions effectively.

Without establishing a local entity, you generally can't register as an employer, run compliant payroll, or issue local employment agreements. However, using an Employer of Record (EOR) can simplify the process, allowing you to hire employees without the complexities of setting up a local business.

What is Required to Employ Someone in Paraguay?

• Local employing entity required to directly employ? Yes (unless using an EOR)
• Payroll registration required? Yes (must register with the Ministerio de Hacienda)
• Withholding/tax remittance required? Yes (employers must withhold income tax and remit to the tax authority)
• Social contributions required? Yes (mandatory contributions to the Instituto de Previsión Social)
• Local employment agreement required? Yes (written contracts are mandatory under Paraguayan labor law)
• Mandatory benefits to budget? Yes (includes vacation, sick leave, and social security)
• Works council/collective agreements considerations? Usually (many sectors have collective agreements that affect employment terms)

Best Options If You're Hiring in Paraguay

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should be cautious about the nature of the work relationship.

While hiring contractors allows you to bypass the need for a local entity, it’s crucial to ensure that the contractors operate independently and aren't misclassified as employees. Misclassification can lead to legal issues, especially in Paraguay, where labor laws are protective of workers' rights.

• Ensure contractors have multiple clients and control over their work.
• Be wary if the work is integral to your business or if you dictate how tasks are performed.

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

Typical entity setup timeline: Typically 4–8 weeks, depending on the type of entity and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 1,500,000–3,500,000 PYG per month ($210–$490)
• Payroll provider: Estimated 300,000–800,000 PYG per employee per month ($42–$112)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated 1,000,000–2,500,000 PYG per year ($140–$350)

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)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Paraguay

Hiring in Paraguay 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 Paraguay 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.