Guatemala Employer of record (EOR)
Hiring in Guatemala can be a complex process due to local labor laws, tax requirements, and employment regulations. Whether you’re a multinational company looking to expand your operations or a small business wanting to hire top talent, partnering with an Employer of Record (EOR) can simplify the process.
With Europortage’s Guatemala Employer of Record (EOR) solution, you can onboard employees quickly and efficiently without the need to establish a local legal entity.
Our Guatemala Employer of Record (EOR) Responsibilities:
✔️ Drafting locally compliant contracts
✔️Processing payroll accurately and on time
✔️ Providing an excellent employee experience
✔️Seamlessly handling global mobility
✔️ Paying your talent in local currency
Employment taxes in Guatemala
Employers in Guatemala must actively meet statutory obligations by contributing to programs that enhance employee welfare, training, and recreation. These contributions play a crucial role in complying with labor laws while also supporting national initiatives aimed at improving workers’ quality of life and their families’ well-being. By fulfilling these requirements, employers ensure their operations align with legal standards and contribute positively to societal goals. Here’s a closer look at these essential contributions:
Social Security (IGSS)
The Instituto Guatemalteco de Seguridad Social (IGSS) is Guatemala’s primary social security institution. Employers must contribute 12.67% of the employee’s gross salary to fund various social security benefits. These benefits include:
- Healthcare Services: Covers medical treatment, hospital care, and medications for insured employees and their dependents.
- Maternity Leave: Provides financial support and medical care for pregnant employees during maternity leave.
- Sick Leave Compensation: Employees who are temporarily unable to work due to illness receive partial salary replacement.
- Disability and Pension Benefits: Ensures long-term financial security for employees who are disabled or retired.
Professional Training Fund (INTECAP)
The Instituto Técnico de Capacitación y Productividad (INTECAP) is a government-mandated program focused on improving workforce skills and productivity. Employers must contribute 1% of an employee’s gross salary to this fund.
Recreation Fund (IRTRA)
The Instituto de Recreación de los Trabajadores de la Empresa Privada de Guatemala (IRTRA) is a unique program in Guatemala that funds recreational and leisure activities for employees in the private sector. Employers contribute 1% of the employee’s gross salary to this fund.
Employee taxes in Guatemala
Employees in Guatemala pay two main types of taxes: income tax and social security contributions. These taxes directly fund vital government programs and social protections, ensuring essential services for workers and their families. Let’s explore each type in detail:
Social Security Contributions (IGSS)
In addition to income tax, employees contribute 4.83% of their gross salary to the Guatemalan Social Security Institute (Instituto Guatemalteco de Seguridad Social – IGSS). These contributions fund programs such as:
- Healthcare: Providing access to medical services and treatments.
- Disability Benefits: Offering financial support in cases of temporary or permanent disability.
- Pension Fund: Ensuring income security during retirement.
For example, an employee earning GTQ 20,000 per month would pay:
4.83% × 20,000 = GTQ 966
Employers are responsible for deducting these contributions and submitting them to IGSS. This system ensures that employees receive crucial benefits while maintaining compliance with local laws.
Income Tax (ISR)
Employees in Guatemala actively contribute to the country’s revenue system through Impuesto Sobre la Renta (ISR), a progressive income tax deducted directly from their salaries. The applicable tax rate depends on the employee’s income bracket, with rates ranging from 5% to 7%.
Table: Income Tax Brackets and Rates
| Monthly Salary (GTQ) | Tax Rate |
|---|---|
| 0 – 48,000 | Exempt |
| 48,001 – 60,000 | 5% |
| Above 60,000 | 7% |
For example, an employee earning GTQ 70,000 per month would pay:
- 5% on the first GTQ 60,000 = GTQ 3,000
- 7% on the remaining GTQ 10,000 = GTQ 700
Total Income Tax = GTQ 3,700
Statutory Benefits in Guatemala
Statutory benefits in Guatemala are mandatory and ensure that employees are treated fairly under labor laws. Among these essential benefits are the Christmas Bonus (Aguinaldo), the Bono 14, and paid vacation. Together, these provisions guarantee financial security and work-life balance for employees.
Aguinaldo (Christmas Bonus)
The Aguinaldo is a mandatory bonus equivalent to one month’s salary. It must be paid in December, providing financial support for employees during the holiday season. This bonus is not subject to deductions, meaning employees receive the full amount.
Bono 14
Similar to the Aguinaldo, the Bono 14 is another mandatory bonus paid in July. This payment helps employees manage mid-year expenses and is an essential component of Guatemalan labor law. Like the Aguinaldo, it is equivalent to one month’s salary and must be paid in full.
Vacation bonus
After completing one year of service, employees are entitled to 15 days of paid vacation. Employers must ensure that vacation time is used within the year to avoid disputes or legal risks. Additionally, any unused vacation time must be compensated upon termination.
Common Non-mandatory Benefits in Guatemala
While Guatemalan labor laws mandate certain statutory benefits, many employers offer non-mandatory benefits to attract and retain top talent. These benefits are not required by law but have become increasingly common in competitive job markets. Providing these additional perks enhances employee satisfaction, loyalty, and productivity. Below are some of the most prevalent non-mandatory benefits in Guatemala, along with a detailed explanation of their importance:
Meal vouchers
Meal vouchers are a common practice in Guatemala, especially in urban areas where employees may need to dine out during lunch hours. Employers can provide vouchers or prepaid cards that are redeemable at various restaurants and grocery stores. These vouchers help reduce the financial burden on employees and are often seen as a practical and appreciated benefit.
Private Health Insurance
Private health insurance is a highly valued benefit, offering employees access to better medical care and shorter wait times compared to public healthcare services. Many employers provide partial or full coverage for employees and their families, including consultations, hospitalizations, and medications. This benefit signals to employees that their well-being is a priority and can significantly reduce absenteeism caused by untreated health issues.
Transportation Allowances
In regions where commuting can be costly or time-consuming, transportation allowances are a significant advantage. Employers may offer stipends for fuel, reimbursements for public transportation costs, or even company-sponsored shuttle services. These benefits not only help employees save money but also ensure punctuality and reduce the stress of commuting.
Life insurance
Although not required by law, many employers provide life insurance policies to ensure financial security for employees’ families in case of unforeseen events. Additionally, some companies offer private pension plans to supplement the mandatory social security pension, helping employees prepare for retirement with greater financial stability.
Payments in Guatamala
Minimum wage
The minimum wage in Guatemala varies depending on the industry. As of 2024, the rates are as follows:
- Agricultural and Non-Agricultural Work: Q. 97.29 per day or Q. 2,497.76 per month.
- Export and Maquila Work: Q. 89.74 per day or Q. 2,304.66 per month.
These rates are updated annually to account for inflation and economic changes. Employers must ensure that all employees earn at least the minimum wage for their respective industries. Failure to comply can result in legal penalties and reputational damage. In addition to the base salary, employers are encouraged to provide additional benefits or bonuses to attract and retain talent in competitive sectors.
Payroll frequency
In Guatemala, payroll frequency can vary depending on company policies and employment agreements. The most common practices are:
- Bi-Weekly Payments: Employees receive their salaries twice a month, usually on the 15th and 30th.
- Monthly Payments: Salaries are paid once a month, typically at the end of the month.
Payday
Paydays in Guatemala are typically determined by the payroll frequency, with payments due on the agreed-upon dates. Employers are required to pay salaries in full and on time. Late payments are a violation of labor laws and can lead to fines or disputes with employees.
Payment requirements
Salaries must be paid in Guatemalan Quetzals (GTQ), and payments should be made directly to employees’ bank accounts. In cases where employees do not have bank accounts, employers must make alternative arrangements, such as cash payments, while maintaining detailed records for compliance purposes.
Working time and overtime in Guatemala
Working hours
In Guatemala, labor laws actively enforce a standard workweek of 44 hours, typically spread across six days. Employees usually work 8 hours each day from Monday to Friday and complete the remaining 4 hours on Saturday.
For those working night shifts, the law reduces the maximum allowable time to 36 hours per week, reflecting the challenges of overnight work. Mixed shifts, which combine day and night hours, are further capped at 42 hours weekly.
Overtime
Overtime in Guatemala ensures fair compensation for employees working beyond standard hours. Employers must obtain consent for overtime unless addressing emergencies. The maximum overtime allowed is 12 hours per week.
Overtime is paid at 150% of the regular hourly rate, while work on Sundays or public holidays earns double pay. Night shifts beyond standard hours also include a premium, recognizing the added challenges of late-hour work.
Time tracking obligations in Guatemala
Employers with 20 or more employees are required to maintain detailed records of working hours and overtime. Time tracking systems, such as biometric devices or digital logs, must accurately document employee attendance, break periods, and any overtime worked. This is essential not only for compliance but also for resolving potential disputes related to unpaid wages or excessive hours.
Certain roles, such as executives, external workers, or remote employees, may be exempt from time tracking requirements. However, employers should clarify these exemptions in the employment contract to avoid misunderstandings.
Leave in Guatemala
Annual leave
Employees in Guatemala are entitled to 15 days of paid annual leave after completing one year of continuous service. This time off allows employees to rest and recharge, contributing to better productivity and job satisfaction. Employers must ensure that employees take their annual leave within six months of becoming eligible, as carrying over unused vacation days to subsequent years is not allowed. If an employee’s contract is terminated before they use their accrued leave, employers must compensate them for any unused vacation time.
Public holidays
Guatemala observes 12 national public holidays, during which employees are entitled to a day off with full pay. These holidays include:
- New Year’s Day (January 1)
- Holy Week (April, variable dates)
- Labor Day (May 1)
- Independence Day (September 15)
- Christmas Day (December 25)
In addition to national holidays, some regions or industries may observe local or sector-specific holidays. Employers must be aware of these additional days to remain compliant with collective agreements or regional labor laws.
Sickness and disability leave
Employees in Guatemala are entitled to sick leave benefits through the Guatemalan Social Security Institute (IGSS). To qualify, employees must provide a medical certificate verifying their illness. During the first three days of absence, the employer pays the full salary. Afterward, the IGSS compensates employees at 66% of their regular salary for up to 26 weeks.
Paternity and maternity leave
Mothers in Guatemala receive 12 weeks of paid maternity leave, split equally before and after childbirth. During this period, the IGSS covers 66% of their salary, with employers paying the remainder. This support helps mothers recover and care for their newborns without financial strain.
Although not mandatory, many progressive employers offer paternity leave, reflecting a commitment to gender equality and family support. This initiative fosters inclusivity, work-life balance, and shared family responsibilities.
Other types of leave
Guatemalan labor laws also provide for additional leave types, including:
- Bereavement Leave: Employees may take time off to grieve the loss of immediate family members. Company policies typically determines the duration of this leave.
- Marriage Leave: Some companies offer time off for employees getting married, though this is not legally mandated.
- Study Leave: Employers may grant unpaid leave to employees pursuing higher education or professional certifications.
End of employment in Guatemala
Ending an employment relationship in Guatemala requires employers to follow strict labor laws. These rules ensure compliance, fairness, and transparency in the process. By adhering to legal obligations, employers can avoid disputes, minimize risks, and maintain their reputation as fair and compliant businesses.
Notice Period Requirements
Employers must provide notice when ending an employment relationship in Guatemala. Employees who complete one year or more of continuous service receive a 30-day notice period. For employees with less than one year of service, the employer determines the notice period based on tenure, with a minimum duration of 15 days. Employers who prefer not to provide notice must compensate employees with payment equivalent to the notice period.
When employees work through their notice period, they gain two hours off daily or one full day off each week to search for new opportunities. This arrangement supports employees during their transition to other roles while ensuring compliance with labor regulations.
Severance
Employers must pay severance to employees terminated without just cause. This compensation equals one month’s salary for every year of service, with prorated amounts for incomplete years. Severance provides financial stability to employees during their job search. Employers also need to compensate employees for accrued benefits like unused vacation days, bonuses, and other entitlements specified in employment agreements.
When employers and employees mutually agree to terminate the relationship, severance may still apply depending on the terms of the agreement. Employers should document all terms clearly to avoid future disputes.
How to hire in Guatemala
Independent contractor
This solution might seem a good fit to reduce the cost of setting up an entity or hiring a full-time employee. Engaging a contractor can be a winning strategy in some cases and will depend of your business strategy and goals. For instance, it is a great solution when you need a talent for a short-term project.