Labor Law Basics: Employment Contracts and Remuneration

Labor Code Fundamentals

1. Definition of Employment Relationship

The employment relationship between employers and workers is governed by this Code and its complementary laws. (Art. 1)

2. Employer Definition

The natural or legal person who uses the intellectual or material services of one or more persons under a labor contract. (Art. 3)

3. Worker Definition

Any natural person performing personal services — intellectual or material — under dependence or subordination, and under a contract. (Art. 3)

Labor Contract Essentials

4. Labor Contract Overview

(Art. 7, 8, 9, 10)

4.1. Types of Labor Contracts

• Individual: Between an employer and an employee.
• Collective: Between employers and one or more worker organizations or associations.

4.2. Key Elements of a Contract

• A Convention (agreement): The mutual consent of the parties.
• Provision of Personal Services: This is the purpose of the contract.
• Relationship of Subordination: The worker is subject to the employer's direction.
• Worker's Compensation: Payment for contracted services, as fixed by the contract.

4.3. Contract Requirements

• Must be in writing within 15 days after the worker is incorporated.
• Must have two copies: one for the worker and one for the employer, which must be maintained in the workplace.
• Should be updated at least once a year or whenever there is a change to it.

4.4. Contract Content and Details

• Location and date of contract.
• Identification of the parties (nationality, date of birth, date of admission of the worker).
• The functions to be developed and the place of work.
• Compensation, form and period of payment.
• Workday (shift system regulated by the Regulations).

Remuneration and Payment

5. Remuneration Principles

Payment under the employment contract (taxable value). (Art. 41-65)

5.1. Elements of Remuneration

• Salary

  Fixed amount of money paid periodically, as determined in the contract, which the worker receives.

• Bonus

  Payment for overtime.

• Commission

  A percentage of the sales or purchase price, or the amount of other operations, resulting from the worker's collaboration.

• Participation

  Proportion of profits from a particular business or company, or from one or more sections or branches thereof.

• Gratification

  Corresponds to the portion of profits that the employer pays to the worker as a benefit.

5.2. Remuneration Timeframes

According to the terms of the labor contract (daily, weekly, monthly, or as agreed).

5.3. Payment Currency

Current currency (or by check at the worker's request).

5.4. Payment Place and Opportunity

During the workday, between Monday and Friday, at the place where the worker provides services, and within the hour following the end of the workday. The parties may agree on other days or hours for payment.

5.5. Authorized Discounts

• Taxes.
• Social security contributions (AFP - Health Fund).
• Union Dues.
• Obligations to public welfare institutions or agencies (e.g., court-ordered).
• Assessments for dividends or mortgage payments, or housing savings (not exceeding 30% of total compensation).
• Payments of any other nature (not exceeding 15% of total compensation).