Professional Employer Organization (PEO) in Paraguay

Businesses, especially small businesses, often find it difficult to manage all the HR-related tasks they need to take care of to keep their employees happy and productive. But even multinational companies with HR departments can find professional employer organizations (PEOs) to be a helpful solution for managing employees in different countries, such as Paraguay. So, what exactly is a PEO?

Professional employer organizations are businesses that provide HR-related services to other businesses. These services can include payroll, benefits administration, workers' compensation, and even recruiting and training.

PEOs can be a great solution for businesses that don't have the time or resources to manage all of these HR tasks on their own. International PEOs can also be a helpful solution for businesses with employees in multiple countries. That's because they can help businesses manage the different HR laws and regulations in each country, which can be a daunting task for businesses not used to dealing with these issues.

Because PEOs are companies that contract with other businesses to act as their human resources department, they're sometimes called employee leasing companies or professional employer services.

What are the Benefits of Using a PEO Provider?

A multinational company might want to use a PEO in Paraguay because PEOs offer several benefits that aren't available when companies try to operate in foreign countries on their own. PEOs can help companies save time and money, reduce compliance risk, and improve their workforce management.

In terms of saving time and money, PEOs can help businesses save on the costs of recruiting and training employees. PEOs can also help businesses negotiate better rates for employee benefits, such as health insurance. In terms of reducing compliance risk, PEOs can help businesses navigate the different HR laws and regulations in each country.

Remember, it can be a daunting task for a business not used with the legal and compliance issues in a foreign country to successfully navigate intricate laws and regulations. Fortunately, a PEO can help your business avoid potential fines and penalties for noncompliance.

Professional employer organizations can also help businesses improve their workforce management. That's because they provide businesses the tools and resources they need to manage their employees more effectively.

For example, PEOs can help businesses track employee performance and attendance, as well as manage employee scheduling. They also help businesses develop and implement employee retention strategies.

PEOs typically offer the following services:

  • Payroll and benefits administration
  • Employee recruiting and training
  • Employee performance management
  • Employee retention
  • Workers' compensation
  • Health and safety compliance
  • Unemployment compliance

PEOs provide a great way for businesses to focus on what they do best and leave the HR tasks to professionals. Additionally, global PEO service providers offer international coverage that enables businesses to easily expand into new markets.

How Does a PEO in Paraguay Work?

If you're a business owner interested in either expanding into Paraguay or sourcing talent from there, you're probably wondering how PEOs work. PEOs typically contract with businesses to become their "co-employer." This means the PEO becomes the employer of record for the business's employees.

The PEO then takes on the responsibility of managing the HR-related tasks for those employees. This includes tasks like payroll, benefits administration, workers' compensation, and compliance with employment laws.

The PEO also provides your business with the tools and resources it needs to effectively manage their employees. This can include employee performance tracking, scheduling, and retention strategies.

PEOs typically operate in one of two ways:

  • They contract with businesses to provide them with PEO services on an as-needed basis
  • They contract with businesses to provide them with PEO services on a long-term basis

Contracting with a PEO on an as-needed basis is a good option for businesses that only need occasional help with HR tasks. For example, a business might contract with a PEO to help them with a one-time project, like recruiting employees for a new office in Paraguay.

Contracting with a PEO on a long-term basis is a good option for businesses that need ongoing help with HR tasks. For example, a business might contract with a PEO to help them with payroll and benefits administration on an ongoing basis.

Local Taxes and Labor Laws in Paraguay

If you're thinking about expanding your business into Paraguay, it's important to be aware of the local taxes and labor laws.

Generally, the Ministry of Work, Employment, and Social Security oversees employment law in Paraguay. It's this law that dictates everything from payroll processing in Paraguay to the leave and working hours.

Currency and Minimum Wage in Paraguay

The Paraguayan guaraní (PYG) is the official currency of Paraguay.

Starting in July 2021, the minimum wage in Paraguay was revised to 2,289,324 PYG per month. This equates to about $330 per month, or $3,960 per year.

Income Tax and Statutory Contributions in Paraguay

The only statutory deduction for employees in Paraguay is 9.5% of their salary, which goes to the social security and pension system. All employees living and working in Paraguay who earn an income higher than or equal to 36 monthly minimum salaries must pay a personal income tax (PIT) of 10%.

Employers, on their part, are required to contribute 16.5% of their employees' salaries to the social security fund.

Payroll in Paraguay

Payroll cycles in Paraguay can be weekly, biweekly, or monthly. Whatever the case, employers are expected to pay salaries once per month at the very least. Like other employees across Latin American countries, Paraguayans are entitled to a 13th salary, which is typically paid at the year's end. The 13th salary is equal to a full month of pay, and it's paid in December. This salary is considered a Christmas bonus.

Working Hours in Paraguay

A standard working week in Paraguay is 48 hours long, where daytime work is concerned, and 42 hours for nighttime work. Employees should work during the day for no more than eight hours or at night for no more than seven hours. Nighttime work is remunerated at 130% of the employees’ standard rate. All employees are entitled to at least one rest day per week, though Paraguay does recognize Monday to Saturday as the workweek.

Overtime in Paraguay

Work done above the typical working hours per week is deemed overtime and is regulated by employment contracts or collective agreements. Even so, Paraguayan employment law caps overtime at 57 hours per week and three hours per day.

When employees work overtime during daytime hours, they must be compensated at 150% of their regular daytime rate. If they work overtime during nighttime hours or public holidays, however, they must be compensated at a rate of 200% of their regular rate.

Public Holidays in Paraguay

Paraguay has 11 public holidays. These are:

  • Labor Day
  • Good Friday
  • Christmas Day
  • New Year's Day
  • Chaco Armistice
  • Maundy Thursday
  • Independence Day
  • National Heroes Day
  • Founding of Asunción
  • Virgin of Caacupé Day
  • Boqueron Battle Victory Day

Visa in Paraguay

Foreigners traveling to Paraguay for work must obtain a business visa to enter the country. The only exceptions are for individuals whose countries of origin are exempt from visas to Paraguay.

The Paraguayan business visa is valid for six months, but it can be renewed for another six months. During this time, the applicant must apply for a resident permit as it grants leave to seek employment. However, proof of employment confirmation must be attached to the application.

The types of residence permits one can apply for include:

  • Provisional residence permit: Meant for employees working for foreign companies over short periods. Valid for six months, renewable for another six months.
  • Temporary residence permit: Allows employees to work for businesses incorporated in Paraguay (one must include an employment contract with one when applying). Valid for a year and renewable repeatedly for up to six years, although this depends on the area of employment and reasons for extending one's stay.
  • Permanent residence permit: Permits the applicant to work and live in Paraguay indefinitely.

Leave in Paraguay

Employees in Paraguay are entitled to paid annual leave, as well as some other types of leave.

  • Annual leave: After every 12 months of continuous work, employees are entitled to at least 12 days of paid annual leave. Employees who have worked for five years get their leave days extended to 18, while those who have worked for 10 years can enjoy 30 days of paid annual leave.
  • Maternity leave: New mothers qualify for 18 weeks of paid maternity leave, which may be extended by six weeks if they suffer an illness or injury in the course of pregnancy or childbirth. Additionally, each child of a mother with multiple births entitles her to an extra 30 days of leave.
  • Maternity leave for adoptive mothers: Meanwhile, adoptive mothers also enjoy maternity leave that’s typically 18 weeks long if their adoptive child is less than six months old. For children older than six months, 12 weeks of leave are granted.
  • Paternity leave: Male employees enjoy 14 days of fully paid paternity leave, but only after their child's birth. Social security compensates both the new fathers and mothers.
  • Sick leave: Employees who miss work due to being sick are entitled to pay. However, they must present signed proof from a registered doctor before the social security fund can cover their cost.
  • Bereavement leave: Employees are allowed three days of leave if an immediate family member, such as a spouse, parent, or child, dies.
  • Wedding leave: Employees who are getting married are permitted three days of leave.

Termination and Severance in Paraguay

Either party can terminate an employment contract in Paraguay, as long as they give prior notice. Even so, proper justification is required to remove from their role employees who have completed 10 years of service. That's because employers who are unable to prove a just cause for their termination to a labor court may be required to either reinstate them or pay them twice their regular severance pay.

However, if an employee is currently on probation (which can last between one and three months or even six months, depending on the role), they can be terminated without notice.

Outside of probation, and when there's no conduct that warrants dismissal, employers must provide employees with notice. This can range from 30 to 90 days, depending on how long an employee has worked.

Employees issued with a notice of dismissal must be given a severance payment that amounts to 15 days of pay for each year they've worked, but up to 50% of their annual salary. As for employees, they can resign from their position with as little as a single day of notice. However, they too must deliver all notices of termination in writing.

How to Choose the Best PEO Service Company

Business owners interested in using a PEO in Paraguay should remember a few things when choosing the most appropriate organization for their companies.

First, you'll want to make sure the PEO has experience operating in Paraguay. PEOs already familiar with the country's laws and regulations will be better equipped to help you navigate them.

Second, you'll want to ensure the PEO offers the services you need. Not all PEOs offer the same range of services, so it's important to choose one that can provide the specific help you're looking for.

Third, you'll want to make sure the PEO has a good reputation. You can ask other businesses in Paraguay for recommendations, or you can check online reviews.

Finally, you'll want to make sure the PEO is affordable. PEOs typically charge a fee for their services, so you'll want to compare pricing before making a decision. However, ensure you vet for quality and experience, not just the cheapest pricing.

Expand Your Business With a PEO in Paraguay

If you're a business owner interested in expanding your operations into Paraguay, a PEO can be a helpful partner. Getting one that offers international coverage can help you navigate the process of setting up a new office in Paraguay. It can also help you hire suitable tech talent from the country.

If you're a tech company, in particular, you can scale your engineering team quickly and cost-effectively by partnering with Revelo. You'll be connected with pre-vetted remote software engineers in Paraguay and, thanks to our global PEO service, even in the larger Latin America.

Get in touch with Revelo today to learn more about how we can help you expand your business into Paraguay.

Further Resources: Alternative Staff Augmentation Consulting

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