Guatemala is a Central American country bordering the Pacific Ocean and the Caribbean Sea. Its large talent pool and connection to other Central American countries make it a great place for companies to expand to.
However, expanding to Guatemala can turn into a complicated process as you will have to manage payroll, hiring, benefits, and more while continuing to run your parent company.
Taxation rules in Guatemala
Guatemala requires both employees and employers to contribute to certain tax funds. Both groups must contribute to social security at varying rates — employers give 12.67% of wages while employees give 4.83%.
Employees must pay income tax. If their income is less than GTQ 300,000, they will pay a rate of 5% over that value. If it exceeds GTQ 300,000 per year, they will pay a fixed amount of GTQ 15,000 as well as 7% on the excess of GTQ 300,000.
Employers are also responsible for paying corporate income taxes. Companies can choose to pay taxes on either profit from income or revenues from income. Profits from income are subject to a flat 25% tax rate with deductions allowed, while revenues from income are subject to a rate based on gross receipts without any deductions.
Guatemala payroll options for companies
There are 3 main Guatemala payroll options, including:
- Internal: You can choose to run your own internal payroll out of your subsidiary. Usually only large companies choose this option since it requires a bigger budget to hire additional staff.
- Guatemala payroll processing company: If you would rather outsource your payroll, you can through a Guatemala payroll processing company. This option will take care of running your payroll, but you’ll still be held liable for any compliance matters.
- G-P: The easiest way to run payroll in Guatemala and stay compliant is partnering with an Employer of Record (EOR) like G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.
How to set up a payroll in Guatemala
Before you can set up your Guatemala payroll, you need to establish a subsidiary in the country. However, the subsidiary setup process can take weeks or months, and that’s before you can hire employees, add them to your payroll, and disperse compensation and benefits. G-P offers an alternative through our Employer of Record solution. We can help you start working faster and mitigate compliance risks, without setting up new entities.
Entitlement/termination terms
The right entitlement and termination terms included in an employment contract can save your company from future problems. We recommend including these terms in an employment contract before setting up your payroll. For example, after terminating an employee in Guatemala, you must pay any salary still owed, the proportional amount of vacation, and more.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.