Guatemala Payroll and Benefits Guide

What global businesses need to know about payroll in Guatemala

Did you know that the average age of the Guatemalan population is just 21? If you’re looking for a place in Latin America to do business, with a workforce that’s young and motivated, then Guatemala might just be the place for you.

Guatemala is a Central American country with a population of around 19 million, which has gradually opened up to foreign investment since the end of a long-running civil war in 1996. It has become an increasingly service-driven economy, but nearly a third of the workforce are still involved in agriculture, supporting major exports like sugar, coffee, fruits and vegetables, and precious metals. More than a third of all Guatemalan exports go to the United States.

However, Guatemala can’t be considered the most economically stable country, and poverty remains an issue in many parts of the country, so care should be taken when setting up a new operation there. With cooperation from the government, however, multinational companies can thrive, provided they work with a payroll solution provider to remain compliant with local labor and payment laws and manage the complexity of the local employment market. Read on for the essentials regarding employment law and running payroll in Guatemala.

Getting Started 

Multinationals with an international payroll looking to broaden existing operations in Guatemala must register new operations with the General Mercantile Registry. This is the government office under the Ministry of Economy in charge of handling all commercial activities around company registrations, individual and company tax IDs, certifications, and more.

Company statutes and incorporation documents should be drafted and notarized before they are sent to the Mercantile Registry. While this is being reviewed, new businesses can set up temporary bank accounts for the share capital (the minimum requirement is nominal) before setting up a full bank account once registration is complete.

Because of the corruption in some areas, foreign companies in Guatemala generally turn to a global payroll provider for compliance in these tasks, along with areas like employment matters of hiring, compensation, company taxes, and employee terminations.

Employment Considerations

Employment laws are set according to The Labor Code, managed by the government, which oversees the necessary laws around hiring employees, collecting overtime and dealing with labor unions.  

Foreign workers must have a current Work Permit, as well as a temporary residence in Guatemala. These foreign workers get a one-year permit and must train local Guatemalans in work practices while in the country. This helps to prevent automatic renewals of foreign work permits. Regular company employees in Guatemala are among the top wage earners in the country.

Working hours in Venezuela are eight hours per day and 44 per week, meaning many employees will normally work Saturday mornings. This weekly limit is reduced to 36 hours a week for those who work at night. Employees cannot work more than 12 hours a day, inclusive of overtime, although senior managers are generally exempt from this limit. The rate of overtime pay is 150% of salary. 

Notice periods start at a week for employees within their first six months, then rising to ten days. This increases further to two weeks after a year’s service and a month after five years. Probation periods are normally two months.

Compensation, Bonuses and Severance

Guatemala’s minimum wage varies between agricultural, non-agricultural, and export-related work. Workers in the Department of Guatemala region also get higher rates. For 2024, rates vary between GTQ 3171.90 per month (£315; $405; €370) and GTQ 3634.59 per month (£365; $465; €425).

Employees in Guatemala are entitled to 13th-month and 14th-month bonuses. These should be paid in July and December each year, the latter in time for Christmas.

If an employee gets terminated without justification, the employee can seek severance equal to one month’s salary for each year of work. There is no limit on the number of years worked. The employee has 30 days to file a severance claim for unjustified dismissal.

Tax and Social Security

Guatemala’s income tax regime is relatively simple, with very low rates. The first GTQ 300,000 earned per year (£30,000; $38,500; €35,200) is taxed at 5%, after which the higher rate of 7% applies. The corporation tax rate is 25%, while the standard VAT rate is 12%. 

Employers contribute 10.67% to social security, while employees pay 4.83%. Employers are also expected to contribute 1% to each of the funds for worker recreation and professional training.

Holidays and Leave

Paid leave entitlement in Guatemala is 15 days per year after one year of service has been completed. Employees receive special holiday pay during their time off, paid at 130% of their usual salary before the start of the leave period. There are ten days of public holidays in Guatemala each year.

Maternity leave is 12 weeks, starting 30 days before the expected due date; employers and social security cover salary equally during this time. Paid paternity leave is two days.

Sick leave is generally paid by social security but may have to be covered by employers in some circumstances. It’s paid at 50% of the normal salary, but the length of the entitlement varies according to length of service, starting at one month after two months’ service, rising to two months after six months’ service, and three months after nine months’ service.

There are also paid leave entitlements for family bereavement (three days), getting married (five days), and carrying out union leadership duties (six days).

In Summary

As with many countries in Latin America, local expertise is essential for any foreign enterprise operating there. Understanding of English can be limited, corruption can be an issue, and there can also be some cultural specifics to take into account. For these reasons, we would always recommend partnering with local law practitioners, as well as a global payroll partner who can give you ongoing compliance support.

This article is for informational purposes only and is not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.

Scroll to Top