Do I Need a Local Entity to Hire in Peru?

In Peru, a "local entity" typically refers to a recognized business presence, such as a subsidiary or branch office, that allows you to legally employ staff and fulfill local payroll obligations. This setup is essential for complying with Peruvian labor laws and managing employee benefits, tax withholdings, and social security contributions.

Without establishing a local entity, you cannot effectively register as an employer, manage payroll, or issue compliant employment contracts. However, using an Employer of Record (EOR) can be a practical alternative, allowing you to hire employees without the complexities of local entity registration.

What is Required to Employ Someone in Peru?

• Local employing entity required to directly employ? Yes (a local entity is necessary for direct employment)
• Payroll registration required? Yes (you must register with the SUNAT for payroll compliance)
• Withholding/tax remittance required? Yes (employers must withhold income tax and remit to SUNAT)
• Social contributions required? Yes (mandatory contributions to EsSalud and pension funds are required)
• Local employment agreement required? Yes (written contracts are mandatory under Peruvian law)
• Mandatory benefits to budget? Yes (includes health insurance, pensions, and severance pay)
• Works council/collective agreements considerations? Usually (many sectors are influenced by collective bargaining agreements)

Best Options If You're Hiring in Peru

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but it comes with risks. Hiring contractors in Peru can be a viable option if the work is genuinely project-based and the contractor operates independently.

However, misclassification can lead to legal issues if the contractor's role resembles that of an employee. Authorities often scrutinize the nature of the working relationship, especially if:

• the contractor works exclusively for you
• you control their work hours or methods
• the contractor is integrated into your business operations

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

Typical entity setup timeline: It often takes 6–12 weeks to set up an entity in Peru, depending on the required registrations and legal processes.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 1,500–4,000 PEN per month ($400–$1,060)
• Payroll provider: Estimated 300–800 PEN per employee per month ($80–$210)
• Employer registrations and recurring compliance: Estimated 1,000–3,000 PEN per year ($265–$800)
• Corporate tax filings and annual reporting: Estimated 2,000–5,000 PEN per year ($530–$1,320)

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 9% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Peru

Hiring in Peru 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 Peru 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.