Minimum Salary Increase in El Salvador
The minimum salary is one of the main tools used by governments to address problems such as poverty and inequality among different population groups within a country. On this basis, the International Labor Organization (ILO) recommends establishing a minimum salary, which guarantees a standard of living according to the basic needs of workers and their families and the cost of living they face.
In El Salvador, by law, the minimum salary must be reviewed every three years, so that it can be adjusted to changes in inflation and living conditions. The last increase to the minimum salary occurred through executive decrees in December two thousand seventeen, which became effective as of January two thousand eighteen.
The current proposal of the Executive Branch to the National Minimum Salary Council was to increase by 20% the minimum salary in all productive sectors of the country (commerce, services, industry, textile and clothing maquila, agricultural sector, coffee processing, sugar cane harvesting and sugar mills), this proposal was approved on July 5, 2021, and will become effective on August 1, 2021.
To date there is no Executive Decree published, but according to information provided by official sources the increase in the minimum salary is fixed according to the table detailed below:
The State plans to implement a subsidy program with the intention of specifically covering the minimum salary increase in the costs of micro, small and medium-sized enterprises for one year (August 2021-July 2022). This subsidy will be delivered through the Development Bank of El Salvador (BANDESAL) through FIREMPRESA funds (Trust for the Economic Recovery of Salvadoran Companies).
Companies applying for this benefit will have to comply with certain requirements:
– Demonstrating that the salary has been paid with the increase incorporated, via the ISSS payroll. Submitting payrolls with and without the salary increase.
For now, it has been estimated that 13,500 MSMEs will be able to receive this non-refundable subsidy. Thus, the authorities estimate that the number of beneficiaries could be up to 1.5 million people, both employees and their families, with the 20% increase in the minimum salary.
Undoubtedly, this unprecedented increase to the minimum salary will put some companies in trouble, especially those that do not apply to the benefit from BANDESAL, however it is important that employers see the positive impact that this increase to the minimum salary can bring in their employees, a salary increase stimulates an increase in worker productivity because they see their effort and dedication rewarded, it generates a moral commitment in the worker to the company to have a performance that is in line with their salary.
