Understanding Payroll in Venezuela: What Global Companies Need to Know About Venezuela’s Payroll
Nov 21, 2017 | Topic: Country Payroll
Home to some of the most incredible sights in the world—including Angel Falls, the world's tallest waterfall—Venezuela offers businesses a backdrop of undeniable beauty. The nation’s natural resources are a significant benefit to its people, with rich oil reserves accounting for around 80% of their total exports and helping to make up a GDP of $371 billion.
This South American nation’s economy is currently in a state of flux, however, as more countries begin seeking alternative sources of fuel. Key partnerships with experienced service providers, including for global payroll, can prove invaluable when navigating evolving compliance requirements and payroll regulations.
There are a lot of rules that businesses need to follow in Venezuela that aren't necessarily standard in other countries. For example, a company’s articles of association must be published in the newspaper prior to commencing operations. To get started, companies can visit the Commercial Registry to find and reserve a company name. All companies will need to have an in-country bank account, which can be set up in one business day. It's customary to deposit 20% of the organization’s declared capital with the bank.
Company documents must be prepared by a lawyer before submission. Businesses must register with a number of different institutions and undergo inspections for employment safety (e.g., fire, health, etc.). Some of the major organizations involved are social security, the Ministry of Labor, the National Institute of Socialist Cooperation & Education, and the National Bank of Housing and Habitat.
Employment Law & Employee Rights
The standard work week in Venezuela is five eight-hour days, although in a bid to address the country’s energy crisis, in 2016 the government reduced public-sector employees’ hours to just two days per week to save on electricity costs. Employment contracts are required in Venezuela, but they can be oral if both employer and employee agree to it. The first month of employment is generally considered probationary, whether it is defined this way or not.
Collective bargaining is allowed in Venezuela, and unions are commonly seen in larger industries, such as oil or steel. However, it is important to note that collectively agreed demands are not always supported by the government.
Compensation & Severance
The minimum wage in Venezuela has been raised three times in 2017, most recently in July to 97,431 bolívars (approximately $12.50) per month. Wages may be paid in cash, via check, or by electronic deposit.
Provided they are terminated without cause, employees are generally entitled to 15 days' worth of wages as severance if they worked between one and six months, 30 days of wages if employed for six to 12 months, or 45 days' pay if they worked at a company for between one and 10 years.
Tax Requirements & Withholding
Corporate tax in Venezuela is calculated on a sliding scale and capped at 34%. VAT is typically 12%. Income tax is calculated on a progressive scale for residents and capped at 34%, while non-residents are taxed at a flat 34% rate. Income tax can be paid either through withholding or as estimated tax payments, but most employers withhold income tax at the source.
Employees need to live in the country for at least six months to be considered a resident. Resident employees will pay into social security at a rate of 5.5%, while employers will pay 10%. Employers also pay 2% as a training tax, 2% to unemployment funds, and 2% housing contribution. All businesses with more than five employees must pay another 2% to the National Institute of Education Corporation.
Time Off & Paid Leave
In general, Venezuelans receive one week of vacation time for each year they've worked. Employees also receive a vacation bonus worth approximately 15 days of their monthly salary, with the amount of the bonus increasing according to years of service. There are also 21 public holidays in Venezuela, with additional days for bank closures. Certain longer holidays, such as Holy Week, are recognized days off only for the public sector.
Expectant mothers receive six weeks of maternity leave before giving birth and 20 weeks after delivery. During this time, their salary is paid at a reduced rate of 66.6% by the social security administration. New fathers may take up to 14 days of paternity leave after a child is born. Employees can take up to one year off if they have a chronic illness, though their employer is only obligated to pay three days of sick leave. Social security pays the difference.
|Date||Venezuela's Public Holiday Schedule|
|January 1st||New Year's Day|
|Monday + Tuesday before Ash Wednesday||Carnival|
|Thursday before Easter Sunday||Maundy Thursday|
|Friday before Easter Sunday||Good Friday|
|May 1st||Labor Day|
|June 24th||St. John's Day|
|July 3rd||St. Peter and St. Paul|
|July 5th||Independence Day|
|July 24th||Simon Bolivar's Birthday|
|August 14th||Assumption Day|
|October 12th||Indigenous Resistance Day|
|November 6th||All Saints' Day|
|December 24th||Christmas Eve|
|December 25th||Christmas Day|
|December 31st||New Year's Eve|
A Rewarding Challenge
Although organizations looking to set up international payroll in Venezuela will face a number of challenges, the country has plenty of opportunity on offer, and the people are highly motivated and looking for stability. Your payroll solution needs to make your financials as simple as possible, and a third-party global payroll company can help. Choosing a provider familiar with both the legal requirements and the customs of Venezuela can make it much easier to get to work.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.