One of the first aspects to focus on during an expansion is payroll. When expanding to Honduras, you’ll have to learn a new set of employment compliance laws and customs and also figure out which Honduras payroll option is best for your company. Instead of adding another stressful component to your expansion, let G-P streamline payroll in Honduras.
When you can partner with us, you can rest assured that all employees will be paid accurately and timely.
Taxation rules in Honduras
Both employer and employee must contribute to the IHSS (Instituto Hondureño de Seguridad Social), such contributions support social security programs, including health services and other social benefits for the employee. Employers contribute 10% of all employees’ monthly wages to Honduras’ social security plan and 4% to an unemployment benefits fund. On the other hand, employees must contribute up to 6.5% of their wages.
Individuals living in Honduras for more than 3 months are considered residents and must pay income tax. The withholding by employers is a mechanism to ensure that taxes are collected throughout the year. In some jurisdictions, individuals who only receive income from employment may not be required to file a personal income tax return if their income falls below a certain threshold. Honduras uses a progressive income tax scale ranging from 0% to 25%, depending on the employee’s income.
Honduras payroll options for companies
There are 3 main Honduras payroll options, including:
- Internal: If you plan to operate in Honduras long-term, you may want to run your own payroll out of your subsidiary. Doing so is a good option for larger companies with the budget to hire a full HR team and set up a subsidiary.
- Outsourcing with a local company: You can also choose to work with a local Honduras payroll processing company to outsource your payroll. Keep in mind that you’ll still be held liable for any compliance matters with this solution.
- G-P: The easiest way to run payroll in Honduras 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 Honduras
Traditionally, you’re required to set up a Honduras subsidiary before you can organize your payroll. Depending on where you incorporate and what entity you choose, it could take anywhere from weeks to months before you can operate in Honduras. Working with G-P will shorten the process. As a global Employer of Record (EOR), we’ll help you get started working in a few days, without setting up an entity in the country.
Entitlement/termination terms
Terminating an employee is not always easy in Honduras. Companies should include certain entitlement and termination terms in an employment contract before choosing a Honduras payroll option. For example, the required notice period of termination ranges from 24 hours to 2 months, depending on how long the employee has worked for you.
Severance payments also range from a minimum of 10 days to 20 days according to the employment time. After 1 year of continuous service, employees are entitled to 1 month’s salary for each year of service, up to a maximum of 25 months’ salary.
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.