Minimum salary increase in Venezuela

On November 17, 2014, the President of the Republic issued Decree Nº 1.431 (the Decree), through which he increased the minimum salary for public and private sector workers by 15%. Such became effective on December 1, 2014.

• Minimum salary

The Decree fixed the following scales for workers’ minimum salaries, with effect on December 1, 2014, notwithstanding the number of workers rendering services for the employer:

According to the provisions of article 7 of the Decree and in accordance with article 172 of the Labour Law, the minimum salary for part-time workers may be paid prorated to the agreed shift.

• Retireees and pensioners

The Decree adjusted the pension of retirees and pensioners of the National Public Administration to the same amount fixed as minimum salary, that is Bs. 4.889,11 per month from December 1, 2014.

The minimum amount for pensions granted by the Venezuelan Institute of Social Security (IVSS) was fixed at Bs. 4,889.11 per month from December 1, 2014 on.

• Adolescents

The Decree sets forth that when the work done by adolescents is performed under the same conditions as other workers, their minimum salary shall be the one fixed in Article 1 of the Decree, that is, Bs. 4,889.11 per month, from December 1, 2014.

• Penalty

Article 8 of the Decree sets forth that in the event the employer pays a salary lower than the one fixed as the minimum national salary, such employer shall be penalized in accordance with article 533 of the LOTTT, with a fine not lower than the equivalent of 120 tax units, and not higher than the equivalent of 360 tax units.

• Effects of the salary increase on labour law

Under Venezuelan labour legislation, many benefits and obligations are calculated based on the minimum salary. Therefore such increase has had the following consequences:

1. Comprehensive care for workers’ children

According to articles 343 and 344 of the Labor Law and articles 101 and 102 of its Regulations, any employer who employs more than 20 workers must have a child care service or initial education center during the working shift for workers with children under 6 years old, and whose salary is lower than five minimum salaries, which from December 1, 2014, on shall be the amount of Bs. 24,445.55. If, to meet this obligation, the employer chooses to pay a monthly amount to an institution duly authorized by the Ministry of People’s Power for the Family, such monthly payment must be equal to 40% of the minimum salary, which from December 1, 2014, on shall be equal to the amount of Bs. 1,955.64 for the monthly fee.

2. Meal allowance

According to Article 2 of the Nutrition Law, any employer from the public and private sectors must give its workers a food benefit, as long as they earn a normal salary not exceeding three minimum salaries, which from December 1, 2014, shall be the amount of Bs. 14,667.33.

3. Tax-payroll contributions

• Social Security (Health and Pensions):

– Employer’s Rate: 9 to 11%.

– Employee’s Rate: 4%.

– Maximum amount of Minimum Salaries: Bs. 24,445.55

– Basis for the Calculation of Minimum Salaries: Five minimum salaries.

– Base Salary: Normal Salary.

• Unemployment Insurance

– Employer’s Rate: 2%

– Employee’s Rate: 0.5%

– Maximum Amount of Minimum Salaries: Bs. 48,891.10.

– Basis for the Calculation of Minimum Salaries: Ten minimum salaries

– Base Salary: Normal Salary