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Peruvian Government Authorises Withdrawal of Length of Services Compensation

Author: César Puntriano Rosas

Length of Services Compensation (CTS per its acronym in Spanish) is a legal benefit designed to cover contingencies upon cessation of employment. It consists of mandatory semi-annual deposits (within the first fortnight of May and November of each year) to be made by the employer in the bank or financial institution elected by the worker.

Deposits are equivalent to many twelfths of the remuneration received in the months of April and October (depending on the corresponding deposit), as full months worked by the employer. Fractions of the month will be computed by thirtieths. The worker is free to withdraw up to fifty per cent (50%) of deposits and interests accumulated.

Key Action Points for Human Resources and In-house Counsel

Normally, the CTS could only be withdrawn upon termination of the labour relationship, but as an exception, the law has authorised the withdrawal of 100% of the deposits which have exceeded an amount equivalent to the employee’s 4 monthly salaries. However, pursuant to Law No. 31480, the Peruvian Government authorised employees to freely withdraw CTS deposits, entirely (100%) or partially, until 31 December 2023.