Paraguay, a landlocked nation bordered by Bolivia, Brazil, and Argentina, exhibits a growing economic landscape underscored by a notable 62.9 economic freedom score, securing its position as the 73rd freest country in 2022. This economic momentum has been particularly pronounced since 2021, propelling Paraguay to the 17th rank out of 32 countries in the Americas region for economic development. A Paraguay EOR/PEO streamlines compliance with local laws and manages payroll, taxes, and HR functions, allowing companies to focus on core operations. 

Grow your team in Paraguay with Gloroots, leveraging their local expertise for seamless recruitment and successful integration into the country's dynamic business landscape. From emerging industries to skilled professionals in agriculture and technology, Paraguay offers diverse opportunities for business expansion. Partner with Gloroots to navigate the complexities and efficiently build your team in this burgeoning market.

In Paraguay, effectively managing the challenge of "Misclassification of Workers" is paramount, given the risks associated with inaccuracies in employee categorization, such as misidentifying independent contractors or incorrectly classifying individuals as exempt from specific regulations. To navigate and mitigate these risks successfully, engaging a PEO/EOR is essential. Partnering with Gloroots, a trusted ally, ensures a dedicated commitment to strict adherence to labor laws, precise worker classification, streamlined payroll management, and comprehensive employee benefits. Entrusting these responsibilities to seasoned professionals guarantees a compliant and efficient experience within Paraguay's nuanced labor landscape, fostering operational efficiency and instilling confidence in your business endeavors in the Paraguayan market, guarding against potential pitfalls associated with worker misclassification.

Labor laws in Paraguay are primarily governed by the Labor Code (Código Laboral) of Paraguay. This comprehensive legislative document outlines a wide range of labor-related issues, including but not limited to employment contracts, working hours, wages, benefits, occupational health and safety, and procedures for dispute resolution. 

Employment Contract

An employment contract in Paraguay should include essential elements to ensure legal compliance and provide clarity for employers and employees. Here are key components typically required for an employment contract in Paraguay:

• Identification Details: Full names and identification details of both the employer and the employee.
• Job Description: A clear and detailed outline of the roles and responsibilities associated with the position.
• Workplace Details: Specific location/s where the employee is expected to carry out their duties.
• Work Hours: Defined working hours, including any stipulations regarding flexibility or overtime.
• Payment Structure: Details on how the employee will be remunerated, including salary, benefits, and payment frequency.
• Problem Resolution: Explanation of the process for addressing and resolving employment-related issues. 
• Employment Protection: A clause specifying protection measures for relevant employees.
• Notice Period: Optional but often included, outlining the period either party must give before terminating the contract.
• Probationary Period: Optional provision specifying a trial period for the employee's performance evaluation.
• Annual Leave: Optional provision outlining the entitlement and procedures for taking annual leave.

Working Time

In Paraguay, the standard workweek typically spans 48 hours, with employees working 8 hours per day.  For employees on the night shift between 8:00 pm and 6:00 am, the weekly hours are limited to 42, and compensation must be provided at a rate of 130% of the employee's regular pay.

Overtime

Any work exceeding the standard weekly hours is considered overtime and is governed by the terms outlined in the employment contract or collective agreements. When employees are asked to work beyond regular hours or on holidays, there is a ceiling of 57 hours per week and 3 hours per day.

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Public Holidays

12 public holidays throughout the year (approximately).

Minimum Wage

The minimum monthly wage in Paraguay amounts to 2,298,324.00 PYG.

Annual Leave

The entitlement to paid leave in Paraguay is contingent on the employee's tenure.

‍Paid Sick Leaves

Employees have the right to receive paid sick leave, granted they have contributed to Social Security for a minimum of four weeks. The compensation is calculated based on the employee's salary from the preceding four months of illness, covering up to 26 weeks and can be extended by an additional 24 weeks under exceptional circumstances. Both the employer and Social Security (IPS) share the responsibility, each contributing 50% of the employee's regular income during the sick leave period.

Maternity Leaves

Workers are eligible for 18 weeks of fully compensated maternity leave, administered by Social Security (IPS) upon submission of a medical certificate. Employers have the discretion to extend an extra six weeks of leave for employees who experienced illness during pregnancy or childbirth. In cases of multiple births, mothers receive an extra 30 days of leave per child. Adoptive mothers are entitled to 18 weeks of maternity leave for children below six months and 12 weeks of sick leave for children older than six months.

Paternity Leaves

The father or partner is granted a two-week paid paternity leave following the birth of the child, with compensation provided by the IPS at a rate of 100% of the employee's standard salary.

Tax and Social Security contribution

Employer Payroll Contribution

Employee Payroll Contribution 

Employee Income Tax

Tax Rate: 10%

Applicability: Applies to all resident employees in Paraguay

Income Requirement: Annual income equal to or exceeding 36 monthly minimum salaries (approximately 13,000 USD annually)

Termination 

The process of termination is contingent on the terms outlined in the employment and collective agreements, influenced by the contract type and the reason for termination. Regardless, termination notices must be provided in writing by the employee. Unlawful dismissal is prohibited by employers, particularly for employees with over ten years of service, and can only occur with just cause.

Severance Pay

In Paraguay, the severance pay, if applicable, relies on the employee's tenure with the company. It is computed at 15 days of the regular salary for each year of service, with a cap at 50% of the employee's annual salary. For an employee with more than a decade of service, if an employer cannot substantiate a just cause before a labor court, the employee may either be reinstated or entitled to twice the regular severance pay amount.

Notice Period

The required notice period is one day.

Probation period

The probationary period is 30 days for unskilled employees or domestic workers and 60 days for skilled workers or apprentices.