Hire anywhere—No entity required
Start hiring nowA lot of people talk about countries like Costa Rica. Tech hub. Startups. Palm trees. Headlines. But there's another story, one that's been unfolding kind of quietly, just a little to the north. El Salvador.
With little fanfare, El Salvador became a powerhouse for distributed teams. The World Bank reports that El Salvador accounts for over 20% of all ICT employment in Central America, with 32,000 professionals working in technology roles across software development, data analysis, cloud computing, and IT consulting.
And the talent pool is expanding. Fast. Well over half of the country's IT companies plan to grow their teams by the end of 2026. This is not just about cost savings (though salaries are competitive). It's about accessing bilingual professionals who operate in the same time zones as North American teams, work in U.S. dollars, and bring serious technical skills to the table.
Meanwhile, the universities are producing more STEM graduates every year. The government's investing heavily in digital infrastructure, in skills training. It's like the ecosystem is quietly, steadily clicking into place.
For globally distributed companies, El Salvador offers something rare. It's what emerging markets promise but rarely deliver: proximity without compromise. You get real-time collaboration across borders. You avoid currency fluctuation headaches. And you tap into a workforce that understands both the technical demands of modern software development and the cultural nuances of working with international teams.
El Salvador's labor market
The numbers tell an interesting story. Unemployment in El Salvador dropped to 4.65% in 2024, the lowest on record in nearly three decades. This tight labor market exists alongside a workforce that keeps getting better trained and better connected. The government has poured investment into the National Digital Agenda, expanding broadband infrastructure and building data centers while pushing digital literacy programs across the country.
Here is what sets the tech workforce apart: About 70% of young professionals in El Salvador report high comfort levels using English, according to workforce analysis from Business Process Outsourcing (BPO) industry leaders. That bilingual edge cuts both ways. Salvadoran developers and digital professionals can jump into Slack channels and client calls without the friction that slows down collaboration. Companies have reported operational cost reductions of up to 30% when they tap into this bilingual talent pool compared to onshore alternatives.
The digital economy itself is in expansion mode. El Salvador positioned itself as a tech hub through landmark legislation like the Digital Assets Law and the Promotion of Innovation and Manufacture of Technology Law. These initiatives created a legal framework that supports technology companies and innovation-focused businesses. The International Trade Administration notes that government initiatives around e-government services, digital payments, and financial inclusion continue to accelerate demand for technical talent across software development, fintech, and cloud computing roles.
What this means for hiring is straightforward. You get access to a labor market where tech talent is growing faster than in neighboring countries. The infrastructure supports remote work. The workforce speaks your language. And the regulatory environment actively encourages digital business growth rather than creating barriers to it.
How to hire employees in El Salvador
When you want to hire in El Salvador, you face a choice that every expanding company eventually confronts. You can build your own infrastructure in the country, or you can partner with someone who already has it.
Setting up a local entity
This is the traditional route. You establish a legal presence in El Salvador by incorporating a subsidiary or branch office. That means hiring a notary, registering with local authorities, navigating tax registration processes, and building out your own HR and payroll infrastructure from the ground up.
For companies planning significant long-term operations with dozens of employees, this investment makes sense. You get complete control over your operations and direct relationships with local regulators. But the reality is that setting up an entity takes time, often several months. You need to maintain that entity even if you only employ a handful of people. And you bear full responsibility for compliance with every aspect of Salvadoran employment law.
Hiring through an employer of record (EOR)
An EOR flips the script entirely. The EOR becomes the legal employer on paper while you maintain complete control over day-to-day management and work assignments. You find the talent, interview candidates, and make hiring decisions. The EOR handles everything else: employment contracts, payroll processing, tax filings, mandatory contributions, and benefits administration.
The speed advantage is substantial. Companies can hire employees in El Salvador within days rather than months. There are no entity setup costs, no need to hire local HR staff, and no requirement to become an expert in Salvadoran labor regulations. For companies testing the El Salvador market, hiring their first few employees in the country, or building distributed teams without geographic boundaries, an EOR removes friction from the hiring process.
Employment contracts in El Salvador
Employment contracts do not technically need to be in writing to be valid under Salvadoran law. But that technicality is not your friend. Written contracts protect both parties and provide clear documentation if disputes arise.
Most employment relationships fall into two categories: indefinite-term contracts and fixed-term contracts. Indefinite-term agreements are the standard for permanent roles with no specified end date. Fixed-term contracts exist for temporary projects, seasonal work, or covering for absent employees. The law restricts their use for permanent positions, and if you repeatedly renew fixed-term contracts for the same role, the government may reclassify them as indefinite.
Every contract must include specific mandatory information. You need full names and addresses of both parties, a clear job description, the workplace location, working hours and schedule, salary details with payment frequency, and signatures from both employer and employee. Contracts can include a probationary period of up to 30 days. During this window, either party can terminate the relationship without cause and without severance obligations.
Working hours, holidays, and leave
The standard workweek in El Salvador caps at 44 hours for daytime positions and 39 hours for night shift work. Overtime happens when employees exceed these thresholds. Premium pay rates apply to overtime hours, and employers must track and document all additional hours worked.
Employees earn a minimum of 15 paid vacation days annually after completing one year of continuous service. El Salvador also recognizes several official public holidays throughout the year. Workers receive paid time off for these national observances. The law also requires a minimum 30-minute lunch break each workday.
Maternity leave receives strong legal protection in El Salvador. The law mandates paid time off for expecting mothers and includes provisions for breastfeeding breaks after returning to work. Employers cannot dismiss employees during maternity leave periods. Paternity leave is not currently mandated by law, though some companies offer it voluntarily as part of their benefits package.
Employee benefits and social contributions
El Salvador mandates several statutory benefits and contributions that employers must provide. These requirements exist whether you hire through your own entity or partner with an EOR. The system protects workers while funding the country's social safety net.
Key mandatory benefits include:
- Social security contributions that fund healthcare and disability coverage
- Pension fund contributions for retirement savings
- Aguinaldo, the mandatory 13th-month salary paid in December
- Vacation bonuses calculated at 130% of regular daily wages
- Severance payments based on tenure when termination occurs without just cause
Both employers and employees contribute to the social security and pension systems. Employers bear the larger share of these mandatory contributions. The percentages are fixed by law and apply to gross salary. Benefits administration requires precise calculation and timely payment to avoid penalties.
Payroll and taxation in El Salvador
El Salvador uses the U.S. dollar as its official currency, which simplifies payroll for North American companies. You avoid currency conversion headaches and exchange rate fluctuations when paying employees. Payroll processing must comply with specific payment schedules and withholding requirements set by Salvadoran law.
Employers withhold income tax from employee salaries based on progressive tax brackets. The tax rates increase as income rises. Employers must remit these withholdings to the tax authority along with detailed reports on each payment period. Monthly and annual tax filings document all payments, deductions, and contributions for each employee.
Payroll cycles typically run bi-weekly or monthly, depending on the employment agreement and company preference. Payment must occur through verifiable methods like bank transfers or documented cash payments. Employers maintain detailed payroll records, including gross wages, all deductions, net pay, and proof of statutory contributions. These records serve as evidence of compliance during labor inspections or audits.
Employee vs. contractor classification
The line between employee and contractor exists in Salvadoran law, and authorities care deeply about which side of that line your workers stand on. Misclassification carries substantial penalties, including back payment of wages, benefits, social security contributions, and fines from the Ministry of Labor.
Salvadoran authorities examine the actual working relationship rather than what you call it in the contract. The key factors they consider include:
- Control. Does your company dictate how, when, and where work gets done, or does the worker control their own schedule and methods?
- Integration. Is the work an integral part of your core business operations or a specific project outside your main activities?
- Economic dependency. Does the worker rely on your company as their primary income source or do they serve multiple clients?
- Tools and resources. Does your company provide equipment and software or does the worker use their own?
- Exclusivity. Does the worker perform services only for your company or are they free to take on other clients?
Payment structure matters too. Employees receive regular salaries or hourly wages. Contractors get paid based on project completion, milestones, or specific deliverables. If the relationship looks like employment in practice, the government will treat it as employment regardless of what your contract says.
Termination and severance in El Salvador
Ending an employment relationship in El Salvador follows specific rules that depend on who initiates the termination and why. The law distinguishes between termination with just cause and termination without cause. That distinction determines whether severance payments apply and how much the employer owes.
Just cause termination happens when an employee commits serious misconduct like theft, repeated absence, insubordination, or disclosure of confidential information. In these situations, employers can dismiss workers without severance obligations. But the burden of proof sits with the employer. You need documentation and evidence to support the just cause claim.
According to the Fair Labor Association, termination without cause requires severance payments based on the employee's length of service. Workers are entitled to one month's salary for each year of employment. Employers must provide advance notice or payment in lieu of notice. The 13th-month salary and any accrued vacation pay must also be settled in the final payment.
Salvadoran work permits and immigration
Foreign nationals need work permits to legally work in El Salvador. The process involves multiple government agencies, including the Ministry of Labor and the General Directorate of Immigration and Foreigners. Your company or your EOR partner must sponsor the work permit application on behalf of the foreign employee.
The law mandates that at least 90% of the workforce must be Salvadoran nationals. This quota applies to companies operating in El Salvador and affects how many foreign workers you can employ relative to your total headcount. Exceptions exist for specialized technical roles where qualified Salvadoran candidates are not available. But you need to demonstrate that necessity in your work permit application.
Work permits connect to temporary residence permits for foreign employees. Processing times vary but typically take several weeks to several months, depending on the permit type and completeness of documentation. Required documents usually include employment contracts, proof of qualifications, criminal background checks, and health certificates. Many companies partner with immigration attorneys or rely on EOR providers to navigate this process and ensure compliance with evolving requirements.
What Pebl can do for you
As an EOR in El Salvador, Pebl gives you access to local talent without the complexity of setting up your own entity. Operating in more than 185 countries, we provide the same platform-the same process-whether you hire in El Salvador, Singapore, or Stockholm. We handle everything from employment contracts and payroll to compliance and benefits administration. The complicated stuff. And you? You can focus on building your team instead of navigating Salvadoran labor law. You get speed without shortcuts and scale without complexity. Get in touch to learn more.
FAQs: Hiring in El Salvador
Companies expanding into El Salvador often ask similar questions about what it takes to hire and operate there. Here are straight answers to the most common concerns.
What is the minimum wage in El Salvador?
As of June 2025, the minimum wage in El Salvador is $408.80 per month for commerce, services, and industrial sectors. The government approved a 12% increase earlier in 2025 to improve worker purchasing power. Different sectors have slightly different minimum wage rates, with agriculture and maquila (raw material factory) industries at lower thresholds.
What is the work culture in El Salvador?
El Salvador's business culture values relationships and hierarchy. Building trust and rapport with employees and partners comes before diving into transactional details. Decision-making typically flows from the top down, and employees generally show respect for authority and seniority. Communication blends directness with diplomacy, especially when addressing sensitive topics or speaking with superiors.
What is a good salary in El Salvador?
The average salary in El Salvador is around $21,000 per year, though this varies significantly by industry, role, and experience level. Tech professionals and skilled workers in urban areas earn considerably higher than the national average, with some roles reaching over $90,000 or above for senior positions. Companies hiring for specialized technical roles should benchmark against regional tech salaries rather than general market averages to attract top talent.
Can I hire in El Salvador without a local business entity?
Yes, you can hire employees in El Salvador without establishing your own legal entity by utilizing EOR services. The EOR becomes the legal employer while you maintain control over daily operations and management. This approach lets you onboard employees within days and avoid the time and expense of entity setup.
What jobs are in high demand in El Salvador?
Technology roles dominate the high-demand list. Software developers, data analysts, cloud computing specialists, and cybersecurity professionals are highly sought after. Python, SQL, AWS, JavaScript, and Kubernetes rank as the most in-demand technical skills for remote work opportunities in El Salvador. Customer service and BPO roles also see strong demand due to the bilingual workforce and nearshore advantages.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.
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