Honduras is gaining traction as a destination for businesses looking to expand their remote teams in Latin America. Known for its cost-effective labor market, strategic time zone alignment, and a growing pool of skilled professionals, Honduras provides a unique opportunity for companies seeking to hire top talent. This guide will walk you through everything you need to know about hiring in Honduras. From understanding different hiring methods and navigating labor laws to managing payroll, taxes, and compliance, this comprehensive guide will help you hire efficiently and compliantly. Whether you’re engaging contractors or setting up a local legal entity, this guide simplifies the complexities of the Honduran market.
Key Stats About Honduras
Language
Spanish (English is spoken in business and tourism sectors, especially in urban areas)
Time Zone
GMT-6 (similar to U.S. Central Standard Time, no Daylight Saving Time)
Currency
Honduran Lempira (HNL)
Population
Approximately 10.3 million
Major Cities for Talent
Tegucigalpa, San Pedro Sula, La Ceiba
Internet Penetration
Over 50%, with reliable high-speed connectivity in urban regions
Labor Force
Approximately 4 million, concentrated in manufacturing, IT, services, and agriculture
Education
Literacy rate of 88%, with increasing numbers of graduates in STEM, finance, and technology fields
Why Hire in Honduras?
Honduras offers numerous advantages for businesses seeking cost-effective and talented professionals in Latin America. Here’s why Honduras is a compelling choice:
Cost-Effective Talent
Honduras has one of the most competitive labor costs in Latin America. Companies can access skilled professionals at a fraction of U.S.-based salaries, making it a cost-effective destination for outsourcing and remote hiring.
Skilled Workforce
With a labor force of 4 million, Honduras offers growing talent pools in industries like IT, business services, customer support, and manufacturing. Cities like Tegucigalpa and San Pedro Sula are emerging as hubs for technology and innovation.
Government Support
The Honduran government promotes foreign investment through free trade zones, tax incentives, and infrastructure development programs. This pro-business approach has helped attract global companies to the country.
Strategic Time Zone
Cultural Compatibility
Honduran professionals share a strong work ethic and cultural alignment with North American standards, ensuring smooth communication and integration into international teams.
Unlock
Honduras's
talent goldmine.
MOST PROMISING MARKETS
3 Ways to Hire in Honduras
1. Hiring Contractors in Honduras
PROS
Flexibility: Suitable for temporary and project-based roles.
Cost-Effective: No requirement to provide mandatory benefits or social security contributions.
Simplicity: Minimal paperwork and no need for a local legal entity.
CONS
Compliance Risks: Misclassifying employees as contractors can result in penalties.
Limited Commitment: Contractors may not provide long-term stability or loyalty.
Attracting Talent: Full-time roles with benefits may attract higher-quality professionals.
Key Considerations: Draft a clear contract specifying deliverables, payment terms, and confidentiality clauses. Ensure compliance with local regulations to avoid misclassification risks.
2. Employer of Record (EOR) Services in Honduras
An Employer of Record (EOR) enables companies to hire full-time employees in Honduras without establishing a legal entity. The EOR manages payroll, taxes, benefits, and compliance on your behalf.
PROS
Compliance: Ensures adherence to Honduran labor laws and tax requirements.
Fast Onboarding: Speeds up hiring without administrative complexity.
Administrative Relief: The EOR handles HR, payroll, and benefits management.
CONS
Service Costs: EOR providers charge fees per employee.
Indirect Control: Some employment decisions must go through the EOR provider.
Key Considerations: EORs are ideal for businesses entering the Honduran market for the first time or hiring small, remote teams.
3. Entity Formation in Honduras
Establishing a legal entity in Honduras is the best option for companies planning long-term operations and direct hiring.
PROS
Full Control: Directly manage employees, payroll, and operations.
Brand Presence: Establish a local reputation and stronger market foothold.
Long-Term Growth: Suitable for companies scaling their workforce and operations.
CONS
Time-Consuming: Involves multiple legal and administrative steps.
Higher Costs: Includes setup fees, legal expenses, and ongoing operational costs.
Regulatory Complexity: Requires navigating Honduran labor and tax laws.
Key Considerations: Registering a legal entity involves obtaining approval from the Honduran Chamber of Commerce, securing a tax identification number, and complying with labor laws and reporting obligations.
Labor Laws and
Employment Contracts in Honduras
Understanding Honduran labor laws is essential for ensuring compliance and maintaining healthy employee relationships.
Types of Employment Contracts
Indefinite-Term Contract: The default and most common contract for long-term, permanent roles.
Fixed-Term Contract: Suitable for temporary roles or project-based employment. Contracts cannot exceed one year.
Part-Time Contract: For roles requiring fewer than 44 hours per week.
Key Considerations: Employment contracts must be in writing and include details such as job duties, salary, working hours, benefits, and termination conditions.
Employee Rights and Benefits
Working Hours: The standard workweek in Honduras is 44 hours, typically over six days.
Overtime: Compensated at 1.5 times the regular hourly rate on weekdays and 2 times on Sundays or public holidays.
Paid Leave: Employees receive 10 days of paid vacation annually after one year of service, increasing to 20 days after four years.
Public Holidays: Honduras observes 10 public holidays as paid days off.
Maternity and Paternity Leave:
○ Maternity Leave: 10 weeks of paid leave, funded through social security.
○ Paternity Leave: 5 days of paid leave following childbirth.
Severance Pay: Employees terminated without just cause are entitled to severance pay of one month’s salary for each year of service, prorated for partial years.
Mandatory Bonuses
Employers are required to pay two bonuses annually:
1. 13th Salary (Aguinaldo): Paid in December, equal to one month’s salary.
2. 14th Salary: Paid in June, also equal to one month’s salary.
Social Security Contributions
Employers must contribute to the Honduran Institute of Social Security (IHSS):
Employer Contribution: 10.7% of the employee’s monthly salary.
Employee Contribution: 6.5% deducted from the employee’s salary.
Key Considerations: Compliance with mandatory benefits and contributions is essential. Employers should accurately document terms and conditions to avoid disputes.
Paid Leave
Employees in Honduras are entitled to paid annual leave, which varies based on years of service. In addition to vacation leave, there are several public holidays that employees typically receive off. Here is a list of Honduras’s public holidays:
January 1 – New Year’s Day (Año Nuevo)
March/April – Holy Thursday (Jueves Santo) – Variable date
March/April – Good Friday (Viernes Santo) – Variable date
March/April – Holy Saturday (Sábado de Gloria) – Variable date
April 14 – Day of the Americas (Día de las Américas)
May 1 – Labor Day (Día del Trabajador)
September 15 – Independence Day (Día de la Independencia)
October 3 – Soldier’s Day (Día del Soldado) – Celebrated in honor of Francisco Morazán
October 12 – Columbus Day (Día de la Raza)
October – Morazán Weekend (Feriado Morazánico) – A long weekend combining October 3, 12, and 21
December 25 – Christmas Day (Navidad)
Honduras observes additional local and cultural celebrations, with some regions celebrating specific patron saint festivals. The Feriado Morazánico, in particular, is an important extended holiday for many citizens.
Employers should account for these holidays when planning work schedules and ensuring compliance with Honduras’s labor regulations regarding time off.
Payroll, Benefits, and
Compensation in Honduras
Effectively managing payroll in Honduras requires careful adherence to local labor laws and tax obligations.
Salary Structure
Minimum Wage: Varies by sector but averages $400 USD per month in urban areas.
Mandatory Bonuses: Employers must pay the 13th and 14th salaries annually.
Allowances: Optional allowances (transportation, meals) can be added to attract talent.
Mandatory Benefits
Employers must contribute 10.7%: of an employee’s salary to social security, with employees contributing 6.5%
Payment Cycles
Salaries are typically paid on a monthly basis
Bonuses (13th and 14th salaries) must be paid according to legal deadlines in December and June.
Deductions
Income tax, following a progressive system ranging from 0% to 25% , based on annual earnings.
Employee contributions to social security.
Key Considerations: Employers must ensure timely salary payments, mandatory bonuses, and contributions to remain compliant. Partnering with a payroll provider can streamline these processes.
Navigating Taxes and
Legal Compliance in Honduras
To operate successfully in Honduras, businesses must comply with the country’s tax system, employment regulations, and social security requirements.
Corporate Taxes
Corporate Income Tax: The standard corporate income tax rate is 25% of net taxable income.
Value-Added Tax (VAT): A 15% VAT applies to most goods and services, with certain exemptions such as basic food items and healthcare.
Municipal Tax: Local municipalities impose taxes on business activities, ranging from 1% to 5% of gross revenue, depending on the industry and location.
Employment Taxes and Withholdings
Employers must calculate and withhold taxes and social security contributions as follows:
Social Security Contributions .
○ Employer Contribution: 10.7% of the employee’s monthly salary.
○ Employee Contribution: 6.5%, withheld from the employee’s salary.
Income Tax Withholding .
Progressive income tax rates apply based on annual earnings:
○ 0% for income below the threshold (approximately $10,000 USD annually)
○ Rates increase to a maximum of 25% for higher incomes.
Data Protection and Privacy Laws
Honduras does not currently have a comprehensive data protection law. However, employers must follow general principles of protecting employee data:
Data Consent: Obtain written consent before collecting or processing personal information.
Permitted Use: Use employee data only for employment-related purposes.
Data Security: Implement safeguards to prevent unauthorized access or misuse of sensitive information.
Key Considerations: Employers must accurately calculate and remit taxes and social security contributions to avoid penalties. Consulting local tax experts ensures compliance with Honduras’s regulatory framework.
Company Formation
and Setup in Honduras
For companies planning to establish a long-term presence in Honduras, setting up a legal entity is essential. This process provides the ability to hire employees directly and scale operations.
Types of Business Entities
Limited Liability Company (S.R.L.): Suitable for small to medium-sized businesses. Liability is limited to the shareholders' contributions.
Corporation (S.A.): Designed for larger companies requiring a board of directors and stricter governance.
Branch Office: Foreign companies can establish a branch to operate under the parent company’s legal structure.
Registration Process
Business Name Registration: 1.Verify and reserve the company name with the Honduran Chamber of Commerce.
Draft and Notarize Bylaws: Define the company’s purpose, governance structure, and operational policies.
Register with the Mercantile Registry: Submit the company’s incorporation documents for official registration.
Obtain a Tax Identification Number (RTN): Register with the Honduran Revenue Administration Service (SAR) for tax compliance.
Register with Social Security (IHSS): Ensure contributions for employees are managed through the national social security system.
Open a Corporate Bank Account: Required for managing payroll and other financial operations.
Key Considerations: The entity formation process can take several weeks. Working with local legal and accounting experts can help streamline compliance and ensure all requirements are met.
Compliance and
Management in Honduras
Ongoing compliance is essential for businesses operating in Honduras. Employers must meet tax, labor, and reporting obligations to remain legally compliant.
Annual Compliance Requirements
Tax Filings: Companies must file annual corporate income tax returns and monthly VAT declarations with the Honduran Revenue Administration Service (SAR).
Social Security Contributions: Employers must remit monthly contributions for social security to the Honduran Social Security Institute (IHSS).
Financial Reporting: Prepare and submit annual financial statements following Honduran accounting standards.
Partnering with Local Experts
To simplify operations and ensure compliance, businesses often work with local professionals:
Accounting Firms: Manage bookkeeping, tax filings, and payroll.
Legal Advisors: Help navigate labor laws, contract terms, and dispute resolution.
Payroll Providers: Streamline salary processing, deductions, and social security contributions.
Key Considerations: Ensuring compliance with tax filings, payroll obligations, and reporting reduces the risk of penalties and ensures smooth operations.
Leveraging Employer of Record (EOR) and Professional Employer Organization (PEO) Services
For companies that want to hire in Honduras without the complexities of entity formation
Employer of Record (EOR): and Professional Employer Organization (PEO) services provide an effective solution.
Employer of Record (EOR): An EOR becomes the legal employer of record for your Honduran employees, managing payroll, benefits, compliance, and taxes. You maintain control over the employee’s day-to-day activities.
Professional Employer Organization (PEO): A PEO co-employs workers, managing HR, payroll, and compliance while you oversee employee tasks and business operations.
Key Considerations: EOR and PEO services are ideal for businesses testing the Honduran market or hiring small teams. These services minimize administrative burdens while ensuring compliance with local laws.
Conclusion to Hire in Honduras
Honduras offers a cost-effective, skilled workforce for companies looking to expand their remote teams in Latin America. With its competitive labor market, strategic time zone alignment, and growing professional talent, Honduras is well-positioned to support businesses seeking to scale efficiently. Whether you choose to hire contractors, partner with an EOR, or establish a local entity, this guide equips you to navigate the Honduran labor market confidently and compliantly.