El Salvador Business Basics

El Salvador Business Basics #1: Cost of labor in El Salvador

The salary that will be paid is the remuneration that the worker will receive related to the activities agreed to and carried out in the employment contract with an employer. The sum paid to the worker will never be less than the established minimum wage.

Minimum wage

This is established to sufficiently cover the basic needs of the workers’ homes and living expenses. This salary is set at a rate that depends on the cost of living and the conditions surrounding it. For El Salvador, the minimum wage ranges from USD 200 to USD 300 per month, depending on the type of work to be performed.

Forms of worker compensation

• Per unit of time: Employees are paid by considering the time spent at work without considering the final result.
• Per unit of work: The worker will be paid based on the quantity and quality of the work carried out.
• Mixed: The employee is paid based on the work carried out during a certain time.
• By task: Workers can be paid for the number of activities carried out during the workday.
• By percentage: The worker will receive a percentage for each activity.
• By piecework: The work carried out will be considered without including the time or days required to complete the work.

What is considered salary?

Salary paid in El Salvador is composed of habitual payment, received in money or in kind.

What does not constitute salary?

Bonuses and remuneration that the worker receives on a sporadic and single-event basis.

Night shift premium

Work performed during evening hours will have a surcharge of 25% on the normal value.

Overtime wages

They are paid a 100% surcharge based on hours worked on a usual workday.

Day off from work

The value received by the worker for the paid day plus a 50% surcharge will be canceled.

Work holidays

This is paid with a surcharge of 100% on the value of the usual working day.

Christmas bonus

• From 1 year to 3 years: 10 days of salary.
• From 3 to 10 years: 15 days of salary.
• 10 years or more: 18 days of salary.

Holidays

15 days of salary are paid plus a 30% surcharge on the monthly salary immediately before requesting the vacation period.

El Salvador Business Basic #2: Labor conditions in El Salvador

Workday

The time that the worker is in his workplace performing activities for which he has been hired.

• Day shift: Included in the schedule from 6:00 am to 7:00 pm. It will not exceed 8 hours a day or 44 hours a week.
• Night shift: Covers the hours from 7:00 pm to 6:00 am and may not exceed 7 hours a day or 39 hours a week.
• Mixed day: It will include hours on the day and night shifts. However, it can never be more than four night hours. Otherwise, it will be considered a night shift.
• Special shift (high-risk tasks): It may not exceed 7 hours a day or 39 hours a week if it is daytime. It will not exceed 6 hours a day or 36 hours a week if it is night.
• Rest between shifts: A 30-minute break will be granted so the worker can eat and rest. This break is granted in the middle of the day.

Rest days and holidays

One day of rest is granted for each week worked, this being Sunday. An additional day of rest may also be agreed upon. It will also apply days of rest related to national or other holidays.

Holidays

For one year of uninterrupted work, the worker will be entitled to fifteen business days of vacation.

El Salvador Business Basics #3: Legal forms of companies in El Salvador

El Salvador recognizes five types of commercial companies through its commercial code.

Company in Collective Name

The corporate name of the Company in Collective Name will be formed with the name of the partners or, if not all of them are included, with the name of some followed by the phrase “And company”

• Partners: It is formed of 2 partners.
• Constitution: It is carried out utilizing a public deed and will subsequently be registered in El Salvador’s Registry of Commerce.
• Capital: There is no minimum capital established by law for its constitution. It may consist of both money and goods and will be represented by participation fees that may be of different values.
• Responsibility: The partners will be jointly liable for the company’s obligations.

Simple Limited Company

The Limited Partnership will always be constituted under a company name, which will be the name of one or several partners or their surname followed by the phrase “And company.” It must also contain the phrase “Sociedad en Comandita” or its acronym “S. in C.”

• Partners: It is constituted with a minimum of 2. In this type of company, you will find two classifications of partners: The partners and the limited partners.
• Constitution: By public deed and registration in the National Trade Registry.
• Capital: There is no minimum amount set by law. Contributions may be in money or goods.
• Liability: The liability will be joint, several, and unlimited for general partners. As for the limited partners, liability will only pertain to the contribution of said partners.
• Administration: Limited partners cannot exercise administration.

Limited Liability Company

This type of business structure in El Salvador can be constituted under a company name or business name. It may be freely chosen, followed by the word “limited” or its abbreviation ” Ltda. ” If this is not included in the company name, it will make the partners jointly.

• Members: Minimum 2, maximum 25 members.
• Constitution: By public deed.
• Capital: According to the Commercial Code of El Salvador, the minimum capital must be $2000 USD. It will be represented in quotas of social participation that can be of different values.
• Liability: The partners will have limited liability up to the amount of the capital contribution.
• Administration: One of the partners, or a third party, can be in charge of the company.

Anonymous Society

It is formed by a company name, which is not subject to forms or rules except that no two names can be identical. It must be accompanied by the phrase “Sociedad Anónima” or its acronym “SA.” The omission of this will make the partners jointly and unlimitedly liable.

• Partners: Minimum 2.
• Constitution: Must be done by public deed.
• Capital: Must be fully subscribed in its entirety. It will not be less than $2000 USD and will be represented in shares.
• Responsibility: The partners will be responsible for up to the contributed capital.
• Administration: This can be entrusted to one or more partners or people outside the company.

Limited Company by Shares

This company will be governed by the same rules as the Collective Company. Its company name is formed with the name of one or more of the limited partners or the surname of some partners, followed by the phrase “And company.” The phrase “Sociedad en Comandita” or its acronym “S. in C.”

• Partners: Minimum 2.
• Constitution: It will be done through a public deed and its subsequent registration in the National Registry of Commerce.
• Capital: It will be represented by shares. It may be made up of both money and goods.
• Liability: The general partners will have joint and unlimited liability. Limited partners will only be liable for the amount of their contribution.
• Administration: The general partners will be in charge.