Hire employees in El Salvador
Everything a foreign company needs to know before employing people in El Salvador: whether you need an entity, what an employee really costs once ISSS, AFP, the aguinaldo and the vacation bonus are added, how dollar payroll works, which leave is mandatory, and what unjustified dismissal costs. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly. Detail follows below.
Do I need a Salvadoran entity to hire?
No. Foreign companies can engage talent in El Salvador through three routes:
- Employer of Record. Dryft Global employs the person through a compliant Salvadoran employer registered with the Ministry of Labor (Ministerio de Trabajo y Previsión Social, MINTRAB), the social security institute (ISSS), a pension fund (AFP) and the tax authority (DGII). Dryft runs USD payroll, contributions, withholding and bonuses. You direct the day to day work.
- Direct local entity. You incorporate a variable capital corporation (Sociedad Anónima de Capital Variable, S.A. de C.V.), register with the National Center of Registries (CNR) and each authority, then run payroll yourself. The guide puts setup at 4 to 6 weeks.
- Independent contractor. A professional services agreement works only for genuinely independent work. Subordination reclassifies it as employment. See below.
When should I use an EOR instead of setting up an S.A. de C.V.?
An EOR makes commercial sense when you are:
- Onboarding developers or support staff in 5 to 7 business days without corporate registration.
- Scaling a remote team of 1 to 15 without domestic entity infrastructure.
- Outsourcing Spanish contracts, MINTRAB filings and Telework Law compliance.
A subsidiary becomes the right answer at roughly 15 to 20 or more permanent staff, or for a long-term hub with direct legal standing.
What does an employee actually cost beyond salary?
Plan for roughly 20% to 26% on top of gross base salary. Statutory contributions total 17.25%: ISSS health at 7.5% capped at a USD 1,000 salary base, AFP pension at 8.75% uncapped and INSAFORP training at 1%. The aguinaldo adds 15 to 21 days of pay depending on tenure and the vacation bonus adds 30% on 15 days of vacation pay. Because ISSS is capped, the effective percentage falls as salary rises. Full breakdown below.
How difficult is termination in El Salvador?
Possible without cause, but it is priced. Unjustified dismissal under Article 58 of the Labor Code costs 30 days of basic salary per completed year of service, on a daily wage capped at 4 times the sectoral minimum, plus pro-rated aguinaldo and vacation with its 30% bonus. Justified dismissal on the narrow Article 50 grounds carries no severance but must be documented and filed promptly. Employees with 2 or more years who resign are also owed 15 days per year.
Can Dryft Global legally employ my team in El Salvador?
Yes. Dryft Global acts as the legal employer in El Salvador. We handle the Spanish contract filed with MINTRAB within 8 days, ISSS and AFP enrolment, USD payroll, DGII tax remittance, the aguinaldo, the vacation bonus, telework stipends and compliant offboarding, while you direct the work.
Hiring routes compared
Speed, capital and administrative burden differ by route. A managed BPO vendor is a fourth option for turnkey seats against SLAs.
| Factor | Direct entity (S.A. de C.V.) | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to onboard | 4 to 6 weeks | 5 to 7 business days | 1 to 2 days |
| Corporate presence required | Yes, registered subsidiary | No, employed through Dryft's local employer | No, services agreement |
| Capital commitment | USD 2,000 minimum plus legal setup fees | None | Minimal |
| Administrative burden | High: monthly tax, CNR filings, ISSS audits | Minimal, turnkey compliance | Low |
| Misclassification exposure | None | None | High under primacy of reality |
| Best fit | 15+ permanent staff, long-term hub | Teams of 1 to 15 developers, agents or regional leads | Short-term, milestone-based projects |
What an employee costs in El Salvador
El Salvador's employer burden is lighter than most of the region because ISSS is capped. The cost sits in uncapped AFP, the tenure-based aguinaldo and the vacation bonus. The guide's model uses a senior engineer on USD 3,500 a month.
| Component | Employer share | Notes |
|---|---|---|
| ISSS (health and social security) | 7.5% | Capped at a USD 1,000 base, so at most USD 75 a month |
| AFP (pension, Crecer or Confía) | 8.75% | Uncapped, on total gross earnings |
| INSAFORP (vocational training) | 1.0% | Employers with 10 or more staff |
| Statutory contributions subtotal | 17.25% | Effective rate lower once ISSS caps out |
| Aguinaldo accrual | ~5.83% | Based on 21 days of pay; from 15 days by tenure |
| Vacation bonus (Prima Vacacional) | ~1.25% | 30% on 15 days of vacation pay |
| Market-standard benefits | ~3.4% | Private group health, dental and life cover |
| Total employer on-cost | ~20% to 26% | Above base salary |
For an employee on USD 3,500 gross a month, the guide's model adds USD 75 of ISSS, USD 306 of AFP, USD 35 of INSAFORP, USD 204 of aguinaldo accrual, USD 44 of vacation bonus, USD 60 of stipend and USD 120 of private health, for roughly USD 4,344 a month, about 124% of base. Ask us for a cost model with current rates applied.
Payroll and tax
Salvadoran payroll runs in US dollars, legal tender since 2001, either monthly or semi-monthly on the 15th and last day of the month. Bitcoin is also legal tender, but contracts, accounting and filings operate in USD; crypto disbursement is possible only at the employee's request. The employer withholds income tax, employee ISSS (3% capped at USD 30) and AFP (7.25% uncapped), and remits tax to the Ministry of Finance (DGII) on the F-14 return by the 10th of the following month.
Income tax withholding (Renta)
Income tax is progressive on gross salary minus employee ISSS and AFP. The guide's monthly brackets: 0% up to USD 472.00; 10% on the excess to USD 895.24 (fixed USD 17.67); 20% on the excess to USD 2,038.10 (fixed USD 60.00); 30% above that (fixed USD 288.57). The Legislative Assembly routinely exempts the aguinaldo from income tax up to 2 or 3 times the minimum wage.
Statutory minimum wage
Minimum wages are set by the National Minimum Wage Council and vary by sector. For international and remote employers the commerce and services rate is the baseline, cited by the guide at USD 365.00 a month, with lower rates for maquila and agriculture. The commerce rate also sets the severance cap, so confirm the in-force figure with MINTRAB first.
Leave and mandatory benefits
- Paid vacation. 15 continuous calendar days after 1 year of service, paid at full salary plus a 30% vacation bonus (Prima Vacacional), about 4.5 extra days of pay. Both are paid out pro-rata on exit.
- Public holidays. 11 national days, including Holy Week, the August Fiestas Agostinas and Independence Day on September 15. Holiday work is paid at double the daily rate.
- Aguinaldo. A Christmas bonus of 15 to 21 days of basic wages depending on seniority, mandatory after 1 year of service and payable strictly between December 12 and 20. Late payment triggers citations and interest.
- Sick leave. Tiered at 20 to 60 days a year by seniority. ISSS pays 75% from day 4; the employer covers the first 3 days and any statutory gap.
- Maternity. 16 continuous weeks (112 days), at least 6 after the birth. ISSS pays 75% of insurable earnings; the employer tops up where required.
- Paternity and family leave. 3 employer-paid days on the birth of a child, 3 for bereavement of a spouse, child or parent, and 3 for marriage.
- Telework. Remote employees need a written telework agreement, employer equipment or a monthly stipend (typically USD 40 to 80), reimbursement of internet and electricity, and a right to disconnect outside contractual hours.
- Working time. Day shifts are capped at 8 hours a day and 44 a week; night shifts at 7 hours and 39 a week with a 25% surcharge. Day overtime is paid at 2.0 times, night overtime at 2.25 times, and rest-day work at 2.0 times plus a compensatory day. Directors and unsupervised commercial agents can be contracted as exempt.
Termination and notice periods
Contracts are presumed indefinite under Article 25 of the Labor Code; fixed terms are valid only for objectively temporary work, and a permanent role labelled fixed-term is reclassified automatically. Probation is capped at 30 continuous calendar days and is valid only in the first contract between the parties; a promotion cannot restart it. After probation, a dismissal is either justified under Article 50 (repeated unjustified absence, violence or serious insubordination, material damage or gross negligence, disclosing trade secrets), documented and filed with the labor courts or MINTRAB within about 30 days, or unjustified under Article 58, which is lawful but paid. The guide gives no statutory notice schedule for dismissal; 30 days is customary.
| Scenario | Notice and payment |
|---|---|
| Probation (first 30 days) | No notice, no severance |
| Unjustified dismissal | 30 days customary notice; 30 days of salary per year of service, capped base |
| Justified dismissal (Article 50) | Immediate; no severance; file within about 30 days |
| Resignation | 15 days written notice for general staff, 30 for technical or managerial, certified before MINTRAB or a notary |
- Severance cap. The daily wage used for severance is capped at 4 times the daily commerce minimum, about USD 48.68 a day or USD 1,460 a month. Above that, extra salary does not raise the bill.
- Resignation pays too. Under the Voluntary Resignation Law (Decree 592), an employee with at least 2 completed years who resigns with certified notice is owed 15 days of base salary per year of service on the same capped base.
- Final settlement. Unpaid wages, pro-rated aguinaldo, pro-rated vacation plus the 30% bonus, and severance.
Can I use independent contractors?
Only for short-term, milestone-based advisory or specialised projects, and never as a way to avoid payroll cost. Professional services agreements (Contratos de Servicios Profesionales) are scrutinised by MINTRAB, DGII and ISSS under the principle of primacy of reality (primacía de la realidad): if the relationship shows subordination, meaning the company sets hours, directs the work and controls the tools, it is reclassified as employment regardless of the contract's title. The consequences are retroactive employer and employee ISSS and AFP contributions with interest and fines of up to 50% of the unpaid amounts, DGII assessments for unpaid withholding tax, and full liability for unpaid aguinaldos, vacation bonuses, holiday premiums and severance. Put scope, deliverables, invoicing and IP assignment in writing. For anyone who works like an employee, an EOR is the compliant route.
The legal framework in brief
Salvadoran labor law follows the constitutional principle of worker protection: statutory rights cannot be waived. The instruments you will hear referenced most:
- Labor Code (Código de Trabajo, Decree 241). Contracts, probation, working time, aguinaldo, justified dismissal (Article 50) and severance (Article 58).
- Social Security Law (Decree 1263). Mandatory ISSS health, occupational illness, disability and maternity cover.
- Pension Savings System Law (SAP). The private pension funds AFP Crecer and AFP Confía.
- Telework Law (Decree 603). Written telework clauses, equipment or stipend, expense reimbursement and digital disconnection.
- Intellectual Property Law. Work-for-hire: economic rights in software created under an employment contract vest in the employer where the contract defines the assignment.
- Article 11 Labor Code (national quotas). At least 90% of headcount and 85% of payroll must be Salvadoran, with up to 2 top executives excludable. Foreign hires need temporary residence with work authorisation from DGME, taking 8 to 12 weeks.
- Authorities. MINTRAB (inspection and contract registration), ISSS, DGII (tax) and CNR (entity registry).
Where the talent is
El Salvador is a cost-efficient nearshore hub on Central Standard Time (UTC-6), fully overlapping Chicago, Dallas and Houston, with no FX risk because everything runs in dollars. STEM investment has grown a pool of full-stack, mobile, QA and cloud engineers; San Salvador hosts one of Central America's largest bilingual customer operations workforces; and finance graduates are trained in US GAAP, IFRS and ERP platforms. Benchmarks run from about USD 800 a month for a bilingual support lead to USD 5,500 for a senior cloud engineer.
| Region | Talent and industry concentration |
|---|---|
| San Salvador | Capital; software development, bilingual BPO and call centres, finance and admin shared services |
| Santa Tecla and Antiguo Cuscatlán | Metro tech corridor; software, product, enterprise offices and co-working |
| San Miguel and Santa Ana | Eastern and western regional hubs; support, back-office and services roles |
El Salvador Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step. Built from Dryft's own onboarding checklist for El Salvador.
- Step-by-step implementation checklist, from hiring route selection to first payroll
- USD compensation benchmarking with the statutory burden applied
- Bilingual contract template compliant with the Labor Code and Telework Law
- Three-original execution and the 8-day MINTRAB registration window
- ISSS and AFP enrolment, DUI and NIT collection
- Payroll setup for the ISSS cap, uncapped AFP and the DGII F-14 return
- December 12 to 20 aguinaldo calendar and Prima Vacacional timing
- Termination playbook: Article 50 evidence, capped severance math, resignation compensation
This guide is general information, not legal, tax or immigration advice. Salvadoran employment rules change through minimum wage council decisions, annual exemption decrees and Labor Code reform. Confirm current figures with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
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