Companies typically use an Employer of Record for fast entry, payroll management for existing entities, and entity setup for durable presence. Peru's gratificación (two mandatory bonuses) and CTS (severance-style fund) are the features requiring the most careful planning.

Employer of Record in Peru

An EOR removes the need to register with EsSalud (health insurance) and the pension system (ONP or a private AFP), and to manage Peru's mandatory statutory bonus and severance-fund payments. It suits early hires and market testing; it is less suited to established entities. Peru's growing technology and professional services sector makes it an increasingly attractive market for companies building LatAm operations.

How payroll works in Peru

Peruvian payroll withholds income tax at progressive rates and requires either ONP (public) or AFP (private) pension contributions from the employee, while the employer contributes to EsSalud health insurance. Two mandatory statutory bonuses (gratificación), each equivalent to one month's salary, are paid in July and December. A separate severance-style fund, Compensación por Tiempo de Servicios (CTS), is deposited into an employee's bank account twice yearly as an ongoing accrued benefit. Payroll is monthly.

Payroll frequency and reporting obligations

Monthly payroll is standard, with EsSalud and pension contributions remitted monthly. The two gratificación payments are made in July and December, and CTS deposits are made in May and November. Annual income tax reconciliation is required. Employers must register with SUNAT (the tax authority) and EsSalud before the first employee starts work.

Key payroll nuances

Gratificación (two mandatory one-month bonuses annually, in July and December) and CTS (a twice-yearly severance-style deposit in May and November) together represent a substantial addition to a simple twelve-times-salary calculation, and both must be budgeted as certain cost rather than discretionary. Employer EsSalud contributions are a modest 9 percent of salary. The choice between ONP and private AFP pension affects the employee's net pay calculation, not typically the employer's direct cost. Statutory annual leave of 30 calendar days is among the most generous in Latin America.

Pay components and employer costs

Typical pay components include base salary, the two gratificación payments (July and December), and the CTS accrual (deposited in May and November). Employer EsSalud contribution is 9 percent of salary. When gratificación and CTS are included, total employer cost is materially above a simple monthly-salary-times-twelve calculation — effectively closer to 15 months of salary equivalent per year when all mandatory payments are included.

Benefits and leave entitlements

Statutory annual leave is 30 calendar days — among the most generous entitlements in Latin America. Sick leave is covered by EsSalud after the first 20 days, which are employer-funded. Maternity leave is 98 days (49 days before and 49 days after birth), funded through EsSalud. Paternity leave is a separate statutory entitlement. Public holidays number around 12 to 13 nationally. The AFP private pension system provides Peru's core retirement savings coverage for employees who choose it over the public ONP system.

Hiring and employment contracts

Written contracts are standard practice, particularly for fixed-term arrangements which are capped in duration under the Labour Productivity and Competitiveness Law. Probation periods are capped at three months (extendable to six months for supervisory roles and 12 months for management roles). Termination without just cause triggers a statutory compensation payment (indemnización por despido arbitrario) based on tenure, in addition to accrued gratificación, CTS, and vacation pay.

Entity setup in Peru

The Sociedad Anónima Cerrada (SAC) is a common structure for foreign employers, with no fixed minimum capital. Registration is completed through the Public Registry (SUNARP), followed by SUNAT registration for tax and EsSalud registration before hiring. End-to-end setup typically takes six to eight weeks.

EOR vs Payroll Management vs Entity Setup — Peru

Frequently asked questions