Hiring in Paraguay: The Ultimate Guide for Global Employers

For many globally expanding companies, South America presents an attractive labor market thanks to its high-ROI talent base. That is, international employers find skilled, hard-working professionals at a fraction of the wages found in North America and Western Europe.

A lesser-known secret that often flies under the radar is the workforce in Paraguay, a landlocked country located in the center of South America. It’s home to remote-ready professionals in various fields, including engineering, marketing, operations, and AI/ML roles, among others.

Paraguay’s economy grew 5.9% year-over-year in the second quarter of 2025, which has fueled momentum in hitting its lowest unemployment rate in eight years at 5.6%. At the same time, the country added over 35,000 new formal sector positions. This isn’t a coincidence. It’s a labor market awakening to global opportunities.

Tech hubs in Asunción and Ciudad del Este are attracting both local investment and international attention as nearshore alternatives. For companies tired of the usual suspects or priced out of premium markets, Paraguay offers an early-adopter advantage in a market that’s stable, affordable, and increasingly skilled. In this guide, we peel back the layers of Paraguay’s talent base, examining its labor market, hiring options, legal nuances, and numerous other considerations for global employers.

Peering into Paraguay’s labor market

Paraguay’s workforce just hit record numbers the country has never seen before. In mid-2025, Paraguay recorded 805,793 registered formal jobs. That represents 98,000 new workers added in less than two years. For context, this is an 8.4% year-over-year increase in workers protected by social security.

Paraguay’s rapidly developing labor force is a youthful and increasingly skilled talent pool, fueled by a combination of government initiatives, international investment, and a growing tech landscape. The average age in Paraguay is 27. The total workforce stands at roughly 3.1 million people (as of 2024), and the services sector just absorbed 29,301 new employees in the first quarter of 2025 alone. This matters because services include the tech roles, customer support positions, and digital operations that distributed companies actually need.

There are valid reasons why the BBC has positioned Paraguay as “the Silicon Valley of South America.” The government just committed US$20 million to build a digital park near Asunción’s international airport. President Santiago Peña’s administration has been meeting with Google and OpenAI to pitch the country as a destination for data centers and AI operations.

The pitch is pretty straightforward. Paraguay runs entirely on hydroelectric power from the Itaipu Dam. That makes it the world’s leading exporter of clean energy with the continent’s lowest electricity costs. For companies running energy-hungry servers or training AI models, that’s not a minor detail. It’s the entire business case.

But what makes hiring in Paraguay different from its bigger Latin American neighbors? Cost is part of the story. Labor costs for software development in Paraguay rank among the lowest in the region without a sharp drop in quality. But what’s also attractive to distributed workforces is that Paraguay sits in a nearly identical time zone to major U.S. cities. You get real-time collaboration without the offshore headache. Plus, government-backed IT training programs are producing bilingual developers and QA specialists who can jump into projects with minimal onboarding friction.

How to Hire Employees in Paraguay

So you’ve decided hiring in Paraguay makes sense for your team. Now comes the practical question: how do you go about hiring someone there? You have two primary paths, and each has different timelines, costs, and operational implications.

Setting up a local entity

Establishing a legal presence is the traditional route to hiring international employees. You incorporate a business presence in Paraguay, register with tax authorities, and become a legal employer in the country. It gives you complete control over operations and makes sense if you plan to build a large team or establish a permanent footprint.

The drawback to this pathway is that it takes considerable time and capital. Expect several weeks to navigate incorporation paperwork, secure tax identification numbers, and register with Paraguay’s social security system (Instituto de Previsión Social). You’ll need local legal counsel to ensure compliance with the Labor Code. You’ll also need infrastructure for payroll processing, benefits administration, and ongoing HR management.

The upfront investment can run into thousands of dollars in legal and administrative fees. You’ll also shoulder ongoing costs for accounting, compliance monitoring, and local HR support. For companies testing the market or hiring just a few people, this can feel like overkill. But for companies that are confident in establishing a long-term presence in Paraguay, setting up a legal entity can make sense.

Hiring through an Employer of Record (EOR)

An EOR flips the script entirely. An EOR in Paraguay becomes the legal employer of your team members while you maintain day-to-day management and direction of their work. They handle employment contracts, payroll in Paraguayan guaraníes, tax withholding, social security contributions, and mandatory employee benefits.

You skip the entity setup process altogether and fast-track your way to accessing Paraguayan talent. Most EOR providers can onboard employees in Paraguay within days once contracts are finalized. This matters when you find great talent and need to move quickly.

For companies hiring small teams or entering the market for the first time, an EOR removes most of the friction. You get assured compliance without needing to become an expert in Paraguayan labor law overnight.

Navigating employment contracts in Paraguay

Written employment contracts are not technically mandatory for every hire in Paraguay, but it’s highly recommended. Without a written contract, it’s your word against theirs, and courts tend to believe the employee. You’re playing defense from day one, trying to prove what you never put in writing. That’s not a position any employer wants to be in.

The fix is straightforward: get everything in writing from the start. Contracts should be drafted in Spanish and signed by both parties. They need to specify job duties, salary, working hours, and the duration of employment if it’s fixed-term. Most foreign companies use indefinite-term contracts because they run until mutual termination or resignation. Fixed-term contracts only work when circumstances clearly warrant it, like hiring someone for a specific project with a defined end date.

One detail that can trip up first-time employers in Argentina is that you need multiple copies of every contract, and each party keeps its own original. Not photocopies—actual signed originals for everyone involved. Either party can request approval and registration with the Labor Directorate, though it’s not required. The documentation is exempt from taxes.

Paraguayan working hours, holidays, and leave

Paraguay’s standard workweek runs 48 hours spread across six days, typically eight hours per day. That’s longer than what you’d see in North America or Europe. Night work (between 8 p.m. and 6 a.m.) is capped at 42 hours per week or seven hours per day. Employees working night shifts are paid 30% above the standard rate.

Overtime is permissible but limited to three hours per day and 57 total hours per week, including regular hours. The first two hours of overtime are paid at 150% of the regular hourly wage. Additional overtime jumps to 200%. If someone works overtime at night, that’s 100% above the standard rate, as is overtime on public holidays.

Annual leave entitlements, or paid vacation allotment, scale with tenure:

• 1 to 5 years of service. 12 working days
• 5 to 10 years of service. 18 working days
• Over 10 years of service. 30 working days

Paraguay observes 11 mandatory public holidays annually. Maternity leave runs 18 weeks fully paid through social security. Paternity leave is two weeks, also fully paid. Employees get three days of paid leave for marriage or family bereavement.

Employee benefits and social contributions

Paraguay runs a compulsory social security system through the Instituto de Previsión Social (IPS). Every employer must register their employees. The contribution rates are straightforward. Employers contribute 16.5% of an employee’s salary for commercial entities or 17% for financial entities. Employees contribute 9% for commercial entities or 11% for financial entities.

The calculation includes every wage item paid in cash or in-kind, except for the annual mandatory bonus (the aguinaldo or 13th-month pay) and family allowances. Employers withhold the employee portion from the salary and pay both contributions together to the IPS. Social security contributions are optional for certain independent positions like administrators, directors, or managers.

Maternity leave, paternity leave, and sick leave are also covered by social security. Sick leave extends up to 26 weeks per year, provided employees have made at least four weeks of contributions beforehand. Employers and social security each cover half the employee’s salary during sick leave. The 13th-month payment is mandatory and typically paid in December. This is a bonus equal to one month’s salary divided by 12 for each month worked.

Payroll and taxation in Paraguay

Paraguay keeps tax administration surprisingly simple. The country’s income tax only applies to employees earning at least three times the minimum salary over the year. Even then, the rate is just 10%. That threshold means many workers face no income tax at all.

For employees who do hit the threshold, the 10% rate applies only to income above that level. Employers automatically withhold taxes from paychecks and remit them to tax authorities. Social security contributions (9% employee, 16.5% employer) are also withheld and paid by the employer.

The government increased the minimum wage in July of 2025 to 2,899,048 Paraguayan guaraníes, or around US$409 per month. In the tech sector, average salaries for roles like software engineers fall around 9,000,000 guaraníes per month, or about US$1,270. The comparison is easy when you do the mental math for the same type of talent in San Francisco.

Paraguayan payroll must be processed in guaraníes regardless of how you negotiate compensation with candidates. Most EOR providers handle currency conversion and local banking requirements automatically. If you run your own entity, you’ll need a local bank account and payroll infrastructure that can handle IPS contributions, tax withholding, and statutory payments. The relatively flat tax structure makes compliance easier than in many neighboring countries, but timing matters. Miss social security deadlines and penalties kick in quickly.

Understanding employee vs. contractor classification

Paraguay lacks a clear-cut test that automatically determines whether someone is an employee or a contractor. Authorities look at the actual working relationship, not just what your contract says.

The key factors matter more than the label.

• Does your company control how and when the work gets done, or does the worker have real autonomy?
• Is the worker’s service central to your core business operations, or is it for a specific project outside your usual work?
• Does the worker rely primarily on your company for income, or do they have multiple clients?

Misclassification carries serious consequences. If authorities determine you’ve labeled an employee as a contractor to avoid obligations, you face back payment of wages, benefits, social security contributions, taxes, and substantial fines. If you’re dictating schedules, providing equipment, restricting the worker from other clients, and the relationship is ongoing and indefinite, you’re probably looking at an employment relationship. Contractors should control their own methods and timeline while you focus on deliverables and results.

Termination and severance in Paraguay

Ending an employment relationship in Paraguay requires either just cause or proper severance payment. Just cause includes serious misconduct, repeated insubordination, criminal conviction, or disclosure of trade secrets. Without just cause, you owe severance.

Severance calculations depend on tenure and contract type. For indefinite contracts terminated without cause, employees receive 15 days of salary for each year of service (or a fraction exceeding three months). An employee with three years of service would receive roughly 45 days of salary as severance. Notice periods typically run 30 days for monthly-paid employees or eight days for those paid daily or weekly. You can pay out the notice period instead of requiring the employee to work it.

Termination must be handled in writing with clear documentation. Employees terminated without just cause also receive compensation for unused vacation days and any outstanding aguinaldo payments. Proper documentation protects both parties. If an employee resigns voluntarily, no severance is owed, but they still receive accrued vacation and proportional aguinaldo payments.

Work permits and immigration

Foreign nationals need a work permit to be legally employed in Paraguay. The process requires a job offer from a Paraguayan company, proof of qualifications, a clean criminal background check, and valid passport documentation. Processing times vary but typically range from several weeks to a few months, depending on the visa category and nationality.

There are different visa categories depending on the nature and duration of work:

• Temporary residence permits for contracted employment with a specific employer
• Permanent residence for those planning long-term stays or investment in Paraguay
• MERCOSUR agreements that simplify the process for citizens of member countries (Argentina, Brazil, Uruguay)

The company usually sponsors the work permit application during hiring. If you’re using an EOR, they often handle visa sponsorship and immigration logistics as part of their service. Without local expertise, the bureaucratic process can feel overwhelming. Requirements change periodically, and missing documentation delays approvals significantly. Remote workers technically need proper authorization even when physically in Paraguay and working for foreign companies.

Why hire in Paraguay with Pebl

At Pebl, our global EOR services cover over 185 countries, including Paraguay. We handle the entire onboarding and administrative process, allowing you to hire compliantly without setting up a local entity. That means payroll in guaraníes, social security contributions, employment contracts, and benefits administration are all managed through one platform. You get speed and compliance without the legal infrastructure headache. Get in touch to learn more.

FAQs: Hiring in Paraguay

You’ve got questions. Here are the answers that actually matter when you’re building a team in Paraguay.

What is the work culture in Paraguay?

Paraguayan work culture runs on relationships first, business second. Initial meetings may start formally, but quickly shift to conversations about family, soccer, or cultural events before anyone talks numbers or deadlines. Hierarchy matters, so respect for titles and seniority is expected, but the environment blends that formality with genuine warmth and hospitality. Individuals avoid direct confrontation in favor of diplomatic, indirect communication that prioritizes harmony.

What is a good salary in Paraguay?

From the lens of U.S. companies hiring internationally in Paraguay, a competitive salary for skilled professionals in tech, finance, or customer support widely ranges between US$800 and US$2,500 per month, depending on experience and specialization. Senior developers, project managers, and bilingual professionals with specialized skills command higher rates. The cost of living in Paraguay remains relatively low compared to neighboring countries, so these salaries provide solid local purchasing power.

Can I hire in Paraguay without a local business entity?

Yes, you can hire employees in Paraguay without establishing a legal entity by recruiting the support of an Employer of Record. The EOR becomes the legal employer while you direct the work, and they manage contracts, payroll, taxes, and compliance. You skip months of entity setup and get employees onboarded in days instead.

What jobs are in high demand in Paraguay?

Software developers, QA testers, and customer support roles lead the demand, especially for bilingual professionals. The government is investing heavily in tech training programs, but companies still struggle to fill positions fast enough as the digital economy expands. Roles in data analysis, IT infrastructure, and digital marketing are also growing as Paraguayan companies modernize operations. Remote-friendly positions attract significant interest from local talent looking to work with international companies.

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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