El Salvador implements new rules for annual bonus payments

El Salvador has implemented new regulations regarding the payment of the annual bonus, known as aguinaldo. Under the updated Labor Code, the legal period for these payments has been expanded to run between October 1 and December 20.

Labor Minister Rolando Castro announced that financial institutions are prohibited from making automatic deductions from these bonuses to cover outstanding debts or scheduled charges. Additionally, aguinaldos up to USD 1,500 are exempt from income tax; if the amount exceeds this threshold, the tax is applied only to the surplus. These bonuses are also exempt from social security and pension fund deductions.

In the public sector, USD 110 million has already been disbursed to state employees. Private sector companies may also begin payments as of October 1. The amount of the bonus is determined by seniority, ranging from proportional payments for those with less than one year of service to 21 days of salary for employees with over 10 years of tenure.