Employer of Record in El Salvador

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

Businesses can only operate smoothly in El Salvador if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in El Salvador below, to avoid any compliance issues.

Employment Contract Requirements

In El Salvador, employment contracts can be either written or verbal, but it is common to use written agreements. A detailed written employment contract typically outlines the following:

• Employee Information
• Compensation
• Job Details
• Working Hours

Onboarding Process

We can help you get a new employee started in El Salvador quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in El Salvador

The standard working week in El Salvador comprises 44 hours, usually distributed as 8 hours a day over five and a half days.

Overtime in El Salvador

In El Salvador, extra work beyond the regular weekly hours is considered overtime, and its terms are defined in the employment contract or collective agreements. There are no specific limits on hours, except for minors. Overtime, usually exceeding 44 hours per week, is paid at a rate of 200% of the employee's regular salary.

Probation Period in El Salvador

The probationary period varies depending on the type of role and is specified in the employment agreement. Probation periods cannot exceed 30 days.

In 2025, El Salvador’s minimum wage remains structured by industry, with the highest rate set at $408.8 per month for sectors like commerce, services, and industry, while agricultural workers receive the lowest at $272.72. While the minimum wage aims to provide fair compensation, discussions continue about whether it meets the reasonable cost of living, especially in urban areas where expenses are higher.

Employers in El Salvador must comply with minimum wage laws based on their industry and ensure that both local and expatriate workers receive at least the mandated wage. There are no specific exemptions for interns, trainees, or part-time workers, though compensation is typically prorated based on hours worked. Given that informal employment remains prevalent, enforcement challenges persist. Employers should stay updated on potential future adjustments to avoid legal risks and ensure fair compensation for workers.

Hiring in El Salvador means navigating local labor laws, mandatory employee benefits, payroll taxes, and strict employment regulations. These requirements aren’t always intuitive, especially if your team lacks in-country legal or HR expertise. An Employer of Record steps in as the legal employer for your hires, managing all compliance-related responsibilities. This includes issuing locally compliant contracts, registering employees with relevant authorities, processing payroll, and handling social security contributions and taxes in line with national laws.

By handing over these complexities to an EOR, your business avoids costly compliance errors and the time required to master local employment standards. You can focus on growing your team and operations while trusting that the legal and administrative foundation is solid. Whether you're making one strategic hire or building out an entire team, the EOR keeps you compliant, removes guesswork, and reduces the risk of legal or financial penalties, without requiring you to open a legal entity or maintain a local HR team.

Managing payroll in El Salvador involves careful adherence to employment tax regulations, including income tax withholding, social security contributions, and pension fund payments. Employers must ensure accurate calculation and timely submission of these taxes to avoid penalties and maintain positive employee relations. Understanding the progressive income tax system and required employer and employee contribution rates is essential for compliance.

Additionally, keeping track of monthly due dates is critical to prevent late fees and legal issues. Monthly employment income tax submissions are due within the first 15 days of the month following the payment of salaries, with annual income tax returns due by April 30. Using payroll management software can greatly assist employers in consolidating payroll data, simplifying compliance tasks, and ensuring smooth and accurate payroll operations in El Salvador.

Running payroll in El Salvador is complex, especially when you're hiring without a local entity. Local laws determine everything from tax withholdings and reporting deadlines to benefit contributions and currency requirements. Missteps can lead to fines, payment delays, or unhappy employees. An Employer of Record takes this burden off your plate by handling the full payroll process. Acting as the legal employer, the EOR ensures you remain compliant with all payroll-related obligations, while still allowing you to manage your team’s day-to-day work and performance.

Key Ways an EOR Supports Payroll in El Salvador:

• Compliance Assurance: Ensures payroll aligns with local tax laws, labor regulations, and statutory deadlines.
• Payroll Processing & Tax Management: Calculates salaries, applies correct tax withholdings, and submits required reports.
• Benefits & Social Security Contributions: Manages employer obligations for pensions, health insurance, and other legal entitlements.
• Contract Generation & HR Administration: Drafts compliant employment contracts and supports onboarding, terminations, and HR tasks.
• Currency Payments: Issues timely salary payments in local currency, ensuring employees are paid accurately and on time.

In El Salvador, work permits and visas are essential for employers hiring foreign workers. The key types include Temporary Work Visas, Permanent Resident Visas, and Frequent Traveler Cards, each with specific requirements and durations. Employers must navigate detailed application procedures, meet compliance standards, and prepare for renewal processes to facilitate international hiring effectively.

Mandatory Leave Entitlement in El Salvador

The annual leave entitlement in El Salvador is 15 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In El Salvador

El Salvador mandates the observance of the following national holidays:

Paid Time Off in El Salvador

Employees who've worked for a year or more (or over 200 days in a year) get 15 days of paid vacation from December 12 to the next December 12. They receive 130% of their regular salary before their leave. But, it's crucial to use all vacation days since they can't be converted to cash.

Maternity Leave In El Salvador

Female employees get up to 16 weeks of paid maternity leave, receiving 75% of their regular wages. They must take at least six weeks before the due date and can take up to 10 weeks after the child is born. If there are pregnancy-related issues, they can ask for an extension of the leave.

Paternity Leave In El Salvador

In El Salvador, fathers get three days of paternity leave to be taken within the first 15 days after the child's birth, and it's paid at their full salary by the employer.

Sick Leave In El Salvador

The amount of paid sick leave an employee can take in El Salvador is based on their years of service:

• For 1-5 months of employment, the employee is entitled to 75% of the basic salary for 20 days.
• With 5 months to 1 year of employment, the entitlement is 75% of the basic pay for 40 days.
• For one year or more of employment, the employee is entitled to 75% of the basic pay for 60 days.

Parental Leave In El Salvador

El Salvador does not offer additional shared parental leave beyond the provisions for maternity and paternity leave.

Bereavement Leave

Employees facing the loss of an immediate family member are granted one day of paid bereavement leave.

Administering employee benefits in El Salvador requires more than just offering a standard package. Local labor laws often mandate specific entitlements, from health insurance to paid leave, and the rules can change without warning. El Salvador also has unique standards for what an attractive, competitive benefits package looks like. For businesses without in-country expertise, meeting these obligations and expectations can quickly become risky and expensive. An Employer of Record acts as your compliance partner, ensuring all benefits are provided according to the latest legal requirements and without administrative strain on your internal team.

Beyond compliance, an EOR brings clarity and consistency to a process that’s often complex and fragmented. They handle enrollments, ensure accurate employer contributions, manage communications with local providers, and keep everything properly documented. This means employees get what they’re entitled to, and you avoid the headache of navigating benefits systems in a foreign market. Whether you're hiring one person or building a larger team, an EOR provides a clear, dependable structure that lets you offer competitive benefits without taking on unnecessary risk or workload.

Termination Process in El Salvador

The process of termination is subject to the terms outlined in the employment agreement or collective agreement. It varies based on factors such as the type of contract, length of service, and the reason for termination. The employer can legally terminate the contract under the following grounds:

• Deception with false documents
• Repeated negligence
• Serious breaches of contract obligations
• Disclosure of secrets
• Intoxication in the workplace
• Disrespectful behavior towards the employer or fellow employees

Notice Period in El Salvador

In El Salvador, the notice period is based on the terms in the employment contract or agreement and is not a legal requirement. However, it is customary for employers to request a minimum of 7 days notice from employees who have completed their probationary period.

Severance in El Salvador

Severance pay, known as "indemnización" in El Salvador, is a mandatory entitlement for employees whose contracts are terminated without just cause by the employer. No severance is given for voluntary resignations or the natural end of a contract. The standard calculation for severance pay is equivalent to 30 days of ordinary salary for each year of service. For periods less than a full year, severance is calculated proportionally.