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What global businesses need to know about payroll in Venezuela
First of all, let’s cover the positives of doing business in Venezuela. It’s a major oil producer and one of the top ten members of the OPEC group by volume. More than 60% of its exports go to reliable major partners in the United States and China, and its exports are varied, from pork and beef to rice, coffee and precious metals.
But there is no escaping the fact that the Venezuelan economy is in a parlous state. Hyperinflation is rampant, up to 90% of the population are officially classed as living in poverty, and the prices of staple goods are rising all the time. Furthermore, it’s believed that more than 20% of Venezuela’s GDP is being generated by illegal activities.
If you are considering an expansion into Venezuela, it’s important to proceed with extreme caution. This guide covers the latest information on payroll and employment regulations, but make sure to check for updates on a regular basis.
You’ll also see that many of the currency conversions noted in this guide are very small. This is due to the hyperinflation and economic strife in the country at present, but they are approximately correct at the time of writing (March 2024). They are subject to substantial change, so you should track fluctuations between the new Venezuelan bolivar (VES) and other major global currencies extremely closely.
Getting Started
There are a lot of rules that businesses need to follow in Venezuela that aren’t necessarily standard in other countries. For example, a company’s articles of association must be published in the newspaper prior to commencing operations.
To get started, companies can visit the Commercial Registry to find and reserve a company name. All companies will need to have an in-country bank account, which can be set up in one business day. It’s customary to deposit 20% of the organization’s declared capital with the bank, but the minimum amount for a limited-liability company is a nominal US $4.
Company documents must be prepared by a lawyer before submission. Businesses must register with a number of different institutions and undergo inspections for employment safety (e.g., fire, health, etc.). Some of the major organizations involved are Social Security, the Ministry of Labor, the National Institute of Socialist Cooperation & Education, and the National Bank of Housing and Habitat.
Employment Considerations
Employment contracts are required in Venezuela, but they can be oral if both employer and employee agree to it. Collective bargaining is allowed in Venezuela, and unions are commonly seen in larger industries, such as oil or steel. However, it is important to note that collectively agreed demands are not always supported by the government.
Venezuela’s standard working week is 40 hours, across five eight-hour shifts; this reduces to five six-hour shifts for employees under 18. Supervisors and managers can work 11 hours a day, as long as they average no more than 40 hours a week across an eight-week period, and get two consecutive paid rest days off each week. Overtime is normally paid at 150% of salary, but this can be varied by collective bargaining or contractual negotiation.
Probationary periods are generally agreed in employment contracts, although most employees can be dismissed without notice or justification within the first 30 days. Notice periods are also agreed in employment contracts.
Compensation, Bonuses and Severance
The current economic and political turbulence in Venezuela has rendered the minimum wage a particularly hot topic. In January 2024, the rate was increased by more than 40% in one go to VES 130 a month (approx. £2.80; $3.60; €3.30), which is more than 700 times what it was in 2019. It’s therefore reasonable to expect other major increases to follow, which may be imposed at extremely short notice.
In line with most other South American countries, the payment of a 13th-month bonus is mandatory; it’s generally paid at the end of the year, but this can vary through collective bargaining.
Severance pay depends on the amount that employees and employers have paid into a severance fund. The terms of this severance fund are agreed in employment contracts.
Tax and Social Security
Income tax is levied progressively in Venezuela. As of the start of 2024, the first VES 9000 earned per year (approx. £195; $250; €230) is taxed at 6%, the first of eight bandings. The highest of 34% is applied to all earnings over VES 54,000 per year (approx. £1170; $1500; €1370). Corporation tax is levied at 15% on the first VES 18,000 (approx. £390; $500; €460) of profits, 22% on the next VES 9000, and 34% thereafter.
The high rates of inflation in Venezuela mean these rates are subject to major change in the future.
There are five main social security contributions in Venezuela:
- Social security: 9%-11% employer, 4% employee
- Employment benefit: 2% employer, 0.5% employee
- Housing contribution: 2% employer, 1% employee
- Employee training: 2% employer, 0.5% employee
- Workplace accident prevention: 0.75%-10% employer (according to risk)
Holidays and Leave
In Venezuela, employees start at 15 days’ paid leave per year, once they have completed their first year of service. They then accrue one additional day for each year of service, up to a maximum of 30 days after 16 years. There are 14 days of public holidays in Venezuela each year.
Maternity leave is 26 weeks, starting six weeks before the due date. Social security covers maternity pay at 66.6% of the normal salary. Paid paternity leave is two weeks, also covered by social security.
Sick leave can run for up to a year. Employers cover sick pay for the first three days, after which social security picks up the tab.
Paid leave entitlement also extends to weddings (three days), family bereavement (two days), and when studying or on military service.
In Summary
Any business looking at Venezuela in the current climate must go into the venture with their eyes open. Circumstances in the country are subject to change at extremely short notice, and having access to local expertise is essential. As well as having local legal representation, make sure you partner with a global payroll provider who can keep tabs on any sudden changes around payroll and employment requirements.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.