When expanding your workforce to Guatemala, discover which mandatory and fringe benefits are sure to attract talented employees. 

Guatemala has continued to attract the attention of foreign investors for its economic stability, tax exemptions, and affordable labor force. As Central America’s largest economy, data from the World Bank reveals that Guatemala’s GDP grew by approximately 3.2% from 2014 to 2023. The 2023 GDP in Guatemala stood at an impressive $104.4 billion, owing to the country’s fiscal management. 

The Central America-United States Free Trade Agreement, or CAFTA, is worth mentioning when you’re looking to do business in Guatemala because it facilitates the trade of goods and services between Guatemala, the U.S., and several South American countries. The agreement offers reduced tariffs and cross-border ease of access. 

In terms of exports, Guatemala is known for its crude oil, agriculture, and manufacturing. In 2023, manufacturing accounted for 22.29% of its GDP, whereas the services sector contributed 61.2% for the same year. According to the U.S. Department of State, more than 200 U.S. and international companies have ongoing investments in Guatemala. 

The first step to expansion in Guatemala is hiring a skilled workforce, but to attract the country’s most talented job candidates, you need to comply with local labor laws by providing employee benefits. Adherence to statutory working hours, annual leave, and social security contributions is necessary to avoid violating Guatemala labor laws.

To prevent legal penalties and hiring an unskilled workforce, this guide will explore the labor law and mandatory employee benefits in Guatemala. Furthermore, it looks at perks you can use to appeal to top talent and why international companies hire Employer of Record (EOR) services for compliance and expansion.

Guatemala Employment Laws

The Constitución Política de la República de Guatemala covers regulations such as the formation of trade unions, collective bargaining, and labor disputes. Under the National Legal Framework regulations, including sickness, maternity, and occupational health and safety, are covered. 

The labor laws involving working hours, annual leave, social security, and employee benefits in Guatemala are administered under the Ministry of Labor and Social Welfare. A closer look at these laws can facilitate hiring and expansion.

Governmental Agreement 229-2014

The Governmental Agreement Act in Guatemala consists of occupational health and safety regulations. Employers must provide workers with a safe professional environment by protecting against workplace risks and offering health and safety training to workers.

Social Security Regulations 

Social security regulations are overseen by the Guatemalan Institute of Social Security (IGSS). Both employers and employees make contributions to the fund, which covers old-age pensions, death benefits, and disability.

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Minimum Wages 

The minimum wage in Guatemala is 3384.59 Guatemalan quetzales (GTQ). This minimum wage applies to all non-agricultural sectors. The average monthly salary in Guatemala is around 4947 GTQ, or $641.

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How to Comply with Guatemala’s Labor Laws

When you wish to hire employees in Guatemala but are unfamiliar with the employment rules and regulations, it places your company at risk of non-compliance. The simplest way to guarantee Guatemalan labor law compliance is with a legal team experienced in the labor sector. 

If you are looking to benefit from outsourced payroll, benefits administration, and compliance, you can hire a Guatemalan EOR for assistance. An EOR firm acts as the legal employer of your workforce and keeps you updated on Guatemala labor law.

Mandatory Employee Benefits in Guatemala

To effectively and compliantly hire a workforce in Guatemala, every employer must include the following statutory benefits in the employment contract:

Social Security

For employees to benefit from the social security regulations in Guatemala, the employer and employee must fund the Guatemalan National Social Security System (IGSS). Employers contribute 12.67% while employees contribute 4.83%.

Annual Paid Leave

Employees receive 15 days of fully paid yearly leave after they have completed 12 months of work with the same employer.

Working Hours

In Guatemala, working hours are based on daytime and nighttime shifts. The standard daytime working hours are eight hours per day or 44 hours a week. Employees who work at night adhere to 36-hour workweeks, and those with a combination of day and night shifts must complete 42-hour workweeks.

Overtime Pay

Employees who work more than the regular 44-hour week must receive overtime pay. Overtime pay is calculated at 150% of the standard hourly work rate.

Paid Public Holidays

While Guatemala has 19 public holidays, these holidays do not form part of paid leave if they fall within the annual leave period. Several Guatemalan holidays are described below:

  • January 1: New Year’s Day
  • April 17: Maundy Thursday (movable date)
  • April 18: Good Friday (movable date)
  • May 1: Labor Day
  • August 15: Assumption Day
  • October 20: Revolution Day
  • November 1: All Saints’ Day
  • December 25: Christmas Day

Paid Sick Leave

The amount of sick leave depends on the employee’s length of service with the same employer. Guatemalan employees receive up to three months of sick leave only if they have worked for their employer for nine months or longer. All sick leave benefits are paid from the IGSS.

Maternity Leave

Paid maternity leave is issued to pregnant employees for 12 weeks. Female employees receive 30 days of paid leave before childbirth, which is included in the maternity leave.

Paternity Leave

There is no policy for paternity leave in Guatemala.

Bereavement Leave

Should an immediate family member pass away, employees receive three days of bereavement leave.

Severance Pay

When an employee’s contract is terminated without just cause, they are entitled to severance pay of one month’s salary for each year worked. Employees who resign because an employer broke the employment contract are entitled to severance pay. 

The Guatemala labor laws require issuing notice to an employer before terminating the employment contract. The notice period is based on the staff member’s length of service; for example, if an employee has worked for a company for less than six months, they only receive one week’s notice.

Supplementary Employee Benefits in Guatemala

Supplementary benefits are otherwise known as perks because they aren’t required by law but offer customized incentives for job candidates to join your workforce. Perks can range from additional leave to private insurance. The benefits should be tailored to the Guatemalan labor force and can include the following:

  • Private Health Insurance: In Guatemala, private health insurance is not mandatory, and therefore employers can offer coverage for employees such as dental care and access to specialist treatment.
  • Employee Bonuses: Minimum wage employees are paid an annual bonus of GTQ 250; however, employers can increase the bonus to attract skilled workers.
  • Additional Leave: Employees in Guatemala prioritize work-life balance. Offering additional leave as a supplementary benefit is sure to appeal to potential employees helping with staff retention while preventing employee burnout.

Optimize Employee Benefits with Remote People

Guatemala is known for its GDP growth, financial stability, and tax breaks offered to local and foreign businesses. The country attracts significant foreign investment, particularly in the communications, manufacturing, financial, and agricultural industries. 

Because Guatemala has become such a favorable investment destination, more businesses look to hire their workforce and expand in the country. If you wish to move forward with Guatemalan expansion, you must follow the local labor laws. This includes providing employees with mandatory and supplementary benefits that are sure to appeal to local top talent. 

When doing business in Guatemala, the simplest way to keep compliant while managing your employees is to call on Remote People’s EOR services. Remote People’s professional team will help you with payroll, benefits solutions, and compliance measures in Guatemala. 

To protect your business while establishing a compliant and competitive workforce, don’t hesitate to contact Remote People today!