Located in the middle of the South American continent, Paraguay is surrounded by Brazil, Bolivia, and Argentina. As a small country, Paraguay is rich in natural resources but has been dominated by the much larger Brazilian market for decades. However, an average growth of 2.8% per year over the past decade has led the country to increased prosperity.

Now considered an upper-middle-income country, Paraguay’s small population of 6.972 million people enjoys a per capita GDP of $6,520 per year. The country’s growth slowed during the COVID pandemic, but solid growth has returned. Its GDP has reached $5.47 billion and is expected to increase by 3.8% in 2025.

Export Category Export Value (USD)
Electricity $2.5 billion
Soybeans $2.1 billion
Bovine Meat $1.6 billion
Corn $1.4 billion
Rice $285 million

Around half of Paraguay’s labor force of 3.502 million workers works in services, such as transportation, distribution, finance, communication, and tourism. One quarter of the workforce works in agriculture, while the other quarter is involved in industry, including manufacturing, public services, construction, and energy.

Paraguay produces significant amounts of cement, iron ore, and steel, so mining is another major industry in the country. However, its major exports are soybeans, corn, beef, and electricity, and its major trading partners include Brazil, Argentina, the US, China, Chile, and Germany. With its relatively steady economic growth, Paraguay is increasingly in the sights of foreign investors looking for opportunities in South America.

In this review, we’ll discuss how entering this market and hiring local people can be made faster, easier, and less risky through collaborations with PEOs in Paraguay.

What is a PEO?

If you want to hire and manage Paraguayan employees, you have the choice of working with an in-house team or outsourcing HR responsibilities to a service provider. A PEO, or Professional Employment Organization, is one type of provider that can handle HR functions on your behalf.

Instead of hiring a local HR manager, consulting with legal and tax experts, or struggling to do everything yourself, you can get all the help you need with HR and compliance from a Paraguay PEO.

PEOs employ their own HR and legal experts and handle multiple clients, so their skills and knowledge can be leveraged by many parties at once. These experts continue to monitor legal changes and update their PEO services accordingly. Automation, in the form of online, cloud-based platforms, increasingly with AI integration, helps PEOs provide their services accurately and efficiently.

They also provide support to both clients and their employees when they have questions or challenges. You can outsource HR functions like payroll, benefits administration, pay-as-you-earn (PAYE) tax management, paid leave, and more to a PEO partner. It will also provide monitoring and reporting services to ensure that your employment activities are always in compliance with Paraguayan law.

In many ways, a PEO is similar to another kind of service provider called an Employer of Record, or EOR. Both manage HR and compliance for their clients, but a Paraguay EOR works in a slightly different way. PEOs act as co-employers with clients who own entities in Paraguay and can legally hire employees themselves.

In contrast, EORs directly hire employees on behalf of clients who don’t own local entities. Aside from this difference, these providers play similar roles, and the terms EOR and PEO are often used interchangeably.

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Why Hire through a PEO in Paraguay?

Paraguayan employees are receiving more and more attention from international employers as the country’s economy grows. Most speak Spanish, but a large minority of people also speak Brazilian Portuguese, giving Paraguayans an important role in connecting Brazil with the rest of South America. English is also an increasingly important language for business in the country. 

At the same time, managing a workforce in Paraguay isn’t easy. You need to be familiar with all labor and tax laws to hire and provide services for your employees compliantly.

With a PEO, however, you gain support from experts who know all about these regulations, including:

  • Regular hours: Daytime employees in Paraguay work eight hours a day and 48 regular hours a week, while nighttime employees work just seven hours a day and 42 hours a week. Part-time workers work between 16 and 32 hours per week.
  • Overtime: Total working hours in a day can’t exceed 11 hours, meaning that overtime is limited to three hours per day and nine hours per week. Daytime overtime hours are paid at 150% of normal wages, while nighttime overtime hours (between 8:00 pm and 6:00 am) must be paid at 200% of normal wages.
  • Annual Leave: Workers become eligible for annual leave after working for a full year for their employers. They get 12 calendar days off per year for their first five years, 18 days for each of the next five years, and 30 days after being employed for ten years by the same employer.
  • Maternity and paternity leave: Pregnant employees are entitled to 18 weeks of maternity leave, two of which must be taken before delivery. They’re paid 100% of their normal wages through social security, not by their employers. Employers, however, are responsible for paying full wages to fathers taking advantage of their two-week paternity leave entitlements.

According to the World Bank, Paraguay is one of the most difficult places to set up a business. The country is ranked 160th out of 190 countries for ease of registering a company. This is because setting up a corporation (Sociedad Anónima or SA) requires seven different procedures and takes at least 35 days.

It also requires a significant financial investment. Paying taxes and trading across borders are also relatively difficult in Paraguay. With a PEO partner, however, some of these activities can be made easier.

For example, your PEO can help you register with the Social Security Institute (Instituto de Previsión Social, or IPS) and with the Ministry of Justice and Labor (Ministerio de Justicia y Trabajo, or MJT) so you can start hiring employees. Your PEO will also manage your employees’ PAYE tax withholdings and remitting payments to the DNIT (Dirección Nacional de Ingresos Tributarios), Paraguay’s tax authority.

PEOs manage the difficult tasks of payroll and benefits administration in Paraguay for you and ensure compliance with local labor laws. Some PEOs also provide recruitment services to help you find local staff with the skills you need.

Services Offered by Paraguay PEOs

Working with a Paraguay PEO can help you reduce costs while providing your employees with professional and complete HR services. While providers differ, the core services that all PEOs should provide include:

Payroll Management

Payroll is a complicated function to perform accurately, even when you’re already experienced and aware of the regulations you need to follow. In a foreign country like Paraguay, it requires even more skill and effort unless you have help from a professional service provider. Your PEO will have experience with Paraguay’s tax and social security systems and therefore, be able to make calculations correctly.

As the worksite employer, you’ll need to collect your employees’ time and attendance records and share these with your PEO, an activity which is often possible using built-in time-tracking tools. Using this data, the PEO can run calculations set up for each employee based on their salary, tax obligations, and benefits.

It will calculate their gross salaries, withhold taxes, deduct benefits contributions, and end up with their net salaries. The PEO will also pay their salaries and remit taxes and contributions to the authorities.

Employee Benefits Administration

All employees in Paraguay are entitled to mandatory benefits that include PTO and social security contributions. Contributions are also made by the employer.

Social security benefits are calculated based on the employee’s total earnings, except for their family allowance and mandatory annual bonus. Workers who are paid less than double the national minimum wage (2,899,408 PYG, or Paraguayan guarani, per month, or around 370 USD) must also be paid a family allowance.

Benefit Employee Contribution Employer Contribution
Social Security Contribution (Most Employers) 9.0% 16.5%
Social Security Contribution (Financial Services Employers) 11.0% 17.0%
Family Allowance N/A 5.0% of minimum wage (for workers who make less than twice the minimum wage)

Employers must also pay their employees a mandatory 13th-month bonus equivalent to one month’s regular wages. This bonus must be paid by the end of the year.

PEOs can also help you provide supplementary benefits to your employees, including private health and life insurance, pensions, and equity plans. They normally connect you with providers and charge an additional fee to administer these benefits for you.

Tax Compliance

As an employer, you’re required to withhold PAYE taxes from your employees’ paychecks and remit them to the DNIT. Paraguay uses a simple, progressive system with only three tax brackets as follows:

Income (PYG) Tax Rate
0 – 50,000,000 8.0%
50,000,001 – 150,000,000 9.0%
150,000,001 or more 10.0%

Recruitment and Employment Contracts

If you haven’t already sourced talent in Paraguay, you may want to look for a PEO that offers recruitment tools or services. Some PEOs provide recruitment tools through their platforms, including access to their talent pools and connections to popular job search websites. Others employ professional recruiters whom you can hire to find you the most promising candidates for your needs.

These recruiters use their talent pools, local connections, and targeted advertising to provide you with quality candidates quickly. After you select successful candidates, on your own or with the help of your PEO, you’ll need to contract them to work for you. Your PEO partner will normally help by generating legally compliant contracts and handling their signing and storage.

Contracts in Paraguay for periods longer than 90 days must be written in Spanish. Fixed-term contracts are legal for non-durable work only. Laborers can be hired on fixed-term contracts for a maximum of 12 months, while other workers can be employed for 60 months. 

Probation periods are legal in Paraguay and can last 30 days for unskilled workers, 60 days for skilled workers, and longer for highly-skilled workers. During probation, either party can terminate the employment agreement at any time. Workers aren’t entitled to notice or severance pay during this period.

Onboarding

Once you’ve hired your new workers, you can start to onboard them. You’ll typically need to give them orientations and job training. You’ll also need to provide them with the tools, equipment, data, and systems they’ll need to perform their jobs. Your PEO will add them to your payroll, collect their personal information, store their important documents, and register them with the appropriate authorities.

Terminations

If you must terminate workers for economic or individual reasons, your PEO can advise you on how to proceed. Except for instances of gross misconduct, workers must be given notice of dismissal of between 30 and 90 days, depending on their seniority, or paid in lieu of notice. Workers are normally entitled to severance pay of one month’s salary for under five years of service, two months’ salary for five to ten years of service, and three months’ salary for more than ten years of service.

Advantages of Using a PEO in Paraguay

Managing employees in Paraguay can be made much easier with the help of a PEO partner. The advantages of working with PEOs to hire Paraguayans include:

  • Efficiency: PEOs can normally onboard new employees in just a few days, helping you enter the Paraguay market incredibly quickly.
  • Recruitment: Some PEOs can help you recruit top talent in Paraguay and negotiate agreeable terms with them.
  • Risk mitigation: With their knowledge of Paraguay’s labor and tax laws, PEOs help you stay compliant by monitoring working conditions and reporting to authorities on your behalf.
  • Cost savings: Instead of hiring HR professionals and consulting with expensive tax and legal experts, PEOs give you access to this expertise at a more affordable price.

How to Engage a Paraguay PEO?

To get started with a PEO partner in Paraguay, all you need to do is follow these simple steps:

1

Choose a Provider

Start by defining your budget and hiring needs in Paraguay, then evaluate PEO providers based on their service offerings, local expertise, and pricing. Look for a provider whose capabilities align with your specific requirements.

2

Consult with the PEO

Once you have identified a suitable provider, schedule a consultation to outline your needs in detail. This gives the PEO a clear picture of what is required and allows them to present an accurate service quote.

3

Enter a Service Agreement

After agreeing on terms, formalize the relationship with a signed service agreement. From there, the onboarding process can begin, bringing your employees onto the PEO’s platform.

Partner With a PEO in Paraguay To Expand Your Business Successfully

Paraguay’s strategic location, growing economy, and multilingual workforce make it a smart choice for companies expanding in South America. However, navigating tax procedures, labor laws, and corporate setup can be time-consuming and costly. A PEO can help simplify everything.

Looking for a trusted PEO provider in Paraguay? Remote People connects businesses with reliable PEO services that handle HR functions, payroll, tax compliance, and benefits administration. Contact us today to start building your workforce in Paraguay quickly and compliantly!