Peru is a democratic republic. Its government is structured following the principle of the separation of the three autonomous and independent branches of government: the Executive, whose primary representative is the President of the Republic; the Legislative or National Congress (unicameral); and the Judicial. The President of the Republic and the 130 members of Peru’s Congress are elected every five years by a universal, secret and direct vote.
Peru´s macroeconomic fundamentals remain solid, including a relatively low public debt to Gross domestic product (GDP) ratio, considerable international reserves, and a credible central bank. Peru´s economy is expected to grow somewhat below its 3 percent pre-pandemic pace in the medium term, supported by higher exports. Peru’s economic performance is one of the best in Latin America.
Muñiz, Olaya, Meléndez, Castro, Ono & Herrera Abogados is a full-service firm founded on August 15, 1981, and is currently one of the most important and prestigious law firms in Peru. It has offices in Peru’s largest cities, like Lima, Trujillo, Chiclayo, Arequipa, Ilo, Tacna, Ica, Chincha, Piura, Puno, Juliaca and Cusco.
Our labour practice is big (40 lawyers) but consolidated. Our team has a solid theoretical base that allows it to carry out analyses with practical, efficient, creative, and effective results to labour and legal matters. Our advice is characterised not only by accompanying our clients to face contingencies, but also by advising them on the design and implementation of preventive structures threw legal opinions, planning strategies to restructure and audit our regular or one-time clients.
2. Labour and Employment Law Requirements
A) EMPLOYER POLICY REQUIREMENTS
Peruvian regulation does not require employers to create and implement employment policies except from salary or remuneration policy which should be communicated to employees. Such policy should include criteria to determine salaries, performance evaluation or any other type that affect their remuneration. To do this, employers may hold individual or collective informative meetings or send written communications detailing the applicable policy. This information must be provided at the time of the worker’s entry, when there is a change in the occupational category to which the worker belongs and when there is a change in the remuneration regime that applies to him in accordance with the remuneration policy.
B) EMPLOYEE TRAINING REQUIREMENTS
Employers are required to train employees regarding safety and health at workplace or employees’ specific functions at the time of hiring, during the execution of labour relationship, as well as when there are changes in the employee’s duties. Such training should not be less than 4 in a year. Also, the employer must train its personnel on the prevention of sexual harassment at work.
C) EMPLOYMENT AGREEMENTS
The general rule within the Labour Regime of private activity is the hiring of personnel for an indefinite period, however, due to the nature of the service to be provided, the law has exceptionally provided for fixed-term hiring, that is, temporary contracts, or subject to modality.
The law allows hiring fixed-term workers if justified by the temporary nature of the service to be provided. To celebrate a fixed-term contract, it is necessary to prove that the service to be provided by the worker is, by its nature, of a temporary nature, whether it is ordinary or complementary work. This must be specified in the contract, specifying the facts that support the temporary contract and be able to document them.
If the employee decides to dispense with the services of a worker hired for a fixed term before the expiration date agreed in the contract without there being “just cause” for it, he must pay as compensation one and a half ordinary monthly remuneration for each month stopped working until the contract expiration. The maximum limit is twelve monthly remunerations in accordance with current legislation.
On the other hand, fixed-term employment contracts will be considered indefinite, with the consequent modification of the rapid regime, in the following cases: i) if the worker continues to work after the expiration date of the stipulated term, or of their extensions if they exceed the maximum limit; and, ii) when the worker demonstrates the existence of simulation or fraud of the rules that regulate fixed-term contracts.
The fixed term contracts available for general labour regime are the following:
- Contract for beginning or increase of activities: This contract is celebrated due to the necessity to hire temporary employees based on the beginning of a productive activity, the subsequent installation or open new stores or markets, or enhancements of existing activities in the company. The maximum term is three years.
- Contract for market requirements: This contract is celebrated in order to meet short-term increases in production caused by substantial variations in the company’s products demand in the market. This contract shall be supported by an objective temporary cause and unpredictable increase of normal production activities. The maximum duration is five years.
- Contract for Enterprise Restructuring: This contract is celebrated to hire personnel due to the replacement, extension or modification of the activities in the company, and in general every technological change in the machinery, equipment, facilities, means of production, systems, methods and production and administrative procedures. The maximum duration is two years.
- Casual Contract: This contract is celebrated to fulfil transitional needs from the company different from than the usual activity in the workplace. The maximum duration is six months per year.
- Contract to substitute personnel: This contract is used to temporary substitute a stable employee whose employment relationship is suspended for any cause under existing legislation, or the effect of treaty provisions applicable in the workplace. Its duration is according to circumstances.
- Emergency Contract: It is used to meet the needs promoted by an accident or force majeure event coinciding with the duration of the emergency.
- Contract for specific work or service: This contract is celebrated to fulfil transitional needs from the company related to its usual activities. The term is subject to the company’s necessities.
- Contract for Intermittent activities: It is used to fulfil needs of the company’s activities which by nature are permanent but discontinuous.
- Contract for seasonal activities: This contract is celebrated in order to fulfil requirements of the establishment which happen only at certain times of the year and are subject to be repeated in equivalent periods of every cycle according to the nature of productive activity.
When a new company begins business in Peru, it could hire employees using an indefinite term employment contract or a fixed term contract due to beginning of activities (see #1 above). Our suggestion is to celebrate fixed term contracts due to their flexibility to terminate employees.
3. Corporate Law Requirements
A) COMPLIANCE FOR INCORPORATION
Corporations are the most widely used vehicle to carry out profitable activities in Peru. Under Peruvian law, there are three types of corporations: (i) Corporation (Sociedad Anónima), (ii) Closely Held Corporation (Sociedad Anónima Cerrada) and (iii) Open Corporation (Sociedad Anónima Abierta).
To organise a corporation, the following basic information is required:
a) Name and ID data (passport number in the case of individuals or registration data in the case of companies) of the shareholders which will incorporate the corporation. Non-domiciled companies must appoint a representative authorised to incorporate the corporation in Peru. This representative must be duly appointed to act in such capacity, for which purpose a power of attorney must be granted abroad. The power of attorney must be legalised by the Peruvian Consulate and certificates of existence and good standing must also be provided. These certificates must then be protocolised and registered in the Public Registry Office of Peru. It should be pointed out that since October 2010, Peru is a full member of the convention which eliminated the requirement of having foreign public documents legalised (“Apostille system”), adopted on October 5, 1961, in The Hague, Kingdom of the Netherlands.
b) Exact name of the corporation to be incorporated to legally reserve its name at the Public Registry Office.
c) Amount of the capital stock of the corporation. There is no minimum amount, except for special cases in some specific sectors. The capital must be expressed in soles and in whole numbers (decimals cannot be used), except for some special cases in some specific sectors.
d) Designation of the members of the board, the general manager and other managers – if applicable, indicating the powers and duties they will have. The general manager or the other managers of the corporation exercise all the powers and duties required to represent the corporation, barring the limitations expressly set forth on the electronic card of the corporation. It is necessary to provide the full ID data of these persons (ID document,
nationality, and address). If a foreign national is designated to serve on the board or to fill the position of General Manager or manager, then the necessary migratory status must be obtained. If members of the board are
designated to serve on the board, then the duly legalised letter of acceptance must be attached.
e) Purpose of the corporation which, except for some special cases in some specific sectors, can be broad and general, thereby allowing the corporation to carry out different activities.
The incorporation procedure is the following:
- Search and reservation of the name of the corporation to be incorporated, to make sure that said name is available at the Public Registry Office.
- Drafting of the articles of incorporation (once the bylaws are ready).
- Filing of the articles of incorporation with a notary’s office in Lima.
- The amount of the capital stock of the corporation must be deposited in a Peruvian financial entity designated for such purpose.
- Conversion of the articles of incorporation into a notarised recorded instrument (public deed) and signing of the public deed. If the corporation has been incorporated by nondomiciled shareholders, then before signing the public deed it will be necessary to take the steps required to have a power of attorney granted at the Peruvian Consulate, as aforesaid.
- Filing of the public deed with the Public Registry Office in and for Lima.
- Legalisation of the register of shareholders and directors (if any) and ledger book.
B) POST INCORPORATION REGISTRATIONS
Corporation must be registered before Taxpayers registry by filing an application. SUNAT (Peruvian Tax Authority) assigns the corporation’s taxpayer’s ID number (RUC).
Once the shareholders decide where the office of the corporation will be located, an application will be filed with the competent city council to obtain a Municipal Operating License. Special licenses may be required in
special cases in some specific sectors.
4. Payroll and Benefits Providers
It is legally valid to outsource payroll and benefit calculation and payment to third companies.
Our regulation (Law No. 29245, Legislative Decree No. 1038, Supreme Decree No. 006-2008-TR) pays attention to outsourcing schemes which meet the following characteristics:
- The client company (principal) delegates one or more parts of its main activities. Main activity is understood as an activity inherent to the line of business.
- Activity is delegated to one or more contractors: This company is carrying out the service or work contracted through their own workers, who are under its exclusive subordination. Contractors and subcontractors are included.
- There is continuous assignment of contractor’s employees: Continuous movement is one conducted regularly between the contractor and the main company. Continuity is configured when:
- the displacement occurs at least for more than a third of the working days of the term agreed in the outsourcing contract; or
- exceeds 420 hours or 52 days of actual work, consecutive or not, within a semester.
The displacement occurs towards the workplace or centre of operations of the client.
Pursuant to said regulation, the elements of validity of outsourcing from a legal viewpoint are the following:
A. The contractor should be independent from the principal or client, and must have its own financial, technical, and material resources and be responsible for the results of activities.
This implies that the contractor possesses autonomy from the principal in terms of resources and budget. It’s possible that the company providing the service does not have its own material resources but has its own financial and technical resources. This exceptional situation be evaluated in conjunction with compliance with other elements to which we refer in this section.
Autonomy means that the contractor possesses its own administrative line and has enough experience to provide the service technical knowledge.
B. Services must be granted at the risk of the contractor: That is to assume the risk of the service and could not be attributed any partial, late or defective activity to the client.
C. Workers assigned to perform service by the contractor should be under its sole and exclusive subordination: This element is fundamental. Workers assigned to the service should not receive orders, directives or even instructions from client’s personnel.
In addition to the essential elements, labour regulation presents some evidence of validity which is advisable to consider:
- Plurality of clients: Evaluation of the origin of this sign of autonomy of the contractor must be made in a case-by-case basis, considering economic activity, background, activity type, and company and its client’s. Notice that this evidence is not required when the activity of the contractor is requested by few customers if the geographic scope is reduced, if parties agreed exclusivity or contractor, is a micro company.
- Contractor equipment: Contractor should develop activities using its own equipment and tools, which could have also been ceded by the client undertaking in comprehensive management, if they are linked directly to the production process. It is important that the contractor assumes the costs of equipment maintenance if necessary. In our opinion contractor should own minimum equipment to render services.
- Other evidence of validity: Physical and functional separation of outsourcing company personnel; the existence of an autonomous organisation; possession and use of skills, experience, methods, trade secrets, certifications, qualifications or, in general, intangible assets that the client company does not own and therefore origins necessity of hiring a contractor.
Consequences of the existence of an outsourcing
- Joint and several liability: The rule on outsourcing regulates joint responsibility between the principal, the contractor and any subcontractor that the latter used. This means that if the contractor owes some job benefit to staff, they may claim the principal (client).
Joint and several liabilities include not only labour obligations by the employer but also social security. Regarding labour obligations only legal ones are included, not conventional source (labour contract, collective agreement) or unilateral (usual rules of procedure). Obligations are accrued during the employee’s assignment until a year later.
- Contractor registration: Contractor declares the displacement of its personnel in electronic payroll.
- Information to employees: The client must inform the union or delegates representing workers about the identity of the contractor and displaced workers as well as the activities that would be performed. The information must be provided within 5 days of the calendar month in which the displacement occurred or within 24 hours of the request being made by the union.
Denaturation (invalidity) of outsourcing
If the hiring of the contractor does not meet validity of outsourcing requirements or in practice is only considered as a manpower agency since it does not render any service, the consequence will be:
- Obligation to retroactively incorporate the worker displaced by the contractor into the client’s payroll under an indefinite term employment contract from the time the denaturalisation occurred (considering seniority).
Contractor employee could be incorporated in the client payroll when (i) obtaining a favourable pronouncement by a Labour Judge or (ii) when required by Labour Inspection Authority.
- Obligation to pay the personnel those benefits granted by client that they would have received had they been directly incorporated into the payroll from the time the denaturalisation of the outsourcing occurred (seniority in client). This amount would be obtained by verifying salaries from client’s direct employees which occupy the same category as contractor’s people and all the benefits that would have corresponded to contractor’s employees if they were directly hired by the client from the beginning of the service.
On 23 February 2022, the Peruvian Official Gazette published Supreme Decree No. 001-2022-TR (the Supreme Decree), which introduces a radical change in the regulation of outsourcing agreements.
According to this new regulation, all activities that constitute the “core business” (núcleo del negocio) of a company cannot be subject to outsourcing. Previously, there was no such prohibition. The core business is defined as follows:
Core business.- The core business is part of the main activity of the company but, due to its particular characteristics, it does not correspond to the specialised activities or works that can be subject to outsourcing with displacement.
To identify the core business in the specific case, among others, the following must be observed:
- The corporate purpose of the company.
- What identifies the company in front of its end customers.
- The differentiating element of the company, within the market in which it develops its activities.
- The activity of the company that generates added value for its customers.
- The activity of the company that usually generates higher income.
The Supreme Decree granted a term of 180 days from its publication to companies to adapt operations to these new rules.
Many companies challenged the Supreme Decree through writs of amparo (proceso de amparo) claiming the non-application of said Supreme Decree due to its illegality, because it contravenes Law that regulates outsourcing services by restricting the possibility of outsourcing nuclear activity, due to its unconstitutionality because it affects the freedom of contracting, freedom of enterprise and the prohibition of the retroactivity application of regulations. Some favourable have been issued but only applied to claimants.
Also, other companies initiated a constitutional procedure claiming the declaration of the Supreme Decree’s illegality and its breach of our Constitution named Acción Popular. If the Judge issues a favourable pronouncement, stating that the Decree is illegal, it would have a general effect to every company and will not be further applicable. Such statement is pending.
Currently, the National Institute for the Defense of Competition and Protection of Intellectual Property-Indecopi has provisionally suspended the effects of the Supreme Decree since such regulation imposes an illegal and bureaucratic barrier to market access. This temporary suspension is subject to Indecopi’s final pronouncement in a case initiated by a company. Such suspension prohibits National Inspection Superintendency-SUNAFIL to verify Supreme Decree’s application by companies in all Peruvian territory.
In our opinion payroll and benefit calculation services are not restricted by current regulation provided that they meet with the legal requirements of validity previously detailed.
 Place or places where the facilities of the client where the worker of the outsourcing company is assigned, under the exclusive orders from his employer.
 Place or places determined by the client (outside its workplace), where the subcontracted worker carries out his work, under the exclusive orders of his employer.
We are pleased to offer our services for all the required work identified above and assist your organisation to open in Peru. As an alternative, all of the above work, which includes legal assistance to hire employees and company’s incorporation can be offered for a project budget of USD 3,500 plus disbursements and tax.