Paraguay is a country in South America, landlocked by neighbouring countries such as Argentina, Brazil, and Bolivia. It has a stable, agriculture-focused economy, with a workforce of 3.5 million people (2024) and a GDP of 42.96 billion US dollars (2023).

With strong ties to other South American countries, Paraguay is a popular choice for businesses looking to expand into countries such as Brazil. Paraguay also has low labor costs in comparison with other Latin American countries and is known for its young workforce specializing in the tech sector.

Companies looking to expand into the Paraguayan market should familiarize themselves with local labor laws to understand the obligations employers have in terms of employee benefits. This help guide aims to inform employers of the mandatory employee benefits they must provide, alongside recommendations for supplementary benefits to consider, and information on how Remote People can help optimize the process.

Paraguay Labor Law

The main law that dictates labor laws in Paraguay is Law 213 of October 19, 1993. This set of laws explains employee rights and employer obligations surrounding annual leave, employment contracts, trade unions, terminations, and overtime rules.

It’s of utmost importance when hiring in Paraguay to consult legal experts for detailed compliance. This is to make sure that employment practices adhere to the latest legislation set by local labor laws and simplify the process of doing business in Paraguay.

Mandatory Employee Benefits in Paraguay

There is a range of mandatory employee benefits that workers in Paraguay are entitled to by law. We’ve included some of these in the sections below:

Social Security Contributions

Paraguay has a Social Security System, which is compulsory for employers to register their employees. The Social Security System offers support to vulnerable people in situations of unemployment, sickness, and retirement.

The rates of social security in Paraguay are as follows:

Contribution TypeCommercial EntityFinancial Entity
Employee9%11%
Employer16.5%17%

Annual Paid Leave

Workers in Paraguay are entitled to annual leave, which increases based on their period of service with their employer. Employees are entitled to the following:

Years of ServiceAnnual Leave Entitlement
0–5 years12 days per year
5–10 years18 days per year
More than 10 years30 days per year

Annual leave may be accrued up to a period of 2 years. There are also a number of public holidays in Paraguay, which are counted as separate days off from annual leave entitlement.

Working Hours

A standard working week in Paraguay is 48 hours long, which is usually spread over 6 8-hour work days. Sunday is the typical day off for workers in Paraguay.

If employees work between the hours of 8 pm – 6 am (night work), the maximum number of hours they can work per week is reduced to 42 hours. Night work is paid at the rate of 30% of the employee’s normal wage.

Work performed on public holidays will also be paid at a 100% surcharge of an employer’s average wage. Employees are entitled to a rest period if they work for over 6 hours per day. This is usually given as a 1-hour break and is not included in an employee’s total working hours.

Overtime Pay

Hours worked by an employee over their typically contracted hours count as overtime. Overtime hours are voluntary and must be agreed upon mutually between the employer and employee.

Overtime hours must be paid at the rate of 50% of an employee’s normal salary, while overtime hours performed at night, on Sundays, or public holidays must be paid at a 100% surcharge of the regular wage for that day.

The maximum amount of overtime hours an employee can work is 3 hours per day or 9 hours per week.

Public Holiday Leave

Several public holidays in Paraguay are considered paid days off for workers. These are separate from an employee’s annual leave entitlement.

The public holidays in Paraguay are as follows:

  • New Year’s Day (1 January)
  • Heroes’ Day (1 March)
  • Maundy Thursday (2 April) (movable date)
  • Good Friday (3  April) (movable date)
  • Labor Day / May Day (1  May)
  • National Holiday (14  May)
  • Independence Day (15  May)
  • Chaco Armistice (12  June)
  • Day of the Oath of the National Constitution (20 June)
  • Founding of Asunción (15  August)
  • Boqueron Battle Victory Day (29  September)
  • Virgin of Caacupé Day (8 December)
  • Christmas Day (25 December)
  • New Year’s Eve (31 December)

Sick Leave

Employees in Paraguay may take up to 26 weeks of sick pay, provided that they have contributed to the Social Security System for at least 4 weeks. 50% of an employee’s salary is paid by the Social Security System while the employee is on sick leave, with the remaining 50% being covered by the employer.

The employee should receive their full rate of pay while on sick leave. Pay is based on a worker’s average salary in the four months preceding the sick leave. A medical certificate is required by employees if they are to be eligible for sick leave with pay.

Maternity Leave

Women working in Paraguay are entitled to maternity leave if they have a baby. This consists of 18 weeks of paid maternity leave, which is paid at the full rate of the employee’s wage by the Social Security System. 

Maternity leave may be increased in the event of multiple births or illness/complications during pregnancy or delivery. In the event of multiple births, an additional 30 days per child is usually granted. If a mother experiences illness during pregnancy/birth, they are often entitled to an additional 6 weeks of maternity leave.

Paternity Leave

Men working in Paraguay are entitled to paternity leave if their wife/partner has a baby. This consists of 2 weeks of paid paternity leave, which is paid in full by the Social Security System, and is not permitted to be extended.

Pensions

The pension system in Paraguay is a mandatory system that is managed by the Social Security System. Contributions are made by employers and employees over a worker’s working life to fund retirement savings.

The retirement age in Paraguay is currently 60 for both men and women. There are also private pension schemes that are offered alongside mandatory pensions to offer further retirement funds.

Severance Pay

If an employee is dismissed from their contract (without the occurrence of employee misconduct), they’d likely be eligible for severance pay. This is calculated as 15 days of salary for each completed year of service (partial years can be calculated pro rata), up to a maximum of 6 months’ pay.

Double severance pay may be given to employees with over 10 years of service. The notice period dictated in an employee’s contract must be adhered to by an employer when terminating a contract – this may vary depending on job role, experience, and years of service.

Supplementary Employee Benefits in Paraguay

It’s advised that employers consider offering their employees supplementary benefits when hiring in Paraguay. This is to improve the chances of applicants applying for new job roles, while also increasing the average period of service for an employee.

A few examples of supplementary employee benefits that companies should think about offering include the following:

  • Performance bonuses
  • Advanced training schemes
  • Allowances for travel, housing, and food
  • Health insurance, such as life insurance or dental insurance
  • Private pension schemes
  • Enhanced leave entitlement
  • Company car
  • Flexible working

Optimize Employee Benefits with Remote People

Remote People can help your business streamline employee benefit compliance through our Employer of Record (EOR) services.

Our EOR solution manages payroll, employment contracts, benefit compliance, and other key administrative tasks. By taking on the legal responsibility of hiring workers in Paraguay, the EOR reduces compliance risks and hiring costs—freeing you to focus on running and growing your business.

Contact Remote People today to see how we can help optimize your employee benefits and make doing business in Paraguay a much easier process.