Payroll and Employment Taxes in Peru

Overview of Payroll Taxes in Peru

Managing payroll taxes in Peru requires understanding several key components that affect both employers and employees. Businesses operating in Peru must navigate a system that includes income tax withholding, social security contributions (EsSalud), pension system contributions (either SNP or SPP), and various mandatory benefits.

For employers, particularly those new to the Peruvian market, compliance with these regulations is crucial to avoid penalties and maintain positive employee relations. Small businesses and large enterprises alike must stay informed about calculation methods, contribution rates, and filing deadlines that can vary based on company size and employee income levels.

This article aims to provide a comprehensive guide to help employers understand and manage their payroll tax obligations in Peru effectively.

Fiscal Year in Peru

1 January- 31 December is the 12-month accounting period that businesses in Peru use for financial and tax reporting purposes.

Payroll Cycle in Peru

The payroll cycle in Peru is usually monthly, with employees being paid by the last working day of the month.

Minimum Wage in Peru

As of 1 January 2025, Peru's minimum wage rates has increased to 7.06 PEN per hour, amounting to 1,130 PEN per month for a typical 48 hour work week.

The minimum wage is reviewed periodically, typically annually, by the National Council of Labor and Employment (CNTPE). It is based on economic indicators and factors like inflation, cost of living, and economic growth.

Bonus Payments in Peru

It is mandatory for employers to provide 13th-month and 14th-month payments. Employees receive an additional month's salary twice a year. The first payment occurs in July (payable by 15 July), around Peru's Independence Day, and the second payment is made at the end of the year (payable by 15 December), around Christmas.

How is Payroll Calculated in Peru?

Payroll calculation in Peru involves several components that affect the final amount employees receive and what employers must contribute. The process typically follows these steps:

Base Salary Determination: Start with the employee's gross monthly salary as stipulated in their employment contract.

Mandatory Deductions:            

• Pension contributions: Either 13% for the National Pension System (SNP) or approximately 12-13% for the Private Pension System (SPP), depending on the employee's choice.
           
• Income tax withholding: Progressive rates between 8% and 30% based on income brackets.
           

Employer Contributions:            

• EsSalud (Public Health Insurance): 9% of the employee's monthly salary.
           
• Family allowance: 10% of the Minimum Vital Wage for eligible employees with dependent children.
           
• Gratuity accruals: Equivalent to one month's salary paid twice yearly (July and December).
           
• Extraordinary bonus: Additional 9% of the statutory bonus (or 6.75% if the employee is affiliated with an EPS).
           
• Service Time Compensation accrual: Approximately 8.33% of monthly salary.
           
• Optional Benefits: Additional benefits like private health insurance, food allowances, or transportation subsidies may be included in the total compensation package.
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The final net salary is calculated by subtracting all mandatory employee deductions from the gross salary, while the total cost to the employer includes both the gross salary and all employer contributions.

Types of Payroll Taxes in Peru

Peru has several distinct payroll taxes and mandatory contributions that employers must manage. Each has specific regulations, calculation methods, and payment schedules that businesses must follow to remain compliant with Peruvian labor laws.

EsSalud (Health Insurance)

EsSalud is Peru's public health insurance system that provides healthcare coverage to employees and their dependents. The contribution is set at 9% of the employee's monthly salary and is entirely funded by the employer. This contribution is mandatory for all employees and must be paid monthly.

The funds provide access to public hospitals and clinics throughout Peru. Employers must register employees with EsSalud within the first month of employment and make timely payments to avoid penalties, which can include fines of up to 1 UIT (Tax Reference Unit) per affected employee and potential legal action for non-compliance.

Pension System Contributions

Peru offers two pension systems that employees can choose between: the National Pension System (SNP) and the Private Pension System (SPP). For the SNP, employees contribute 13% of their monthly salary, while SPP contributions total approximately 12-13% of salary (including retirement account contributions, AFP commission, and insurance premiums).

These contributions are deducted from the employee's salary, with employers responsible for withholding and remitting the funds to the appropriate pension authority. Employers must ensure proper registration of employees in their chosen system and make timely monthly payments. Failure to correctly withhold or remit pension contributions can result in fines, interest charges, and potential legal liability.

Income Tax Withholding

Income tax in Peru follows a progressive system with rates ranging from 8% to 30% depending on income levels. Employers are responsible for calculating, withholding, and remitting income tax on behalf of their employees. The tax is applied to all forms of compensation, including regular salary, bonuses, and other taxable benefits. Monthly withholdings are considered advance payments toward the employee's annual tax obligation.

Employers must file monthly declarations and make payments according to a schedule determined by the tax authority (SUNAT). Non-compliance with income tax withholding obligations can result in significant penalties, including fines calculated as a percentage of the unpaid tax amount, interest charges, and potential tax audits.

How to Set Up a Payroll in Peru?

Setting up a payroll in Peru requires registration with several government entities:

   
• SUNAT (National Superintendency of Tax Administration): Register your business to obtain a RUC (Unique Taxpayer Registry) number, which is essential for tax purposes. This registration allows you to operate legally and make tax declarations.
   
• Ministry of Labor: Register as an employer and submit your company's internal work regulations if you have more than 20 employees.
   
• EsSalud (Social Health Insurance): Register your company and employees to ensure proper health coverage. This registration must be completed within the first month of operations or employment.
   
• Pension System: Establish accounts with either the National Pension Office (ONP) for the public system or with Private Pension Fund Administrators (AFPs) based on employee choices.
   
• Electronic Payroll (PLAME): Register for the electronic payroll system to submit monthly reports on employee compensation and contributions.

Choosing a Payroll System

Selecting the right payroll system is crucial for efficient operations in Peru. Consider these options:

   
• In-house processing: Suitable for very small businesses with few employees and simple payroll needs.
   
• Outsourced payroll services: Professional firms that handle all aspects of payroll processing, ideal for medium-sized businesses.
   
• Payroll software: Digital solutions that automate calculations and reporting.
   
• Playroll: A comprehensive global payroll platform that helps businesses manage international payroll compliance, including Peru-specific requirements.
   
• Local accounting software with payroll modules: Programs adapted to Peruvian tax and labor regulations.

When selecting a system, consider factors such as the number of employees, budget constraints, compliance requirements, and integration capabilities with other business systems. The right solution should accommodate Peru's complex bonus structure, multiple contribution types, and electronic filing requirements.

Onboarding Employees for Payroll

Proper employee onboarding is essential for accurate payroll processing in Peru. When hiring new employees, collect the following documentation:

   
• National ID (DNI) or foreign resident card
   
• Tax identification number (RUC for independent contractors)
   
• Pension system election form (choosing between SNP and SPP)
   
• Banking information for salary deposits
   
• Family information for dependent benefits (marriage certificate, children's birth certificates)
   
• Previous employment certificates if applicable

Create individual employee files containing employment contracts, tax withholding forms, and benefit elections. Ensure all employees are registered in the Electronic Payroll system (PLAME) within the legally required timeframe, typically within the first month of employment.

Step-by-Step Payroll Processing in Peru

Collecting Timesheets and Attendance Data

Accurate time tracking is fundamental to payroll processing in Peru, especially for hourly workers or those eligible for overtime. Employers should implement reliable attendance systems that comply with Peruvian labor regulations, which may include biometric systems, electronic time cards, or digital attendance apps.

Regular working hours in Peru are typically 48 hours per week, with overtime paid at 125% of regular hourly rate for the first two hours and 135% for additional hours. Maintain detailed records of regular hours, overtime, absences, and leaves to ensure accurate compensation calculations and to provide documentation in case of labor inspections or disputes.

Calculating Salaries and Deductions

Salary calculations in Peru must account for various components and deductions. Start with the base salary as defined in the employment contract. Add applicable allowances and variable compensation such as commissions or production bonuses.

Calculate mandatory deductions including pension contributions (13% for SNP or 12-13% for SPP) and progressive income tax withholdings (8-30% depending on income level). Determine employer contributions including EsSalud (9%), family allowances if applicable, and accruals for gratuities and compensation for time of service (CTS). For employees with irregular schedules or mid-month changes, prorate calculations accordingly. Document all calculations thoroughly to support payroll records.

Generating and Distributing Payslips

Peruvian law requires employers to provide detailed payslips to all employees. These payslips must include gross salary, itemized deductions, employer contributions, and net pay. They should also reflect accrued benefits like vacation time and gratuities. Payslips can be distributed electronically with employee consent or in physical form.

Ensure that the format complies with labor regulations and includes all required information. Many employers in Peru now use digital platforms that allow employees to access current and historical payslips securely. Regardless of distribution method, maintain copies of all payslips for at least five years to comply with record-keeping requirements.

Submitting Payroll to Authorities

Employers in Peru must submit monthly payroll information to various authorities. The primary submission is the Electronic Payroll (PLAME), which must be filed with SUNAT by a schedule based on the last digit of the company's RUC number, typically between the 12th and 22nd of the following month. This submission includes detailed information about employee compensation, deductions, and contributions.

Additionally, pension contributions must be reported and paid to either ONP or the respective AFP, depending on employee elections. EsSalud contributions are typically reported through the PLAME system as well. Ensure all submissions are accurate and timely to avoid penalties and interest charges.

Paying Employees

Salary payments in Peru are typically made monthly, though some companies opt for bi-weekly payments. The most common payment methods include direct bank deposits and electronic transfers. Cash payments are discouraged and may raise compliance concerns.

Employers must pay salaries no later than the last day of each month, though many companies establish fixed payment dates earlier in the month. Special payments like gratuities have specific timeframes: July gratuities must be paid by July 15th, and December gratuities by December 15th. Compensation for Time of Service (CTS) deposits must be made by May 15th and November 15th each year. Maintain proper documentation of all payments for accounting and compliance purposes.

How to Submit Payroll Tax in Peru

Peruvian employers have several methods for submitting payroll taxes and contributions:

   
• Electronic Filing through SUNAT Virtual Platform: Submit the Electronic Payroll (PLAME) through SUNAT's online portal. Requires digital certificate or authentication credentials. System automatically calculates certain contributions based on reported data. Most common method for medium and large businesses.
   
• PDT Software: Downloadable software provided by SUNAT for tax declarations. Allows offline preparation of submissions. Must be uploaded once completed. Suitable for areas with unreliable internet connections.
   
• Mobile Applications: SUNAT app allows certain declarations from mobile devices. Limited functionality but useful for simple submissions. Requires prior registration with SUNAT Virtual.
   
• Authorized Banking Network: Physical payment of tax obligations through authorized banks. Declaration forms must still be submitted electronically. Provides payment confirmation receipts.
   
• Third-Party Services: Accounting firms or payroll providers can submit on behalf of the company. Requires proper authorization and power of attorney. Responsible for accuracy remains with the employer.

Payroll Tax Due Dates in Peru

Payroll Contributions in Peru

Understanding the tax obligations for both employers and employees is crucial when operating in Peru's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Peru.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 9% on top of the employee salary in Peru.

Employee Payroll Tax Contributions

In Peru , the typical estimation for employee payroll contributions cost is around 12.50% to 13.00%.

Individual Income Tax Contributions

The income tax rates are applied on a progressive scale expressed in UITs (Tax Units). The value of one UIT is set by the government at the beginning of each year. The current value of 1 tax unit is 5 150 PEN.

Pension in Peru

The national pension system is funded through mandatory employee contributions. Employers are required to make monthly withholdings for pension fund contributions, which are equal to 13% to 12.5% of the compensation received by the employee.

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Managing Common Payroll Challenges in Peru

Global employers operating in Peru often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Peru.

Maintaining Accurate and Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping Up With Ever-Changing Tax Laws & Compliance Laws

In Peru, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

What Does a Global Payroll Management Platform Cover?

A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Peru.

Key functions of a payroll management platform can include:

• Consolidate payroll data: Streamline fragmented payroll data into one source of truth when you’re operating in multiple regions.
   
• Analytics and reporting: Advanced capabilities to analyze payroll data and generate automated reports per region.
   
• Monitor and standardize payroll: Get an accurate view of employee costs, bonuses, and taxes per region, catch variances, and standardize payroll processes across regions to minimize errors.
   
• Compliance and record-keeping: Maintains accurate payroll records and ensures adherence to labor laws and regulations, reducing the risk of legal issues.
   
• Employee self-service: Provides portals where employees can access pay stubs, update personal information, and manage benefits selections.

How Playroll Can Streamline Payroll & Taxes in Peru

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

• Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
   
• Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
   
• Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
   
• Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.