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Salvadoran Employment

Salvadoran Employment Protection Law is approved

On May 5th, 2020, the Legislative Assembly approved Decree 641, known as the “Salvadoran Employment Protection Law”, which is effective from its publication in the Official Gazette until the funds allocated to address the national emergency are exhausted.

The objective of this regulation is to establish exceptional, temporary measures that mitigate the economic impact and its effects on Salvadoran employment, which has been caused by the COVID-19 pandemic and the health measures imposed to deal with it.

The measures for employment protection are:

a) Labor safeguards: Companies that are authorized to operate during the state of emergency must comply with the labor obligations established by law and the labor contracts signed with the workers.

b) Vacation: It is enabled that during the state of emergency or the regulations issued due to the pandemic, workers and employers may, by mutual agreement, establish the enjoyment of individual vacations in advance, in a single period or in installments and without giving 30 days’ notice of the enjoyment of vacations. Vacations must be paid in the time and form established in the Labor Code, that is, they must be paid immediately before the worker begins to take them and will cover all the days between the date on which he or she leaves for vacation and the date on which he or she must return to work. (This option will not apply to workers who suffer from the disease in question)

c) Revocation of labor sanctions: Companies that have been sanctioned by the Ministry of Labor, within the framework of the pandemic, if they proceed to rectify the fact that caused the sanction, may notify the Ministry of Labor of such circumstance, which will verify such rectification and proceed to revoke the sanctions imposed within 72 hours.

d) Subsidy: A subsidy has been created for employees of micro, small and medium-sized enterprises registered with the Salvadoran Social Security Institute (ISSS) that have been affected by the pandemic and its effects. The requirements for participation are as follows:

  1. That in the ISSS register, they have less than 100 employees, reported in the last form submitted between the months of December 2019 and February 2020.
  2. Have had annual gross sales revenue in an amount equal to or less than USD 7 million in 2019 as reported at March 31, 2020, or failing that in 2018, or the audited financial statements as at December 31, 2019, or for those who commenced operations in 2020 as reflected in their last payment on account statement

The subsidy for employees will be equivalent to FIFTY PERCENT (50%), of the monthly payroll, for a maximum period of 2 months, and with a maximum monthly allowance per company of up to USD 22,500.00, for a maximum total per company of USD 45,000.00. The mentioned benefit will be up to a maximum of USD 500.00, per employee.

This subsidy must be requested within a maximum period of four months from the date that BANDESAL, publishes the beginning of the delivery of the funds.

e) Credit Awarding Program: This online working capital program administered by BANDESAL is created for companies or entrepreneurs registered with the ISSS affected by the pandemic. They will be granted at a maximum interest rate of 3% per year, for a maximum term of 10 years, and with a grace period of 12 months. These lines of credit will be prioritized for micro, small and medium enterprises.

f) Productive Financing Program: It will be a line of working capital created for the informal sector affected by the pandemic, which will be administered by BANDESAL. It will be granted at a maximum interest rate of 3% per year, for a maximum term of 10 years, and with a 12-month grace period. These credit lines will be prioritized for micro, small and medium enterprises.

David Claros Flores
García & Bodán
El Salvador