How to pay international contractors in El Salvador [2025]

Nestled in the heart of Central America, El Salvador has become an attractive destination for international businesses looking to expand their reach. Recent data suggests a rising trend of skilled professionals in San Salvador and beyond, making it an opportune location for foreign entities to scout independent contractors. 

However, while diving into El Salvador's burgeoning talent pool, how can global companies ensure they’re compliant with Salvadoran employment laws? Delve into our comprehensive guide below, which outlines the steps to effectively and legally paying contractors in this Spanish-speaking nation.

Step #1: Classify your workers in El Salvador

Misclassification in El Salvador can lead to substantial legal repercussions, including the back payments of benefits, along with additional penalties.

Be sure to distinguish between full-time employees and independent contractors. Here are some of the differences to keep in mind:

Step #2: Determine the best way to pay your contractors in El Salvador

In El Salvador, where Spanish is the official language, onboarding contractors involves a blend of cultural and financial considerations. While the official currency is the United States dollar (USD), businesses must navigate a range of payment options:

• Wire transfers: This method is preferred due to its reliability, especially for international transactions. Remember, transfer fees may vary depending on your bank and the amount being transferred.

• Local bank transfers: Ideal for contractors with Salvadoran bank accounts, local transfers allow for faster access to funds. When doing business, it's essential to understand the local banking protocols and any associated fees.

• Global payroll providers: Since Salvadoran contractors aren’t typically added to payroll, providers like Rippling can simplify the payment process, ensure compliance with local laws, and help manage fluctuating exchange rates.

• Payment platforms: While popular in many countries, services like PayPal might not be the first choice for Salvadoran contractors. Additionally, varying exchange rates can make it difficult to predict your spending when using international payment platforms. Be sure to find out which platform your independent contractors prefer to be paid in. 

Step #3: Use global payroll software to process payments for Salvadoran contractors 

The dynamics of global employment can get intricate. Platforms like Rippling offer features tailored to specific country regulations, ensuring businesses remain compliant while streamlining the payment process. With Rippling, you can pay contractors across the world in one system. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Ensure your Salvadoran contractor has the right tax information 

Salvadoran contractors are responsible for managing their own taxes. With El Salvador’s unique tax systems, it’s important for contractors to understand the specifics. Here's a more detailed look:

• Tax registration: Before beginning any work, Salvadoran contractors need to be registered with the local tax authorities. In El Salvador, the primary tax authority is the "Dirección General de Impuestos Internos" (DGII), which is responsible for collecting and overseeing income taxes. By registering with the DGII, contractors obtain their unique taxpayer identification number, which they'll need for all their official tax dealings.

• Income tax declarations: In El Salvador, the frequency of tax filing often depends on the contractor's total income. For instance, if a contractor earns less than $100,000 annually, they're typically required to file an annual tax return. But, if they earn more, they might need to file quarterly. Properly classifying the nature of their work can make this process smoother. 

• Specific documentation and deadlines: San Salvador is well-regarded as the hub for tax seminars and workshops. International contractors should be well-informed about specific documentation requirements, filing deadlines, and potential penalties for late submissions.

• Value-added tax: VAT, or value-added tax, is a consumption tax placed on a product or service whenever value is added at each stage of the supply chain. In essence, it's the end consumer who typically pays the VAT. However, businesses collect and account for the tax. In El Salvador, contractors offering certain services or selling products may need to charge VAT, remitting these collections to the local tax authority. 

Effortlessly manage contractors around the world

It's never been easier to grow your international workforce. With Rippling, you can pay contractors globally, whether they're in El Salvador or somewhere else in the world.

Frequently asked questions about running payroll for contractors in El Salvador