How to properly draft an Employment Contract for Foreign Employees

Hiring foreign employees in Peru involves not only complying with immigration obligations, but also properly drafting the respective employment contract, as this document constitutes the legal basis of the employment relationship and serves as the main supporting document in the event of labor and immigration audits.

A poorly structured contract or one that omits essential elements may lead to observations, objections relating to its validity, or legal contingencies for the employer. Therefore, proper drafting is critical.

Below we outline the key aspects to be considered when preparing an employment contract for foreign employees:
 

1. Properly Determine the Labor Regime

At a preliminary stage, it is essential to determine whether the foreign employee:

  • Falls under the Foreign Employee Hiring Regime, or
  • Qualifies for an exemption or a special hiring regime (e.g., Andean Community, MERCOSUR, or other agreements), in which case they are subject to the General Private Sector Labor Regime.

This initial determination is critical, as it directly affects the structure of the contract, the mandatory clauses to be included, and the applicable hiring conditions.

 

2. Properly Establish the Duration of the Employment Relationship

Foreign citizens subject to the Foreign Employee Hiring Regime must be hired under fixed-term contracts, for periods of up to three (3) years which may be continuously renewed. In addition, each contract or extension must be duly formalized.

In contrast, foreign citizens hired under the General Private Sector Labor Regime may be hired under either fixed-term or open-ended contracts, following the same hiring rules applicable to Peruvian citizens.

 

3. Verify Limiting Percentages on the Hiring of Foreign Employees

In cases involving foreign employees subject to the Foreign Employee Hiring Regime, it is essential to previously verify compliance with the limiting percentages established by applicable regulations, namely:

  • Foreign employees must not exceed 20% of the Company’s total headcount; and
  • The compensation paid to foreign employees must not exceed 30% of the Company’s total payroll.

It is important to point out that relevant regulations provide for several exceptions to said limiting percentages, including:

  • When hiring specialized professional or technical personnel.
  • When hiring managerial and/or executive personnel for a new business activity or in cases of corporate restructuring.

 

4. Carefully draft mandatory clauses

Employment contracts must be correctly drawn up and be adapted not only to the reality of the provision of services, but also to the labor regime under which the foreign employee is being hired.

In the case of foreign employees subject to the Foreign Employee Hiring Regime, the following mandatory clauses must be expressly and properly included:

  • A commitment to train local employees.
  • A provision conditioning the term of the contract upon obtaining the qualifying immigration status.
  • A commitment to repatriate the foreign employee to their country of origin or another country upon termination of the employment relationship.

In the case of foreign employees subject to the General Private Sector Labor Regime, the inclusion of the special clauses referred to above is not required, and employment contracts must be structured under the same rules applicable to Peruvian employees, without prejudice to compliance with the corresponding immigration obligations.

 

Key Considerations

Failure to comply with the obligations related to the proper hiring of foreign employees may constitute minor, serious, or very serious infractions, whose penalties may range from 0.26 to 52.53 tax units; i.e., from PEN 1,430.00 to PEN 288,915.00.

Receiving specialized labor and immigration advisory is essential to foster a culture of prevention, timely identify risks, and ensure compliance with applicable obligations when hiring foreign employees. At BDO SERVICIOS LEGALES Y LABORALES S.A.C., we have a team specialized in corporate immigration and labor matters, providing comprehensive support to each organization.

For further information or assistance, please contact us at: servicioslegales@bdo.com.pe.


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