Economy and Finance Minister Elmer Cuba announced that President Keiko Fujimori’s government will present a bill to Congress to ease dismissals for top-earning formal workers in Peru.
The proposed legislation targets employees at the top of the wage scale, covering workers on payroll or defined-term contracts. Minister Cuba stated in a television interview that current regulations create a rigid environment that penalizes formal employees who earn higher salaries.
According to Cuba, the initiative forms part of a broader package of structural labor and tax reforms that the Executive branch will send to the Legislature during the summer of next year. He acknowledged potential legislative hurdles, admitting that the dismissal-flexibility measure might fail to pass in Congress.
Did You Know? Minister Cuba pointed out that under current rules, a worker earning 10,000 soles pays a 10 percent contribution to EsSalud and another 10 percent for pensions, matching the percentage paid by someone earning 1,000 soles, and added that for lower wage levels, contributions should adjust to workers’ economic capacity by not contributing 10 percent for a pension and instead contributing 5 percent in that salary bracket, or remaining in the SIS rather than having health contributions.
In contrast to the rules for higher earners, the government ruled out cutting labor benefits in the microenterprise sector, where informality hovers around 90 percent. Cuba explained that authorities will refine existing microenterprise legislation without removing rights like holiday pay and bonuses, noting on Cuarto Poder that they are talking about keeping vacations and keeping aguinaldos.
The microenterprise proposals focus on lowering mandatory social security and pension contribution costs. Lowering these financial burdens is intended to encourage formal job creation, according to the minister’s statements.
Regarding health contributions, which correspond to the employer, Cuba responded that although they figure that way contably, their cost ends up influencing the worker’s remuneration.
Expert Insight: Adjusting mandatory contributions relative to wage levels highlights the administration’s dual strategy: attempting to ease hiring costs for lower-income segments while tackling perceived rigidities for high earners, despite clear legislative friction over dismissal rules.
Economy and Finance Minister Elmer Cuba announced the initiative on behalf of President Keiko Fujimori’s government during an interview on the program Cuarto Poder.
The government plans to refine current microenterprise laws without cutting rights like vacations and aguinaldos, while calibrating mandatory contributions to EsSalud and pensions.
Minister Cuba acknowledged political difficulties ahead, admitting that the dismissal reform might not pass in the legislative body.
What impact do you think recalibrating social security contributions will have on informal businesses in Peru?
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