Employer of Record Guide in 

Paraguay

Vacation Leave

• Standard entitlement: 12 working days after one year of continuous service
• Increased entitlement:
  • 18 days after 5 years
  • 30 days after 10 years
• Vacation pay: Full salary during vacation period
• Timing: Must be taken within the year following entitlement
• Payout: Unused vacation must be paid upon termination

Sick Leave

• Paid sick leave: Up to 18 days per year at full salary
• Extended illness: Social security covers extended periods
• Medical certification: Required for absences exceeding 3 consecutive days
• Chronic conditions: Special provisions may apply for ongoing medical needs

Maternity Leave

• Duration: 18 weeks total
  • 6 weeks before expected delivery
  • 12 weeks after delivery
• Pay: 50% of salary paid by social security, 50% by employer
• Job protection: Position must be held during leave period
• Nursing breaks: 1.5 hours daily for nursing mothers for up to 6 months

Paternity Leave

• Duration: 2 weeks of paid leave
• Timing: Must be taken within 30 days of birth
• Pay: Full salary paid by employer
• Adoption: Same provisions apply for adoptive fathers

Other Statutory Leave

• Bereavement leave: 3 days for immediate family members
• Marriage leave: 3 days for employee's wedding
• Study leave: Time off for educational pursuits (conditions apply)
• Military service: Required leave for mandatory service

Summary

Termination Types

Termination With Cause (Despido Justificado):

• No severance required
• Must be based on serious misconduct defined in the Labour Code
• Examples include theft, repeated absences, insubordination

Termination Without Cause (Despido Injustificado):

• Requires severance payment
• Most common form of termination
• No specific reason required but cannot be discriminatory

Notice Period Requirements

Paraguay does not require advance notice for termination. Instead, the system relies on severance payments:

Additional Termination Payments

Christmas Bonus (13th Month):

• Pro-rated amount for partial year worked
• Must be paid regardless of termination reason

Vacation Pay:

• Any accrued but unused vacation days
• Calculated at full salary rate

Prohibited Terminations

Employees cannot be terminated during:

• Pregnancy and maternity leave
• Sick leave periods
• Military service
• Union activities (for union representatives)

Final Pay Requirements

All final payments must be made within 48 hours of termination, including:

• Final salary
• Severance payment
• Pro-rated 13th month bonus
• Accrued vacation pay

Termination Documentation

Required documents include:

• Termination letter stating reason
• Certificate of work (certificado de trabajo)
• Social security clearance
• Final payment breakdown

National Public Holidays

Paraguay observes the following national holidays:

Holiday Pay Rules

• Working on holidays: Employees receive double pay (100% premium)
• Substitute days: If holiday falls on Sunday, Monday becomes the holiday
• Eligibility: All employees entitled to holiday pay regardless of tenure
• Payment timing: Holiday pay included in regular payroll

Religious Observances

Paraguay recognises Catholic holidays as national observances. Employers should accommodate religious practices of employees from other faiths where reasonable.

Required Documents for Employment

Employment Contract:

• Must be in writing for contracts exceeding 90 days
• Include job description, salary, working hours, benefits
• Specify probationary period (maximum 90 days)

Employee Documentation:

• National identity card (Cédula de Identidad)
• Tax identification number (RUC)
• Social security registration
• Educational certificates (if required for position)
• Criminal background check (for certain positions)

Work Authorisation

Paraguayan Citizens:

• No additional authorisation required
• Must provide valid national identity card

Foreign Workers:

• Work permit required before employment
• Temporary or permanent residence visa
• Labour Ministry approval for certain positions

Social Security Registration

• Employer must register employee with IPS (Social Security Institute)
• Registration must occur before first day of work
• Employee receives social security number for healthcare and pension benefits

Tax Registration

• Employee must obtain RUC (tax identification number)
• Employer responsible for income tax withholding
• Monthly tax declarations required

Probationary Period

• Maximum 90 days for most positions
• Can be terminated without severance during probation
• Must be specified in employment contract
• Same labour protections apply (no discrimination, etc.)

Onboarding Timeline

What the EOR Handles

Borderless AI manages:

• Employment contract drafting and compliance
• Social security registration
• Tax withholding and remittance
• Payroll processing in local currency
• Labour law compliance monitoring
• Local HR support and guidance

Worker Classification

Paraguay distinguishes between employees and independent contractors:

Employees (Trabajadores Dependientes):

• Work under employer direction and control
• Receive regular salary and benefits
• Protected by Labour Code
• Employer withholds taxes and social security

Independent Contractors (Trabajadores Independientes):

• Provide services independently
• Invoice for work performed
• Responsible for own taxes and social security
• Not covered by employment protections

Misclassification Risks:

• Penalties for incorrect classification
• Retroactive payments for benefits and contributions
• Legal liability for labour violations

Industry-Specific Considerations

Agriculture:

• Special provisions for seasonal workers
• Different working hour arrangements
• Specific safety requirements

Domestic Workers:

• Separate labour regulations apply
• Different minimum wage rates
• Special social security provisions

Cultural Workplace Norms

Communication Style:

• Formal business relationships initially
• Personal relationships important for business success
• Spanish and Guaraní are official languages
• Punctuality expected but flexibility common

Work-Life Balance:

• Family time highly valued
• Extended lunch breaks common
• Religious observances respected
• Siesta culture in some regions

Remote Work Framework

Legal Status:

• Remote work regulations established post-COVID
• Written agreements required for remote arrangements
• Same labour protections apply
• Employer must provide necessary equipment

Requirements:

• Defined working hours and availability
• Health and safety standards for home office
• Communication protocols
• Performance measurement criteria

Compliance Monitoring

Labour Inspections:

• Ministry of Labour conducts regular inspections
• Penalties for non-compliance can be severe
• Record-keeping requirements strictly enforced
• Employee complaint mechanisms available

Documentation Requirements:

• Employee records must be maintained for 5 years
• Payroll records and tax documentation
• Social security contribution records
• Health and safety compliance documentation