El Salvador (formally the Republic of El Salvador) is a Central American nation. It shares borders with Honduras in the northeast, Guatemala in the northwest, and the Pacific Ocean on the south. San Salvador is El Salvador's capital and biggest city. The country's population is expected to reach 6.8 million in 2021.
The Lenca (after 600 AD), Mayans, and eventually Cuzcatlecs were among the Mesoamerican nations that ruled the area. Archaeological evidence also points to an early Olmec presence in the first millennium BC. The Spanish Empire invaded Central America in the early 16th century, bringing it into the Viceroyalty of New Spain, which was controlled by Mexico City. The Viceroyalty of Mexico, on the other hand, had little to no impact on the day-to-day affairs of the isthmus, which was colonized in 1524. The Spanish designated the region to be the Captaincy General of Guatemala in 1609, which comprised the territory that would become El Salvador until its independence from Spain in 1821. It was forced into the First Mexican Empire until seceding and joining the Federal Republic of Central America in 1823. When the federation disbanded in 1841, El Salvador became an independent state, and later created the Greater Republic of Central America with Honduras and Nicaragua, which lasted from 1895 to 1898.
El Salvador had chronic political and economic instability from the late nineteenth to the mid-twentieth centuries, marked by coups, revolts, and a series of authoritarian regimes. Persistent socioeconomic disparity and social discontent culminated in the Salvadoran Civil War, which lasted from 1979 to 1992 and was fought between a military-led government supported by the US and a coalition of left-wing guerrilla organizations. The Chapultepec Peace Accords brought the fighting to a close. This negotiated agreement created a multiparty constitutional republic, which still exists today.
During the country's civil war, a considerable number of Salvadorans fled to the United States, becoming one of the country's biggest immigrant groups by 2008.
Agriculture has traditionally dominated El Salvador's economy, dating back to the 16th century when the Spanish took control of the indigenous cacao crop, with production focused in Izalco, as well as balsam from the ranges of La Libertad and Ahuachapan. This was followed by a surge in the usage of the indigo plant (ail in Spanish) in the nineteenth century, mostly for use as a dye. Following that, the emphasis turned to coffee, which accounted for 90 percent of export revenues by the early twentieth century. El Salvador has now lessened its reliance on coffee and begun diversifying its economy by growing the industrial sector and opening up trade and financial linkages. The colón, El Salvador's currency since 1892, was replaced by the US dollar in 2001.
The Human Development Index ranks El Salvador 124th out of 189 nations. El Salvador is the most egalitarian nation in Latin America in terms of economic inequality while having high rates of poverty and gang-related violent crime. El Salvador was one of the least difficult economies for conducting business among the 77 nations studied in 2021.
Employees who have worked for the company for at least a year are entitled to 15 days of paid voluntary leave. The 12-month period from December 12 and December 12 is used to measure annual leave. Unused holiday days cannot be refunded; instead, the person must take all of his or her vacation days during the calendar year.
El Salvador recognizes 11 public holidays.
The amount of pay and leave an employee receives is determined by the length of time they have served for the company.
For a period of one year or more, 75 percent of the minimum wage is paid for 60 days.
For a period of 5 months but less than a year, you will be paid 75% of your base salary for 40 days.
For a period of one month but less than five months, 75 percent of the minimum wage is paid for a period of 20 days.
In El Salvador, a woman is entitled to a total of 16 weeks of paid maternity leave, which is paid by social security at a rate of 75%. Six weeks should be taken prior to the planned due date and ten weeks after the infant is born.
If the woman is temporarily injured as a result of the birth, she will be entitled to 100% of her normal salary. There is all that social security does to people who have paid their taxes.
Furthermore, if the woman has complications during her birth, she might be entitled to extra rest. The woman cannot be subjected to hard labor until the fourth month of pregnancy.
Finally, the woman must provide their boss with medical paperwork detailing their maternity status and anticipated due date.
Fathers are entitled to three days of paid paternity leave, which must be taken within the first 15 days of the child's birth.
There are currently no provisions in El Salvador law regarding parental leave.
Employers must issue a written termination letter outlining the basis for the dismissal for individual dismissals. Otherwise, the dismissal is regarded as null and void.
Notice period is not required by law.
Probation cannot be more than 30 days.
Compensation is only required in the event of a wrongful termination. When a labor court decides that a dismissal was unjust, the employee is entitled to compensation beginning with the day of the layoff and severance pay. Severance pay is determined on a 30-day wage basis for each year employed.
A standard workweek consists of 44 hours spread over six days. Typically, employees work eight hours per day, five days a week, followed by four hours on the sixth workday. Employees who work at night or in hazardous conditions have their work hours reduced.
Employees may work an unlimited amount of overtime, but some exceptions may apply to younger employees. Overtime is generally compensated at 200 percent of the regular rate of pay. In the event of a force majeure, overtime pay is waived.
El Salvador does not have a national minimum wage, but it does have industry-specific minimum wages, such as $304.17 per month for retail employees, $304.17 per month for industrial laborers, $299.30 per month for apparel assembly workers, and $202.88 per month for agriculture industry workers.
Salaries are typically paid semi-monthly, with employers also required to provide a Christmas bonus. Each bonus amount will be determined by how long the employee has been with your company.
The Salvadoran Institute of Master Welfare (ISBM) takes after teachers and their families, while the state provides healthcare to individuals who work via ISSS. The Solidarity Fund for Health (FOSALUD) distributes medication, vaccines, medical supplies, and laboratory equipment to national health facilities and hospitals.
Companies in El Salvador are imposed a corporate tax rate of 30 percent.
Individuals in El Salvador are imposed an income tax rate between 0 and 30 percent. The actual percentage varies depending on the income bracket the individual belongs to.
The value-added tax (VAT) or the goods and sales tax (GST) in El Salvador is set at a flat rate of 13 percent.
All foreign nationals wishing to work in El Salvador must get a Work Permit as well as a Temporary Residence Permit. The Work Permit and Temporary Residence Permit are valid for one or two years and may be extended for a total of five years.
Nationals of Central American nations may apply for permanent residency immediately. After one year of possessing a Temporary Residence Permit, nationals of Spain or Latin American, Spanish-speaking nations may apply for permanent residence. After three consecutive extensions of their Temporary Resident Permit, all other foreign nationals may apply for permanent residency.
Employment contracts should be drafted in Spanish and contain the employee's information, such as their birth date, nationality, workplace location, hours of work, marital status, gender, wage, job description, and the term or purpose of their contract.
Within eight days of the start date, a written copy for the employer, employee, and another must be presented to the General Labor Office.
Fixed-term contracts must specify the period of the job as well as the precise task to be completed. They are for a certain amount of time and, if renewed, may turn into an endless contract.
Indefinite contracts are permitted, as are fixed-term contracts, but only for a short time period, such as a project or to replace an employee who is temporarily unable to work.
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The location and business structure of your company have an influence on how you may set up your El Salvador subsidiary. Before deciding on a location for your headquarters, we suggest researching the regulations of the city or area. Varied locations of the nation may have different El Salvador subsidiary laws that make incorporation simpler or more complex. A lawyer or consultant may also assist you in locating the ideal place.
You may choose from a number of various subsidiary structure alternatives. Each organization has its own set of benefits and drawbacks, and the one you pick should be based on your individual company conditions and requirements. El Salvador has a limited liability company (LLC), a public limited company, a branch, and a representative office. Keep in mind that each structure has its own set of rules governing your company's operations, freedom in El Salvador, and other factors, so you must choose an option that matches your needs.
In El Salvador, many businesses form as an LLC since it provides them with the greatest flexibility. If you wish to incorporate your business as an LLC, you must do the following steps:
(1) Sign a Deed of Incorporation in the presence of a notary public.
(2) Register with the Commercial Registry (must renew every year)
(3) Register with the city hall in your area.
(4) Register with the Internal Revenue Service and the Pension Fund Administrator
(5) Register with the Salvadoran Social Security Institute and the Ministry of Labor.
(6) Create a corporate bank account in your home country.
Companies often prefer to establish their El Salvador company as an LLC since the country's rules are favorable to outsiders. To start an LLC, for example, you'll need at least two stockholders and one director. Shareholders' liability is restricted by the amount of capital they provide. All three persons may be foreigners, but at least one director, known as the legal representative, must be Salvadoran.
The minimum issued share capital is $2,000, and 5% must be paid up at the time of formation. If your corporation is run by a board of directors or a single administrator, they must have a formal reelection no more than seven years after taking office. Each year, you must also select an auditor and submit audited financial reports.
