Guatemala is a fast-growing economy that offers a haven for businesses. The country has seen a decent increase in foreign direct investment levels owing to its strategic location-linked favorability. The nation is also part of several government-negotiated free trade agreements. The nation ranks 95th in the World Bank’s Ease of Doing Business report.
The geographical location of the country acts as an advantage for doing business.. Guatemala enjoys proximity to Mexico and the rest of Central America. This makes the country a bridge to markets with more than 68 million inhabitants plus a GDP of USD 319 billion. Additionally, doing business in Guatemala enables companies to establish themselves in a central regional logistics hub.
Doing business here means having operations in the largest Central American economy. Guatemala represents 35% of Central America’s GDP. It has seen a growth rate for foreign direct investment at 376% since 2013.
The main sectors in the Guatemalan economy are-
- Retail commerce
Guatemala’s currency, Quetzal, has seen stability against the USA’s dollar through the last decade.
Owing to its stable business environment, Guatemala offers a skilled labor force. 70% of the total population of Guatemala is under 30 years of age. If you are hiring in or conducting business in Guatemala, you will have access to graduates from the 14 distinguished universities here.
Recruitment and selection in Guatemala can be a challenge, given the red tape that is well prevalent in the country, as per the World Bank and the International Finance Corporation rankings. Companies that hire in the country must comply with the laws and related rules. Read up on how to recruit employees in Guatemala from this write-up.
Things to Know Before Hiring in Guatemala
Before beginning recruitment and selection in Guatemala, employers must comprehend Guatemalan Labor Law.
Employers must provide a written employment contract to employees. The contract must specify all the working conditions, including work timings, leaves, notice period, and others.
Consider the following factors when hiring employees in Guatemala:
Guatemala has a strict Employment Law that ensures equal opportunity for all, irrespective of nationality, color, gender, ethnicity, language, religion, political views, disability, sexual orientation, and marital status.
There are majorly three types of contracts used under employment law in Guatemala.
- Indefinite contract: Indefinite contracts are the most common contract type across Guatemala. These have no specific termination date. However, mutual agreement between the employer and employee ends these contracts.
- Fixed-term contract: Fixed-term contracts are valid for a set period mentioned within the contract.
- Specific contract: Specific contracts are made for the completion of a particular task. The parameters and benchmarks are specified, along with what the task conclusion looks like.
A typical Guatemalan employment contract must be written in Spanish. Companies must make three copies of the contract and share one with the employer, employee, and the Directorate General of Labor 15 days from the hiring day.
- The contract will include all of the employee terms, like-
- Termination details
Other specifications that must be a part of the employment contract are-
- Name of the employer
- Registered address of employer office
- Name of the employee
- Address of the employee
- Employee details for educational qualification
- Job profile
- Job description
- Place of work
- Employment type
- Date of work initiation
- Working hours
- Headers to determine basic salary, performances, compensation, increment in salary, and income of the employee
- Payment deadline
- Duration of working hours
All figures must be mentioned in the local currency of Guatemala.
An employment contract will expressly stipulate all rights or duties. All matters not mentioned in the contract fall under the purview of the Guatemalan Labor code and collective agreement when the same is not contrary to Labor Law.
An employer may cancel a contract for employment if there is proof that the employee hasn’t performed appropriate work in a professional capacity. The notice period varies from a week to one month, depending on the length of service with the company.
- Termination is also possible if the employer deems an employee does not have appropriate qualifications for a job.
- Probationary work will be interrupted before the expiry of test work by an employer or employee.
- Employers must send a written notice to an employee providing all the reasons for the same.
- Severance payment is mandatory when any employee gets laid off for redundancy. This amounts to a month’s salary. As per the Law of Labor, an additional 30% is payable to cover other benefits such as travel and phone allowances.
- Pregnant or nursing women cannot be dismissed without a reasonable cause.
- Employers will not dismiss employees as part of worker’s union formation.
- All contracts of leaders of a workers union cannot be terminated without just cause.
- Termination will not be carried out when there is a collective conflict under collective bargaining.
Working hours and breaks
- A standard workweek has five days of work.
- Employees have to work 8 hours per day/ 44 hours per week. The daily working hours should not exceed 12 hours per day.
- The working hours vary for the day and night shifts. For the day shift, working hours range from 6 am to 6 pm.
- These hours range from 6 pm to 6 am the following day for a night shift.
- Any hours above these 44 in a work week are labeled overtime and must be paid at 150.00% of regular pay.
When hiring staff in Guatemala, you need to pay employees monthly. However, payment can be daily, hourly, weekly or bi-monthly as per the nature of the contract involved.
As per the Labor Law in Guatemala, employers must pay minimum wage to employees.
- Currently, the minimum wage in Guatemala is variable for different categories per the type of work involved.
- The minimum wage for all general workers is GTQ 2743 per month, and the salary for factory activities is about GTQ 2508 monthly.
- The minimum wage for agricultural activities is GTQ 2,872.55, for non-agricultural activities and GTQ 2,959.24, and it stands at GTQ 2,704.35 for export work and Maquila activities.
Sick leave – Instituto Guatemalteco de Seguridad Social or IGSS compensates for this per its internal regulations or by an employer if the latter is not regulated at IGSS’s end for the concerned illness.
The length and the payment calculation for sick pay depend on the employee’s tenure of employment.
- 2-6 months – 30 days of paid sick leaves at 50% of an employee’s salary
- 6–9 months – two months’ paid sick leave at 50% of an employee’s regular salary
- 9+ months – three months’ paid sick leave at 50% of an employee’s regular salary
Maternity leave – Pregnant employees can avail up to 12 weeks of maternity leave starting 30 days before the expected delivery date. In the event of a miscarriage or even stillbirth, a mother is entitled to 42 days’ paid leave.
Other leaves – As per the collective agreement or terms of an employment contract, an employee can be allowed other leaves as per employer approval for the categories below –
- Bereavement – Employees can get three days’ paid leave for a death in the family.
- Wedding – A five-day leave is allowed for this.
- Labor union leader – Such a leader, gets six days’ paid leave for carrying out union-related duties.
Holidays for employees
Guatemala has 12 public holidays over the year, as follows-
- Jan 01 – New Year’s Day
- In April, Maundy Thursday (variable)
- April Good Friday
- Apr 03 Easter Saturday
- May 01 Labour Day (variable)
- Jun 28 Army Day Holiday (variable)
- Aug 15 Assumption Day
- Sep 15 Independence Day
- Oct 20 Revolution Day
- Nov 1 All Saints’ Day
- Dec 24 and 25 Christmas
- Dec 31 New Year’s Eve
An employee who completes working for a year is entitled to 15 days of vacation or paid leave.
- Employees making minimum wage must get a monthly productivity bonus of 250 quetzales.
- All salaried employees must receive two yearly bonuses, each equal to a month’s salary.
- One bonus is payable in July and the other in December, for Christmas.
Taxes and social security contributions
The Employer Payroll contributions stand at 1.00%, while the Workers Recreational Institute stands at 1.00%. The contribution of the Professional Training Institute is 10.67%.
- As for Social Security, the employer contribution is 12.67%, and employees pay 4.83% towards the same salary.
- The Income tax rate is 5.00% for up to 300,000 annual income in local currency.
- The rate hikes to 7.00% when income rises to more than 300,000 in local currency.
The Cost of Hiring an Employee in Guatemala
The recruitment fees in Guatemala vary depending upon the company policies. Here is a rough guide to the costs of the recruitment process in Guatemala or the hiring process in Guatemala.
The first cost involved in the recruitment process is putting up advertisements and posts on sites for jobs. The best job boards are –
- Opcion Empleo
- Go Abroad
- You can hire a resource to manage these posts and track responses to the same.
- Having a translator on board is vital if you aren’t familiar with Spanish.
- Magazines and newspapers are also reliable options for putting up job openings.
- You may outsource parts for the hiring process in Guatemala at a cost and free up your time and other resources to engage in different management and operations’ areas.
- Recruitment companies can help in drafting employment contracts in compliance.
- Seek legal help to understand compliance with labor laws and HR norms while hiring.
Salary and bonuses
- Employers must take care of the cost of paying salaries and bonuses annually to the employees in place of services.
- Hiring foreign workers in Guatemala requires additional costs owing to the training process. It includes introductory sessions, orientation, and others.
What Does a Company Need to Hire Employees in Guatemala?
Employers in Guatemala can employ both permanent and part-time staff. To hire new employees in Guatemala, a company must establish a presence and meet all employer obligations. An employer must obtain the required licenses and permits from the concerned authorities.
Other than that, employers need to link the company with local bank accounts for business transactions. In addition, stay updated with the changes in local employment, if any.
Various options for Hiring Employees in Guatemala
Once you understand the processes for recruitment and hiring in Guatemala, you might select from one of the two options for the same –
- Tie-up with a global EOR service: You can simply partner with an employer of record (EOR), such as Multiplier. The latter will deal with all logistics, including compliance, benefits, compensation, payroll, and workforce management, without needing to set up an entity.
- Direct hiring: If you have a subsidiary or branch established in Guatemala, you may directly hire in the country with an HR department in charge.
The Steps to Hiring in Guatemala
Employers must follow the following steps to conclude the hiring process in Guatemala:
Step 1 – Advertisements
- Begin the hiring process in Guatemala with advertisements of the job openings listed along with the requirements across various channels.
Step 2 – Scanning applications
- Collate the applications you receive from various channels.
- Shortlist the ones that match your requirements for the job.
Step 3 – Telephonic interviews
- Arrange for an initial telephonic interaction to check if the candidate is suitable for further interviewing.
Step 4- Scheduled Interview
- Put together a panel with a hiring manager at the top to interact with the candidates you shortlist. As an employer, this helps you understand potential candidates’ backgrounds, interests, experiences, and competencies.
- Employers may also schedule the next round of interviews if required.
Step 5-Reference check
- As an employer, you can verify references the candidate mentions; ask about the performance and skill sets of the same.
- Background checks are allowed as long as there is no check on the police records of the candidate in question.
Step 6-Final offer
- The final step is to identify the most qualified profile from the shortlisted ones. The hiring team works on drafting a letter of final offer that you must accept before moving on to signing an employment contract.
This concludes the hiring process in Guatemala and the recruitment process in Guatemala, too.
Let Multiplier be Your EOR Platform in Guatemala
Recruiting employees and onboarding the selected candidate takes time and effort. From advertising jobs, shortlisting profiles, scheduling meetings, and finally fulfilling compliance standards, there is much to do to ensure that the recruitment process in Guatemala stays smooth. You may choose to work with a global PEO-EOR firm such as Multiplier.
The experts here will make the recruitment process in Guatemala a smooth ride. We offer Saas-based Employer of Record solutions related to talent employment. And yes, you don’t need to establish a branch or subsidiary in the country either. We can even help you understand newer markets and tackle automated payroll management for teams in Guatemala.