Multiplier Logo
Loading Animation Image
El Salvador 1

Benefits & Compensation El Salvador

What are Employee Benefits?

Employee benefits are programs, policies, or services organizations provide employees as indirect compensation. Benefits offered to vary based on the organization’s location and business situation. Certain benefits are legally required, known as statutory benefits, while others are at the employer’s discretion, known as discretionary benefits. Some examples include health insurance, paid time off, and life insurance.

Compensation Laws in El Salvador

The benefits and compensation in El Salvador are drafted considering all the existing labor laws in the country. Here are a few compensation laws you can consider:

  • As per Salvadoran Constitution Art. 38 Ord. 6, an employee must have fixed work timings, i.e. eight hours per day.
  • Employees are entitled to paid time off as per Salvadoran Labor Code.
  • If employees are asked to work on paid time off, they are entitled to compensation as per Article 185 of the Salvadoran Labor Code.
  • As per Labor Code Art 309, pregnant female employees are entitled to maternity leave.
  • Male employees are also entitled to paternity leave according to the Labor Code Art 29.6(b), which they can utilize once the child is born.
  • Salvadoran labor code also allows female employees the right to nursing or a daily reduction of working hours.

How to Design Your Employee Benefits Program for Employees in El Salvador

Follow the steps to design a compensation package in El Salvador:

Step 1: Establish a budget

  • It’s essential to consider your company’s affordability before making any commitments. Remember that certain benefits, such as health and dental, come with higher costs. Understanding what benefits you can realistically offer your employees is essential as a crucial initial step.

Step 2: Define objectives

  • Understanding your package’s objectives will assist your organization’s end product to be more effective.
  • By considering both practical goals, such as staff retention and productivity, and philosophical objectives, such as enhancing employee quality of life and improving workplace morale, it is possible to create a comprehensive benefits package.

Step 3: Conduct a needs analysis

  • Conducting a needs assessment can help your organization better understand what your employees want and need from the compensation package in El Salvador.
  • You should also conduct a survey on the benefits your competitors are offering to their employees. It can guide you in determining what to include in the compensation structure in El Salvador.

Step 4: Design compensation and benefits policy in El Salvador

  • Once you have considered your budget and gathered feedback from the needs assessment, it is time to determine which benefits you should prioritize in your package. Popular choices include medical, dental, and vision insurance and retirement planning.

Step 5: Communicate the plan to employees

  • It is essential to effectively convey the benefits package to employees and address specific goals.
  • You can ask the feedback from the employee on the compensation and benefits policy in El Salvador.

Step 6: Develop an evaluation process for benefits effectiveness

  • Periodically reviewing the effectiveness of the employee benefits package is an excellent approach to guarantee that the program you have established is the best one for your organization and employees.

Types of Guaranteed Benefits in El Salvador

Some guaranteed benefits are:

Annual leave

  • The leave benefits in El Salvador include 15 days of paid annual leave for an employee who has worked for at least one year.
  • As per the compensation package in El Salvador, the employee must receive a payment equal to 15 days’ wages plus an additional 130% of the salaries for the same period before the start of the leave.
  • It is not allowed to offer compensation instead of annual leave, except when the employer terminates the employment contract before the employee has taken their entitled annual leave.

Maternity leave

  • The maternity benefits in El Salvador provide women with a paid maternity leave of 16 weeks, compensated at a rate of 75% and financed by social security.
  • The leave can be split into two parts, with up to 6 weeks before the anticipated delivery date and the remaining ten weeks after birth.
  • If the pregnancy leads to temporary disability for the mother, she may receive full pay, subject to contributing to social security.

Paternity leave

  • Within the compensation and benefits policy in El Salvador, new fathers are eligible for a three-day paid paternity leave with 100% of their regular pay. Employees can take a break during the first 15 days following the birth of their child.

Sick leave

  • Per the medical benefits for employees in El Salvador, employers provide coverage for the first three days of a severe illness.
  • Social security covers the remaining medical leave at 75% of the salary and includes coverage for disabilities for up to one year.

Working hours and overtime

  • In El Salvador, the standard work week comprises 44 hours, spread over 5 and a half days, with an average of 8 hours per day.
  • Any work conducted beyond the standard working hours is considered overtime, with the employment contract or collective agreements regulating it.
  • Employers reimburse overtime exceeding the standard 44 hours per week at an overtime compensation rate of 200.00% of the employee’s regular salary payment.

Severance pay

  • A fair compensation package in El Salvador is a legal requirement for unjustified dismissals.
  • Suppose an employer terminates an employee unfairly, and the labor court confirms this. In that case, the employer must compensate the employee from the date of dismissal and severance pay.
  • The severance pay is calculated based on the employee’s length of service, with 30 days’ salary provided for each year worked.

Social Security

The social security system in El Salvador provides various benefits, including health and maternity benefits, disability benefits, old-age retirement benefits, and death allowances. Listed below are some benefits it covers:

 Employer contributionEmployee contribution
Social Security7.5%3%

Employee Benefits for Expatriates

Expatriates working in El Salvador are entitled to receive the same employee benefits as local employees. However, additional help may be specific to expatriates, such as relocation assistance, housing allowances, and language training.

Certain employers may also offer supplementary benefits like international health insurance, travel allowances, and home leave.

To ensure expatriates receive all entitled benefits, they should understand the benefits package provided by their employer, including any potential tax implications.

Moreover, expatriates should be aware of any cultural or legal differences in El Salvador that may impact their benefit entitlement.

How Are Employee Benefits Taxed in El Salvador?

Employee benefits in El Salvador may be subject to taxation, depending on the specific benefit and the country’s tax laws. Some common compensation and benefits in El Salvador and their tax implications include

  • Health insurance: Premiums paid for health insurance are typically tax-deductible for employers in El Salvador. It is included in the social security contribution.
  • Retirement contributions: Employee contributions to retirement plans are generally tax-deductible, subject to certain limitations. Employers’ contributions to these plans are also tax-deductible.
  • Life insurance: Life insurance benefits are typically tax-free for El Salvador recipients. However, premiums paid by the employer may be considered taxable income for the employee.
  • Meals and housing: Meals and housing provided by the employer are often subject to taxation in El Salvador, depending on the value of the benefit.

Restrictions for El Salvador Benefits and Compensation

The compensation structure in El Salvador adheres to the governing laws and regulations. These include the minimum wage, mandatory benefits like social security and retirement pension plans, termination pay, paid time off, and overtime restrictions, except for minors. Employers should comply with these restrictions to provide employees with the appropriate benefits and compensation as the law requires.

Supplemental Benefits for Employees in El Salvador

Some common examples of compensation and benefits policies in El Salvador offer:

  • Health insurance
  • Life insurance
  • Dental insurance
  • Retirement plans
  • Profit sharing
  • Performance bonuses
  • Employee discounts
  • Wellness programs

How Multiplier Can Help with Benefits Management in El Salvador

Utilizing Multiplier’s offered infrastructure can help employers hire talent in the country without the need to start a subsidiary. Our services ease setting up teams in new countries, allowing you to explore newer markets. You can attract talent at cheaper costs and expand your business.

Frequently Asked Questions

Employers in El Salvador offer health and maternity benefits, disability benefits, retirement benefits for old age, and death allowances.

Employee contributions to social security and pension funds in El Salvador are based on their monthly salary and reported through monthly payrolls.

Yes, employers in El Salvador must follow tax regulations while providing employee benefits and compensation, as these offerings have associated tax implications.

Need help hiring in El Salvador?

Table of Contents

World’s Preferred EOR/PEO Platform for a Global Workforce