Spotlight on Peru

Peru, one of the fastest-growing economies in Latin America (LATAM), has recorded two decades of high GDP expansion, low inflation and economic stability. Notably, this continuous, steady growth has allowed the country to tap into international credit markets at low-interest rates, funding further public and private investments in key initiatives like workforce development, infrastructure, innovation and more. As a result, multinational companies (MNCs) are increasingly turning to Peru for foreign direct investment (FDI) projects and hiring needs. 

  • The Peruvian government is prioritizing international business and focusing on reducing bureaucratic barriers to FDI, nurturing small and medium enterprises (SMEs) and incentivizing FDI in local infrastructure projects.
  • Peru is one of the lowest risk countries in LATAM for investors. Peru’s Emerging Market Bond Index Global (EMBIG) stood at 1.83% in 2021, well below the 3.92% regional average. 
  • As a result of innovation and technology sector growth, the country’s data center market is expected grow at a compound annual growth rate (CAGR) of 11.22% from 2022 through 2027. Amazon Web Services announced it will launch a Local Zone in Lima, aimed at supporting the adoption of cloud, artificial intelligence (AI) and other new technologies. 
  • As one of the least expensive countries to live in South America, Peru also offers MNCs one of the most cost-effective workforces in LATAM.

What are some key principles multinational companies (MNCs) should be aware of when hiring in Peru for the first time?

Employment contracts are compulsory in Peru. While a contract can be verbal, it is highly recommended employers put it in writing. Contracts must be in Spanish and outline terms for working hours, benefits, probationary periods, health and safety obligations and data protection requirements. By default, a contract runs for an indefinite term. However, a fixed-term contract is possible, with restrictions, and may last for up to five years. Employment is not at-will in Peru, meaning an employer can only terminate an employee under certain circumstances. Beyond the rights required by Peru’s labor code, union employees may also benefit from additional provisions as detailed in collective bargaining agreements.

MNCs with more than 20 employees in Peru may be surprised to learn they are required to implement an employee profit-sharing program with employees. Companies in telecommunications, manufacturing and mining must share 10% of their pre-tax profits, while wholesale entities, retail businesses, restaurants and mining companies share 8% of their pre-tax profits. All other companies must share 5% of their profits.

While most MNCs are focused on hiring when they first expand into a new country, it should be noted termination can be tricky in Peru. Probationary periods are set at three months for regular staff and are extendable for another three months. For management positions, the probation period can be up to 12 months. Once the probation period closes out, an employee can only be terminated for fair reasons and on objective grounds, including a criminal conviction for fraud or other serious offenses. Other examples where termination is allowed include completion of the project at hand, mutual agreement between both parties or a worker’s permanent disability. An agreement may also be terminated following an unforeseen event, such as a natural disaster or a company declaring bankruptcy. Employers cannot terminate an employee due to union membership or for submitting a complaint against the company. 

The employer must provide the employee, in writing, with the reasons for the dismissal. They must then allow for at least six calendar days’ notice for the employee to present a response. Except when a serious offense has occurred, this notice period can be extended by either party. During the notice period, the employer can relieve the employee of their work obligations but must still compensate them for the corresponding salary remuneration and benefits. 

Why is demand growing in Peru for Employer of Record (EOR) services?

In recent years, the government of Peru has implemented structural reforms to make the country a more attractive destination for FDI. At the same, Peru is becoming more well-known on the world stage for stable growth and low-risk investment. For these reasons, MNCs from around the globe are taking a closer look at investing and expanding into Peru. 

Hiring is often the first step for MNCs looking to dip their toes in and test the market in Peru. However, this requires a local entity to be set up. Apart from the establishment process, the company’s HR and accounting teams are then faced with learning a new tax framework, labor laws, contract regulations and other operational nuances. For example, Peru has a unique labor code, which needs to be accounted for when drafting an employment contract. If statutory benefits are not met in an employment contract, or at any point during the employment relationship, an MNC can find itself in hot water. 

Rather than setting up a local entity and hiring locally, MNCs often determine the EOR model to be a more viable, nimble solution for entering Peru. Effectively, by partnering with an EOR like GoGlobal, the MNC circumvents the arduous process of setting up a company and administering cross-border payroll. Simultaneously, they mitigate many of the risks, requirements and restrictions that typically come along with hiring in Peru – while still tapping into the country’s cost-effective talent pool. 

How can partnering with GoGlobal help MNCs grow their team in Peru?

Despite Peru’s favorable economic conditions and cost-effective workforce, the country’s unique labor code and administrative requirements often make it difficult for an international HR department to manage the payroll. Essentially, GoGlobal takes the reigns and ensures employees are hired, onboarded and managed compliantly. This way, our clients can focus on the core business activities that help them grow a team in Peru – without being weighed down by red tape, paperwork and unfamiliar regulations. 

Our innovative EOR solution has successfully helped MNCs build fully compliant workforces in LATAM markets. We take pride in embracing a global mindset while maintaining teams of local experts on the ground in each market we serve. Our dedicated, expert team in Peru knows the nuances of the regulatory environment, staying up to date on all legislative updates. They are also fully aware of Peru’s business customs and the local culture. This ensures a comfortable experience for both clients and client-employees. 

Before the onboarding process begins, our onshore team in Peru will work hands-on with your team and the worker to explain how the EOR arrangement operates. Throughout the arrangement, that same dedicated team remains the point of contact for both the client and client-employee. We will address any questions that come up pertaining to payroll, taxation or benefits. When we serve our clients and client-employees, we seek to infuse the end-to-end global hiring experience with agility, efficiency and peace of mind. 

If your company offers a positive employee experience in your home country, GoGlobal will help you bring it to Peru.

Find additional details on benefits and hiring in Peru, or contact us to talk with an international HR expert.

The content provided in this publication is for general information purposes only and should not be considered legal advice. Due to potential changes in regulations, the information may become outdated. GoGlobal and its affiliates disclaim any responsibility for actions taken or not taken based on the information contained in this publication.