Starting a new business or expanding business operations in an “employee-economy” country like Honduras is a viable option. Here’s why.

Honduras is a Central American country having borders with Guatemala, El Salvador, and Nicaragua. It has a long Caribbean coastline in the north. There is a smaller coast to the south that meets the Pacific Ocean. According to the latest figures, the country’s population is over 10.9 million, while its labor population is more than 4.6 million.

Honduras boasts a GDP of USD 34.4 billion, better than El Salvador (USD 34.02 billion) and Nicaragua (USD 17.83 billion). It features a healthy annual GDP growth of 3.6% because of the constant upward trend since 2020. 

The boost in the economy has positively impacted the minimum wage, which has increased by almost 70% since 2016. In 2023, the average minimum wage rate in Honduras was HNL 8134 per month (equivalent to USD 319), an increase of HNL 714 from 2022. 

However, the country’s average monthly salary is slightly higher, between USD 400 and USD 500. Even then, the average monthly wages in Honduras are lower than in other Central American territories like Costa Rica (USD 800 – 1000) and Panama (USD 900 – 1100). 

The above figures seem ideal for launching your new business or outsourcing business operations in Honduras, but not without professional assistance. Why?

To begin with, you need to know the labor demographics and how to hire the right talent. Moreover, you have to be prepared to compensate your employees according to local labor laws and tax regulations. Instead of doing everything yourself, you can hire a professional employer organization (PEO) in Honduras to hire, retain, and manage the workforce. 

In this guide, you’ll find out how PEOs in Honduras can make your business operations run safely and smoothly.

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Professional Employer Organization (PEO)

According to NAPEO (National Association of Professional Employer Organizations), businesses working with PEOs:

  • grow 7 – 9% faster than those that do not
  • are 50% less likely to fail
  • have 10 – 14% lower turnover

A PEO is a private organization that facilitates small and midsize businesses with HR and payroll management, along with other administrative support. They serve as co-employers to manage your company’s workforce and perform multiple responsibilities, such as: 

  • Payroll processing
  • Employee screening, training, onboarding, offboarding
  • General HR services
  • Legal compliance
  • Employee benefits disbursement
  • Compensation, etc.

A PEO facilitates you in more ways than one, including the following:

  • Reducing your operational costs: A PEO also benefits a company financially, as hiring one can help the company save on operational costs. 
  • Complying with labor laws: Working with a PEO can help you streamline your HR processes and comply with payroll laws. 
  • Countering internal evils: In addition, it brings an outside perspective that can help diffuse issues regarding internal politics, favoritism, or disputes between in-house employees.

Start hiring with a Honduras PEO

Let us handle the complexities of hiring, compliance, and payroll in Honduras while you focus on growing your team.

  • Hire employees in Honduras with a Honduras EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Honduras

👉 Get Your Customized Honduras PEO Proposal Today!

Major Benefits of Working with a PEO

Starting your own business or expanding its operations in an unknown region poses quite a few challenges. However, you can overcome them by collaborating with a professional who understands the terrain, is familiar with the local employment laws, and completes the paperwork on your behalf. 

In addition to this, you will experience several other benefits during the operational phase. These include:

  • Faster payroll processing 
  • Adherence to payroll laws
  • Accurate tax and benefits calculations
  • Better benefits to workers
  • Tailored HR processes
  • Automated HR operations

What You Need to Know Before Hiring in Honduras

Honduras has a competitive labor industry that serves businesses worldwide. These businesses offer attractive packages to ensure they get the right talent for the job. This makes talent acquisition more challenging for a foreign employer. In this context, some PEOs in Honduras can help you get the right talent. 

They can start the hiring process on your behalf without waiting for a legal entity to establish in Honduras. This efficiency allows you to start operations immediately.

Critical Things to Know Before You Hire in Honduras

AspectDetails
The languageSpanish is the widely spoken language.
Societal normsLocal people are polite and appreciate being handled politely.
Tax rateThe personal income tax is a constant 25%.
Labor force distributionThe labor force is associated with textile manufacturing, agriculture, cigar manufacturing, wood production, coffee production, tourism, sugar processing, and seafood export.
EconomyHonduras has an underdeveloped economy, but it’s growing briskly.
Exchange rateUSD 1 equals 25.49 Honduran Lempira (HNL).
Employment lawsLocal employment laws are strict for foreign businesses, prohibiting discrimination based on race, gender, and disabilities.

Importance of Hiring a PEO in Honduras

Honduras offers excellent opportunities for employers, with around 76% of males and 49% of females making up the labor force. While the country shows progress in its growth owing to its hard working human resource, it’s quite firm on eradicating child labor — something that employers should keep in mind. 

Apart from guiding your hiring process, the Hunduran employment laws will also safeguard employee’s rights. Therefore, you need a PEO in Honduras to keep track of — and comply with — the following rules and regulations: 

Working Conditions

Working conditions vary depending on the business model, and so do the rules. A reliable PEO in Honduras understands it and helps you align your working environment with the local rules and regulations.

Working Days

Honduras considers Monday through Saturday to be a working week, while Sunday is the rest day. Employers are liable to pay overtime to employees working on a Sunday.

Regular Working Time

In Honduras, 44 hours of work per week is considered as a standard. Employees (laborers) should work no longer than eight hours per day over six working days. On the other hand, executives and managers can work longer, for up to 12 hours per day.

Night Shifts

Businesses operating 24/7 must design 6-hour night shifts spread over six days (no longer than 36 hours a week). Jobs between 7:00 pm and 5:00 am fall in the night-shift category. They must allow workers to take a break for at least 30 minutes.

Permission for Minors

You may need to hire minors based on the job requirements. This is where a PEO can handle technicalities and prevent non-compliance risk. 

For example, Honduran minors between 14 and 18 are permitted to work, but their working hours may differ based on their age categories. For example:

  • Minors between 14 and 16 years are allowed to work (with parent’s consent) for 4 hours a day
  • Minors between 16 and 18 years can work for six hours per day

Also, they are entitled to receive two hours of break time during work.

Employment Contracts

There are two types of employment contracts in Honduras:

  • Definite (Temporary) Contracts: It’s a fixed-term contract, and its length should be determined before the employment period begins. In general, these contracts last up to one year. However, if the contract involves a period of technical training during work, its length can be extended to up to five years. 
  • Long-Term (Indefinite) Contracts: These contracts have no predetermined expiration date. 

Your PEO in Honduras helps keep violations at bay by ensuring non-discrimination at the workplace. Moreover, they will prepare written agreements and hand them to the concerned employees before the job commences.

Payroll Compliance

Employers in Honduras who do not comply with the rules and regulations are subject to penalties. 

For example, if an employer commits a payroll violation, especially in prying minimum wage, they may lead to fines of up to HNL 1000 (~ USD 39). However, if they continually fail to comply, the fine may increase by 150%. 

Your PEO in Honduras knows how to avoid these violations.

Social Security and Tax

Social security insurance in Honduras is covered by the insured person — employer or the government. The income tax rate in the country is 25%. Similarly, the corporate tax rate in Honduras is 25%.

Employee Contributions

One key responsibility of the PEO in Honduras is providing accurate figures for employment contributions. Here are the details of the employee contributions:

  • Unemployment allowance: Businesses with 10 or fewer staff pay 1.32% of each employee’s monthly salary, while those with more than 10 workers have to pay 1.98%.
  • Family allowances in Honduras: These are paid by the government alone.
  • Health care/maternity: Employers must pay 5% of the employee’s salary, and the employee contributes 2.5%, while the government contributes 0.5%. 
  • Injury at work: The employer alone pays at least 50% of the employee’s salary, depending on the severity of the injury.
  • Aging and disability: The employee contributes 2.5% of their salary, and the employer pays 3.5%, while the government adds 0.5%.
  • Collective capitalization: The employee pays 1.6%, while the employer contributes 2.6% of the monthly salary.

Maternity Leave

Employers must allow maternity leave for up to 12 weeks, starting six weeks before birth. This paid leave covers 66% of their average wages over the previous quarter. 

In case of health complications, the employee can extend their leave. The period exceeding the 12-week threshold is considered leave without pay.

  • The employer must cover the social security insurance for the worker if she has none. 
  • Parental leaves are only allowed for female employees.

Sick Leave

Honduran employees with health-related issues can request sick leave. They must provide a medical report to support their request. Employees are allowed to get up to 26 weeks of sick leave and can extend this period in case of chronic issues.

During sick leave, they’re entitled to receive a percentage from their previous quarter’s salary.

  • Up to 66%: If they have dependents.
  • Up to 50%: If they have no dependents. 

Annual Leave

As an employer, you must allow every employee in your company in Honduras a paid annual leave for 10-20 days. However, not all employees can benefit from this scheme. 

Your PEO in Honduras will calculate the amount of time each employee has spent with your company to see which of them qualify for annual leave.

To be eligible for annual leave, the employees must spend one year or more with the company — OR — they must have worked up to 200 hours within a calendar year.

Your PEO in Honduras will calculate the working period and determine the number of leaves to be assigned to the qualified employees:

Years of ServiceAnnual Leave (Days)
One year10 days
Two years12 days
Three years15 days
At least four years20 days

Holidays

You need to be familiar with the national holidays in Honduras and compensate your employees according to the rules and regulations. 

Honduran employees are entitled to paid days off during public holidays, including:

  • Semana Santa (Holy Week in English)
  • Discovery of America Day
  • Independence Day
  • Christmas Day
  • New Year’s Day
  • Americas Day
  • Francisco Morazán’s Day (also called Soldier’s Day)
  • Labor Day
  • Armed Forces Day

Employees working on these national holidays must receive a 100% bonus wage. Moreover, if these holidays fall on a Sunday, the workers are entitled to receive a 100% bonus wage + a rest day.

Overtime

The Honduran Law restricts employers not to utilize employees for more than 12 hours per day. In simple words, overtime per employee should not exceed more than four hours per day. 

Overtime should not be forced, and employers should not utilize willing workers for more than four days (a total of 16 hours per week). 

Your PEO in Honduras is responsible for providing accurate overtime calculations as per the laws. 

  • For day shifts: 125% of the agreed wage
  • For night shifts: 170% of the agreed wage

Expand Your Business With a Trusted PEO in Honduras

Working with a PEO in Honduras can open doors to business growth and expansion. The country offers a cost advantage; Honduran workers are literate, and its laws support both employers and employees. 

So, in order to operate safely and smoothly, you can partner with a reliable PEO in Honduras, leveraging their expertise in HR and administration, and build a sustainable business. 

The above list of top-notch PEOs in Honduras should help you find a reliable partner. Yet, if you have concerns — or want to save more — contact Remote People. 

As part of our PEO broker service, we recommend the best available service — and save you up to 40% on PEO services. Contact us and explore our amazing services now.  

Frequently Asked Questions

You need a reliable PEO in Honduras who is familiar with the local rules related to employment, income taxes, payroll, hiring, firing, and managing your employees. Moreover, PEOs have access to a pool of helpful resources to find you the best talent. 

It is difficult to provide an exact number because pricing strategies vary from PEO to PEO. Some use a fixed-priced model, while others use a percentage-of-payroll model, bundle pricing, pay-as-you-go model, etc.

The final cost depends upon the number of employees hired and the services expected of them.

PEOs provide a wide range of employee benefits, including retirement plans, health insurance, medical benefits, paid leaves, and more. These benefits are customized according to the client’s requirements.