Everything About the Individual Employment Contract in Guatemala

Drafting an employment contract may seem like an easy task, as there are multiple contract templates available online.

Even the Ministry of Labor and Social Welfare provides a template to facilitate its preparation, but the real question is... Does the contract used protect the interests of the company?

The importance of effective advice Lawyers in Guatemala The key to creating an efficient and tailored employment contract lies in the fact that a contract is how an economic relationship with the employee begins.

The contract is the tool to make the rules clear, remembering that in the labor sphere, before administrative and judicial bodies, any doubt favors the worker.

Therefore, the door of ambiguity cannot be left open, for which various strategies for the proper design of an employment contract that protects the interests for which the company or institution where one works was created are detailed below.

A contract consistent with the company's business activities:

An employment contract is like a tailor-made suit; it doesn't fit everyone. It must be specifically designed in accordance with the company's business and its needs.

For example, if it is a company that sells goods or provides services, this circumstance must be adapted to the employment contract.

In practice, the contract usually covers basic and general matters such as salary, hours, duties, among others.

However, it is important to take into account that the consequences that may arise from an employment relationship depend considerably on the company's business purpose.

A contract tailored to the employee's job.

A common mistake in companies or different workplaces is to create a “template” contract for all job positions.

Although the company's direction has already been adapted, it is also necessary to harmonize it with the position of the employee being hired.

The above is due to the existence of positions of trust, roles with different responsibilities, and distinct profiles.

Therefore, in order for employment contracts to achieve the objective of avoiding future contingencies, they must be compatible with the dynamics of each worker, their functions, schedules, work location, and other conditions.

For example, for a company dedicated to the transportation of goods, it is relevant to observe the issue of civil liability, damage insurance, and the authorized routes for the drivers operating the vehicles.

Otherwise, it would be very difficult to protect the company's interests in case of an accident if the contract does not stipulate these terms.

A contract must clarify the rules for economic advantages.

Not all jobs involve the fact of enjoying Economic advantages.

However, if nothing is specified in the contract regarding this matter, the Labor Code establishes a legal presumption that these amounts represent 30% of the salary.

A healthy and preventive strategy is to set a lower percentage or establish that said position will not hold any economic advantage.

Employment contract registration.

A very common mistake is also not sending the contracts to the Ministry of Labor and Social Security.

In accordance with the Labor Code, it is an obligation to register employment contracts with the Labor Registry Department of the Directorate General of Labor of the Ministry of Labor and Social Welfare.

In order to present an Employment Contract to the Labor Inspectorate or a Labor and Social Security Court, it must have the received stamp of the Labor Registry to be valid.

Labor Law is preventive rather than reactive, and prevention begins with the drafting of a good employment contract, thus avoiding future administrative and judicial problems that hinder the company's progress.

Conclusion.

Labor Law is preventive rather than reactive, and prevention begins with the drafting of a good employment contract, thus avoiding future administrative and judicial problems that hinder the company's progress.

In Guatemala, the number of lawsuits filed by workers has increased considerably in recent years, and this has notably concerned the business sector.

A contract that is not strategically drafted makes it difficult to succeed in labor courts, hence the importance of evaluating whether the contracts currently used by the company will protect me from a future contingency.

The Individual Employment Contract should be viewed beyond a “document by means of which the employer manifests the clear rules of the game that the worker will perform in their place and position of work”

The importance lies in different aspects that protect the employer and encompass the following:

Avoid Fines

The General Labor Inspectorate has the authority to impose fines of up to eighteen minimum wages for failing to comply with the formal requirement of subscribing a written employment contract.

Addendum to the Internal Regulations of Work:

The Labor Code establishes that the Regulations are mandatory from ten workers. However, it is important to highlight that the contract and the regulations are legal tools that must be harmonized in their wording to mutually assist each other.

In other words, the contract should be seen as a tool that complements the Regulations and ensures that its drafting contributes to establishing the obligations, powers, and working conditions in accordance with what is established in the regulations, so that they do not contradict or hinder each other. Rather, they should be favored.

Economic Advantages

The topic of economic benefits has already been discussed in another publication. However, it is important to reiterate that without an employment contract, there is no possibility of modifying them, and therefore it is tacitly understood that they correspond to the 30%.

Job Individualization

Employers have been seen using the same -generic- contract for all workers.

The written Individual Employment Contract is an opportunity to individualize the specific conditions of each worker, as each job generates different obligations, rights, and powers.

The importance of the foregoing lies in the fact that, in the event of any circumstance, if the employer wishes to call the employee's attention for some infraction and this is not specified in the contract, the disciplinary process for a possible dismissal Future demand disfavors employer protection, as the employer does not have the appropriate evidence to substantiate which condition or obligation was breached.

To ensure the correct drafting of contracts, it is recommended to seek legal advice from Lawyers in Guatemala.

Motherboard

Our Individual Employment Contract is the most important tool for defending the employer's position in the face of a potential labor lawsuit, for a claim of compensation.

This is because, if we as employers cannot prove to the judge that the worker in fact received a certain salary, with a certain work schedule and working conditions; the worker has the power to invent that their conditions were superior to what was agreed upon.

In other words, in a labor process, the employer bears the burden of proof. This means that everything the worker states is considered true unless proven otherwise. And in the absence of an employment contract, it is extremely difficult to effectively defend a lawsuit.

Service Agreement vs. Employment Contract in Guatemala:

Deciding Whether to Hire Under a Professional Services Agreement or an Individual Employment Contract It is a dilemma that many companies in Guatemala face.

The belief is that the first option is the most “beneficial.”.

However, this may turn out to be the most counterproductive If the intention is to engage in a work relationship, the usual strategy to adopt is to opt for a service contract in order to evade labor obligations.

It is important to understand the differences between each of the contracts.

This article in no way intends to suggest replacing a service contract with an employment contract if what actually exists is a Civil and non-employment relationship.

In other words, there are cases in which a professional services contract should be the first option.

Consequently the question is:

What contract should I sign?

To answer this question, first, it is important to define what an individual employment contract (labor relationship) is according to article 18 of the labor code.

“An individual employment contract, regardless of its name, is the economic and legal relationship through which one person (the employee) is obligated to provide personal services to another (the employer) or to perform a specific task for the employer, personally, under the employer’s direction continuous y immediate direction or a representative of the latter, in exchange for a compensation of any kind or form...”

Based on this concept, it is necessary to determine whether the service provided to me is of an employment nature or a civil nature (professional services).

In a employment contract, 3 main characteristics are met:

• Continued dependence (provision of personal services on a continuous basis, with mandatory working hours and assigned workdays, Monday through Friday for example).
• Immediate direction (instructions from a supervisor on how to perform personal duties)
• Compensation economic consideration

If, once the assessment has been made, these three characteristics are met, we are dealing with an indisputable Employment relationship, which implies complying with all the labor provisions of our national legal system (annual bonus, vacation, incentive bonus, Christmas bonus, economic benefits, severance pay if applicable, among others...).

On the other hand, if a person is providing a personal service in exchange for remuneration but, for example, there is no immediate direction and continuous dependence, the contract must and can be civil nature (service contract).

Often, despite this contractual principle, companies insist on continuing to operate under the civil law framework of a professional services contract.

This bad practice is referred to as “sham contract”, in which an employment relationship is disguised as a civil relationship or concealed.

For this purpose, the following is detailed...

The disadvantages of this bad practice (Contract Simulation).

• Fines by the General Labor Inspectorate:  This institution has the power to impose sanctions monetary penalties for failure to comply with the Labor Code, including not signing employment contracts when required.
• Indemnification: Work simulation does not release from the payment of compensation for unjustified dismissal, an expense that the company probably did not anticipate when signing a service agreement.

• Salary Adjustment Worker's right to request retroactive payment of remuneration not received due to non-recognition of work rights (minimum wage, overtime, annual bonus, incentive bonus, Christmas bonus)., Economic advantages, compensation if applicable, among others...).
• Legal Non-compliance: Beyond contract simulation, the company is incurring in breach of the law

Conclusion:

Nowadays, contract simulation is not an effective strategy. Complying with the law by recognizing labor rights should be seen as a monetary and legal compliance investment, as it can be observed that evading obligations today has serious repercussions in the future.

It's never too late to reorganize a company's labor aspect. If the intention is to comply with the employer's legal duties, it's important to sort this out as soon as possible and give it the legal and economic health that every company deserves and needs.

The part-time contract.

The part-time contract is undoubtedly a topic that has generated a lot of controversy in the workplace.

There is currently a diversity of information on the topic.

Therefore, what is intended with this article is to cover the most relevant points so that it can be used as a Business Guide And that the entrepreneur has the capacity to implement it in a practical way.

Legal field.

Government Agreement 89-2019 of the President of the Republic regulates everything related to Part-Time Work.

This document states the Regulations of Convention 175 of the International Labour Organization, which at the time faced legal actions.

However, this came into effect after the Constitutional Court ruled in favor of the agreement.

Formal Aspects.

To implement this work modality, the formalities already established in the Labor Code must be met.

In other words, the part-time contract is also recognized by the Labor Code as an employment relationship, and consequently, all legal parameters must be met regarding deadlines, written contract, obligations to the Ministry of Labor, and recognition of labor rights and legal benefits.

How much should I pay an employee?

The most important thing to know is that the salary must be calculated based on hours worked plus an incentive bonus, according to this year's minimum wage. It is important to remember that this is the minimum an employer can pay, and Q250 for the incentive bonus must be added to the total calculation.

In this line of thinking, the employer will be able to pay less than the monthly minimum wage, as long as the minimum hourly remuneration outlined is respected and understanding that the worker will be at their disposal for fewer hours than the ordinary workday.

Can I change a full-time job to a part-time one?

This is probably the most common question for this modality.

As long as there is a written agreement of wills between the employer and employee, it is possible to change the working hours.

It is important to mention that part-time work is a modality that can benefit both the employer and the employee, as, in special circumstances, it is possible that the employee can no longer commit to a full-time schedule and needs to request a change to fewer hours.

Observation: If there is an agreement as stated and it was duly documented, the worker cannot claim a change in their working conditions.

Contract Simulation.

Labor law is governed by the principle of “realism,” which gives priority to facts, meaning what has actually occurred in reality.

This prevents attempts to sign part-time contracts if the employer ultimately forces and requires you to be available for more hours than agreed upon and corresponding to part-time.

Other important aspects.

For the hiring of Part-Time Work, compliance with other inalienable rights must also be observed, such as: vacation, annual bonus, overtime pay, Christmas bonus, incentive bonus, overtime pay, social security contributionsS, among others.

Conclusion.

There are specific cases where an employer does not require a full-time employee because the job position does not demand it, and on the other hand, there are potential workers who cannot allocate their time to a full-time job. This is where this new modality makes sense.

Part-time work should be seen as beneficial to both parties, not just the employer.

It is important to follow the recommendations indicated in this article to ensure effective implementation and avoid future contingencies with the General Labor Inspectorate and/or Labor and Social Welfare Courts.

It is suggested that the employer also update the Internal Work Regulations to have complete backing for the implementation of this new modality.

Seek advice from Lawyers in Guatemala for correct application.