Employee Payroll, Benefits, and Separation Procedures

Understanding Employee Compensation

Wages in Kind

This refers to salary paid to the employee in the form of products or services. Such payments cannot exceed 30% of the employee's total compensation.

Non-Wage Payments

These are payments not considered wages and include:

• Indemnities or Allowances: Received by the worker to cover costs incurred as a result of work activities.
• Social Security (SS) Benefits: Amounts received by the worker from the Social Security system.
• Allowances for Removal, Suspension, or Dismissal.

Deductions

These amounts decrease the wage received and represent mandatory contributions to Social Security (SS) and Personal Income Tax (PIT).

Social Security Procedures

The company has two main obligations towards the Social Security system:

A) Employee Membership and/or Registration

When hiring a new worker, the company must verify their Social Security membership status. Membership is a one-time act in a worker's life, done the first time they work. If the worker has never worked, they must be affiliated. If they have worked previously, they only need to be registered (alta).

B) Social Security Contributions

Both the employer and the employee contribute to Social Security. The employer is responsible for remitting both amounts. The worker's contributions are reflected on the payslip, while the employer's contributions are detailed in documents known as TC forms (TC1, TC2, TC1/2).

Managing Employee Absenteeism

Delays or absences from work may be grounds for sanctions. Collective agreements typically establish a system of violations and penalties (mild, serious, or very serious). If an employee commits an infraction, the company will follow procedures, including notifying the worker of the penalty, according to the applicable classification.

Employment Termination Procedures

Employment may end for various reasons:

• Completion of a fixed-term contract
• Resignation or abandonment of work
• Dismissal

In all cases, the company must deregister the worker from Social Security. The company is also obligated to provide a final settlement (liquidación) covering all outstanding amounts.

Final Settlement Components

The settlement typically includes:

• Payment for days worked during the final month.
• The proportionate share of extra payments (e.g., bonuses).
• Payment equivalent to unused holidays.
• Applicable deductions (e.g., Social Security).