Hiring at a Glance

Paraguay is a cost-efficient Latin American hiring market with a relatively straightforward tax profile (headline 10% corporate income tax and a low-rate personal services tax regime), but payroll compliance is still operationally strict because employers must execute monthly social security remittances and maintain defensible working-time records.

Standard working time is generally structured around a 48-hour workweek (8 hours/day), with night work commonly capped at 42 hours/week and subject to premium pay rules; overtime is controlled by hard caps (commonly 3 hours/day and 57 hours/week total including overtime) and higher overtime multipliers for night/public holiday work.

From a payroll cost standpoint, Paraguay’s compulsory social security contributions via IPS (Instituto de Previsión Social) are a major driver: for most commercial employers, PwC summarizes employee 9% and employer 16.5% on contributable remuneration, with specific exclusions (notably, the mandatory annual bonus/aguinaldo is excluded from the IPS base in PwC’s summary).  An EOR in Paraguay becomes the legal employer and runs contracts, IPS registration, monthly payroll, and filings—allowing you to hire locally without forming and operating a Paraguayan entity.

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Key characteristics of talent market

Paraguay’s hiring demand is concentrated in Asunción and surrounding commercial corridors, with expanding capacity in business services, sales operations, and increasingly technical roles serving regional and international markets. The market’s biggest employer risk is rarely recruiting—it’s payroll execution and hour tracking: Paraguay’s system uses clear statutory boundaries for night work and overtime caps, and inspections/disputes tend to focus on whether recorded hours match payroll calculations and whether IPS payments are consistent with the defined contribution base.

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Most In-Demand Skills in 2026

Demand in Paraguay continues to rise for roles that combine operational maturity with scalability: finance operations (accounting, payroll, controllership), commercial roles (B2B sales, customer success), and technology roles supporting digitalization and nearshore delivery (software engineering, data reporting, IT infrastructure). Employers also compete for HR/payroll specialists because IPS contributions, wage components, and overtime controls must be administered precisely to avoid back-payments and penalties.

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Top Universities Supplying Talent

Paraguay’s graduate pipeline is primarily anchored in national and large private universities in the Asunción metro area, which supply business, engineering, and IT talent for corporate, services, and public-adjacent employers. For many foreign companies, the most consistent hiring channel is a mix of university pipelines for junior roles and experienced talent for operationally critical functions (finance, payroll, compliance, technical leadership), given the importance of “done-before” experience in statutory payroll execution.

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Salary Benchmarks for Roles

Salaries are commonly benchmarked in PYG and vary significantly by city (Asunción premium), English proficiency, and whether the role supports international clients. For budgeting, Paraguay is often attractive on base salary, but true employer cost must include statutory IPS contributions—PwC’s current summary for commercial entities is 16.5% employer plus 9% employee on contributable pay (with the employer withholding and remitting the employee portion).

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Employer of Record vs Legal Entity Setup in Paraguay

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To legally hire employees, a company must

A company hiring directly (without an EOR) must be able to operate as a registered employer and execute the full compliance stack:

• Employment documentation and classification: Issue compliant contracts and define schedules properly (day vs night work), because night work uses reduced weekly caps and premium pay logic.
• IPS registration and monthly remittances: Register employees with IPS and remit contributions monthly at the applicable rates; PwC notes the IPS contribution base includes wage items in cash or in kind, with specific exclusions (including the mandatory annual bonus/aguinaldo in their summary).
• Personal income tax (IRP/“PIT” on personal services): Apply the personal services income tax regime when applicable. PwC summarizes progressive rates on net income of 8% up to PYG 50M, 9% from PYG 50M–150M, and 10% above PYG 150M, and notes that if gross income from personal services does not exceed PYG 80M, the tax is not required.
• Mandatory annual bonus (aguinaldo): Budget and administer the statutory 13th-month style payment; EY describes it as 1/12 of compensation accrued during the calendar year and payable before December 31 (or proportionally upon termination).

Using an EOR shifts these registrations, payroll calculations, and filings to the EOR as the legal employer.

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Cost of Entity Setup

Entity setup in Paraguay can be commercially straightforward, but the real cost is ongoing compliance: local accounting, tax administration, payroll operations, IPS reporting/payment cadence, and year-end employment obligations like aguinaldo administration. Many companies delay entity formation because they can achieve compliant hiring through an EOR while validating headcount plans and operating model—then form an entity later when scale justifies maintaining a local finance/payroll function. (Paraguay’s low headline tax positioning is often part of the long-term calculus, but it does not remove the operational payroll burden.)

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What Hiring Through an EOR Means in Paraguay

An Employer of Record (EOR) in Paraguay becomes the legal employer registered before the Subsecretaría de Estado de Tributación (SET) and the Instituto de Previsión Social (IPS), while the employee works exclusively for your company. You manage the employee’s daily work and performance, but the EOR assumes all statutory employer obligations under Paraguayan law.

Employment in Paraguay is governed primarily by:

• Código Laboral (Labour Code – Law No. 213/93)
• Social Security Law (IPS regulations)
• Income Tax Law (Impuesto a la Renta Personal – IRP)
• Occupational Health and Safety regulations
• Ministerial resolutions issued by the Ministry of Labour (MTESS)

Foreign companies cannot legally employ workers in Paraguay without:

• Registering a local legal entity or branch
• Obtaining a Tax ID (RUC)
• Registering with SET
• Enrolling employees with IPS
• Managing payroll tax and statutory contributions

An EOR provides this entire employer infrastructure without requiring you to establish a Paraguayan company.

An EOR in Paraguay handles:

• Labour Code-compliant employment contracts (Spanish required)
• Payroll processing in PYG
• Income tax (IRP) withholding
• Social security contributions (IPS)
• Mandatory 13th salary (Aguinaldo) accrual and payment
• Paid leave and public holiday compliance
• Overtime tracking
• Severance and termination execution
• Labour inspection coordination
• Work permit and immigration support (if applicable)

This model is ideal for companies seeking to hire in Paraguay without assuming direct exposure to labour court disputes and statutory compliance risk.

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Risk Involved in Both Models

Paraguay has formal employee protections, particularly around severance, mandatory bonuses, and dismissal procedures. Enforcement is overseen by the Ministerio de Trabajo, Empleo y Seguridad Social (MTESS).

Key characteristics:

• Mandatory written employment contracts
• Statutory 13th salary (Aguinaldo)
• Social security enrollment requirements
• Seniority-based severance entitlements
• Formal termination documentation rules
• Active labour authority oversight

Compliance failures can result in:

• Labour fines from MTESS
• Retroactive IPS contribution payments
• Tax penalties from SET
• Court-ordered severance compensation
• Reinstatement claims in unfair dismissal cases

Termination disputes represent a primary source of employer litigation in Paraguay.

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EOR Vs. Entity: When to use What?

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Why is an EOR the Most Efficient Way to Hire in Paraguay?

Paraguay is an emerging South American market with growth in agribusiness, energy, logistics, and shared service operations. However, employment is governed by mandatory benefits, statutory bonuses, and formal severance requirements.

An EOR is not simply a payroll provider. It is the legal employer recognized by Paraguayan authorities, responsible for:

• Labour Code compliance
• Social security reporting
• Payroll tax filings
• Aguinaldo administration
• Leave and overtime compliance
• Termination handling

This allows foreign companies to operate in Paraguay without assuming direct employer liability.

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#1. EOR Manages Social Security Contributions (IPS)

Employers must register employees with Instituto de Previsión Social (IPS) and make statutory contributions.

Social security covers:

• Healthcare
• Pension benefits
• Disability coverage
• Maternity benefits
• Workplace injury protection

Employer contributions are significant, and employees also contribute a portion of their salary.

Errors can trigger:

• IPS audits
• Retroactive contribution demands
• Interest and financial penalties

An EOR ensures accurate contribution calculation and reporting.

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#2. EOR Handles Income Tax (IRP) Withholding

Paraguay applies personal income tax (IRP) based on statutory thresholds.

The EOR ensures:

• Proper withholding calculation
• Monthly payroll tax reporting
• Annual compliance submissions
• Employee tax documentation

Incorrect withholding may result in:

• Tax audits by SET
• Employer liability for unpaid tax
• Administrative fines

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#3. EOR Controls Mandatory Benefits and Leave Compliance

Paraguayan law mandates:

• 13th salary (Aguinaldo) paid annually
• Minimum paid annual leave (12 days increasing with tenure)
• Paid public holidays
• Overtime premium compensation

Failure to comply may lead to:

• Wage claims
• Labour inspection penalties
• Employee disputes

An EOR ensures:

• Proper Aguinaldo accrual
• Leave tracking
• Overtime documentation
• Payroll adjustment accuracy

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#4. EOR Minimizes Termination Risk

Termination in Paraguay requires:

• Valid legal grounds or statutory severance
• Notice period compliance
• Seniority-based severance calculation
• Payment of accrued Aguinaldo and leave

Improper dismissal can result in:

• Court-ordered compensation
• Additional statutory penalties
• Litigation exposure

An EOR manages termination documentation and settlement calculations to reduce employer risk.

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EOR vs. PEO in Paraguay: How to Decide the Right Hiring Model?

A PEO in Paraguay does not replace the legal employer.

Under a PEO model:

• The client remains the legal employer
• The client must register with SET and IPS
• The client bears social security and tax liability
• The client assumes severance exposure

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Payroll, Taxes, and Monthly Compliance

Monthly payroll in Paraguay is built around three recurring compliance blocks:

1. IPS social security: PwC summarizes monthly IPS rates for commercial employers as 16.5% employer and 9% employee, paid together to IPS by the employer as withholding agent.
2. Working time and overtime controls: Standard schedules typically align to 48 hours/week, while night work is capped lower and overtime is capped (commonly 3 hours/day and 57 hours/week total); overtime beyond standard hours is paid at premium multipliers, including 150% for daytime overtime and 200% for night/public holiday overtime in the Papaya guide.
3. Personal income tax on services (IRP/PIT): PwC’s current summary provides the progressive bands (8%/9%/10%) and the PYG 80M gross-income threshold for liability under the personal services category.

Operationally, payroll reporting and payments are typically executed through Paraguay’s tax system tooling and IPS channels; providers commonly reference SET’s Marangatu platform as part of the practical payroll workflow for filings/records.

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Salary Structure: Where Most Compliance Issues Begin

In Paraguay, compliance issues usually start when employers treat total compensation as “base pay” without controlling (a) working time classification, (b) overtime caps and rates, and (c) what counts toward the IPS contribution base.

• Overtime tracking and caps: Paraguay uses hard limits (commonly 3 overtime hours/day and 57 total hours/week) and premium multipliers; failures typically come from weak timekeeping or paying overtime incorrectly (especially night/public holidays).
• Night work misclassification: Night schedules (often defined in practice around 20:00–06:00) have lower weekly hour caps and premium treatment; mislabeling shifts can trigger back pay disputes.
• IPS base errors: PwC notes the IPS base includes wage items in cash or kind, but excludes the mandatory annual bonus (aguinaldo) in their summary; incorrectly including/excluding components creates audit and reconciliation problems.
• Aguinaldo under-budgeting: EY frames it as a statutory annual bonus equal to 1/12 of annual accrued compensation due before December 31; treating it as discretionary is a common budgeting/compliance mistake.

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What Monthly Payroll Operations Actually Involve

Monthly payroll in Paraguay is a controlled sequence. Employers (or the EOR) first validate payable elements—base salary, variable pay, allowances, and overtime—then validate hours against statutory limits (including night work caps and overtime ceilings).

Next, they compute statutory deductions: IPS withholding (employee share) and employer IPS contributions at the applicable rates and remit the combined amounts to IPS.  If the employee falls into the personal services tax regime, payroll must also apply the relevant IRP/PIT logic (PwC’s bands and thresholds) and maintain documentation to support the tax basis.  Finally, employers produce payslips, transfer net wages, submit monthly filings through the required channels (often operationalized via Marangatu/SET + IPS workflows), and keep audit-ready records for hours, payroll registers, and payment proofs.

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Step-by-Step Onboarding Process With an EOR in Paraguay

Hiring in Paraguay requires tax registration, social security enrollment, and strict labour documentation.

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1. Verify EOR Registration with SET

Confirm valid RUC registration and tax standing.

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2. Confirm IPS Enrollment Capability

Ensure the EOR is properly registered with social security authorities.

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3. Determine Contract Type

Paraguay recognizes:

• Indefinite contracts
• Fixed-term contracts (limited cases)

Improper structuring may create permanent employment exposure.

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4. Validate Salary and Minimum Wage

EOR ensures compliance with:

• National minimum wage
• Sector-specific requirements (if applicable)

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5. Calculate Total Cost-to-Company

Includes:

• Employer IPS contributions
• Aguinaldo accrual
• Severance exposure
• Payroll taxes

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6. Draft Labour Code-Compliant Contract

Contract must include:

• Role and duties
• Work schedule
• Salary structure
• Bonus entitlements
• Termination conditions

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7. Register Employee with IPS

Registration must occur at employment commencement.

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8. Establish Payroll and Benefit Tracking

EOR sets up:

• Monthly payroll
• Aguinaldo accrual
• Leave tracking
• Overtime monitoring

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9. Immigration Compliance (If Applicable)

For foreign nationals:

• Work authorization assistance
• Residency permit coordination

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10. Execute First Payroll

Includes:

• Salary payment
• Social security contributions
• Tax reporting

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11. Ongoing Compliance Management

EOR oversees:

• Monthly payroll filings
• IPS reporting
• Labour inspections
• Annual tax reporting

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12. Termination and Final Settlement Handling

EOR manages:

• Legal termination procedures
• Severance calculation
• Final payment execution
• Labour authority coordination

Most employer disputes in Paraguay arise during termination and unpaid bonus claims.

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Build Your Paraguay Team with Bolto EOR

Hiring in Paraguay requires careful management of statutory bonuses, social security contributions, and termination protections.

Bolto’s Employer of Record model absorbs:

• Labour Code complexity
• Social security compliance risk
• Payroll tax obligations
• Aguinaldo administration
• Termination and litigation exposure

This allows you to expand into Paraguay without establishing a local entity or inheriting direct employer liability.

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Full Legal Employer Coverage in Paraguay

Bolto becomes the legal employer before:

• Subsecretaría de Estado de Tributación (SET)
• Instituto de Previsión Social (IPS)
• Ministerio de Trabajo, Empleo y Seguridad Social (MTESS)
• Labour courts

Bolto manages:

• Employment contracts
• Payroll and statutory filings
• Social security reporting
• Labour inspection coordination
• Termination execution

You manage employee performance. Bolto manages legal risk.

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Built for Fast Market Entry and Flexible Exit

With Bolto EOR:

• Hire within weeks
• Avoid Paraguayan company registration
• Skip RUC and IPS setup complexities
• Exit without liquidation procedures

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Transparent Cost Structure

Bolto provides:

• Clear statutory cost breakdowns
• Visibility into Aguinaldo and severance accrual
• Predictable EOR service fees
• No hidden compliance liabilities

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End-to-End Employee Lifecycle Management

Bolto manages:

• Contract drafting
• Payroll processing
• Social security and tax compliance
• Leave and bonus administration
• Termination handling

You never interact directly with Paraguayan labour authorities.

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Designed for Risk-Controlled Expansion in Paraguay

Paraguay enforces penalties for:

• Social security underpayment
• Failure to pay Aguinaldo
• Improper termination
• Tax non-compliance

Bolto enables compliant hiring in Paraguay while shielding your company from direct employer liability exposure.