Employer of Record in Honduras: how to hire compliantly without an entity.
Employ full-time employees in Honduras without setting up an entity. Locally compliant contracts, monthly payroll, statutory benefits, taxes. Below: what the law actually requires, in plain English.
- Country
- Honduras
- ISO code
- HN
- Region
- North America
- Phone code
- +504
- Employ Latam coverage
- Full EOR + contractor payments
Last updated July 2026
Overview
Honduras sits in the heart of Central America with a workforce of around 4 million people. The country runs on the Honduran lempira, operates a monthly payroll cycle, and follows a labor framework built around the Labor Code (Decreto No. 189). For companies hiring remotely, the setup is straightforward once you understand the key statutory obligations.
Country at a glance
| Detail | Honduras |
|---|---|
| Currency | Honduran lempira (HNL) |
| Working week | Monday to Friday (44 hours/week standard) |
| Standard workday | 8 hours |
| Probation period | Up to 60 days |
| Notice period | 1 month (indefinite contracts) |
| 13th-month salary | Yes, paid in three installments: April, August, December |
| Payroll cycle | Monthly |
What hiring in Honduras actually involves
Most employees are hired on indefinite-term contracts. These carry full benefit and termination protections under Honduran law. Fixed-term contracts exist but must be justified by the nature of the work and are generally capped at one to two years.
Key obligations every employer carries:
- Payroll runs in lempiras, with income tax (ISR) withheld progressively up to 25%
- Social security contributions (IHSS) run roughly 12.75 to 18.5% of gross salary on the employer side
- The 13th-month bonus (aguinaldo) is mandatory and split across three payment dates
- Vacation starts at 10 days after the first year and grows with tenure
- Maternity leave is 6 weeks pre and post-natal; paternity leave is 4 days
- Contracts for engagements over 60 days must be written and registered with the Ministry of Labour within 15 days of signing
There is no severance fund equivalent to Brazil's FGTS. Termination without cause triggers a severance calculation of one month's salary per year worked, plus proportional bonuses and a seniority premium.
Foreign hires add a layer of process. Work permits are issued by the National Migration Institute and require employer sponsorship, proof that no local candidate was available, and Ministry of Labour approval of the employment contract.
Employ Latam handles the locally compliant employment contract, statutory contributions, and payroll in lempiras. Onboarding can be live in 72 hours. Pricing starts from $349 per employee per month.
Employment contracts and worker types
Honduras defaults to the indefinite-term contract. If you are hiring someone for ongoing work, that is the contract you use. Fixed-term and task-based contracts exist but require justification tied to the nature of the work. Using them to avoid statutory protections is a common compliance risk.
All contracts longer than 60 days must be written and registered with the Ministry of Labour within 15 days of signing. Verbal agreements are technically permitted for short-term or low-value work under 60 days, but written contracts are always the safer baseline.
Contract types at a glance
| Contract type | Typical use | Max duration | Probation allowed |
|---|---|---|---|
| Indefinite (tiempo indefinido) | Ongoing roles, standard employment | No fixed end | Up to 60 days |
| Fixed-term (tiempo determinado) | Seasonal work, project with defined end | 1 to 2 years, must be justified | Up to 60 days |
| Specific task (obra determinada) | Project-based work ending at completion | Until task is complete | Up to 60 days |
| Probationary | Evaluating a new hire before confirming employment | 60 days maximum | N/A (is itself the trial period) |
A few things worth noting:
- Probationary periods run up to 60 days. During that window, either party can end the relationship without cause and without severance.
- Fixed-term contracts end automatically at the agreed date. No notice is required at expiration, but repeated renewals can convert the arrangement into an indefinite contract in practice.
- Honduras has no zero-hour contract structure. Part-time and hourly workers follow the same rules as full-time employees, with pay and benefits prorated accordingly.
- There is no distinct internship contract category. Internships fall under specific task or temporary arrangements and carry the same registration requirements.
Misclassification risk
Classifying an employee as an independent contractor to avoid payroll obligations is a real exposure in Honduras. Labor courts apply an economic dependency test. If the person works set hours, uses your tools, and has a single client (you), they are likely an employee under Honduran law regardless of what the contract says. Statutory contributions, severance, and benefits would apply retroactively if a claim is upheld.
What an employment contract must cover
At minimum, a compliant Honduran employment contract includes:
- Full names and identification of both parties
- Job title and description of duties
- Agreed salary and payment frequency
- Work location and hours
- Contract duration (or confirmation it is indefinite)
- Reference to applicable collective agreement, if any
Employ Latam issues locally compliant employment contracts for every hire and handles Ministry of Labour registration. Onboarding goes live in 72 hours.
Payroll, taxes, and the 13th-month salary
Honduras pays salaries monthly. Employers run payroll in Honduran lempiras (HNL) and handle withholding before funds reach the employee.
How the 13th-month bonus works
Honduras calls it the aguinaldo, and it does not arrive in one December payment. The law splits it into three installments across the year:
- April: 1/12 of the prior year's gross salary
- August: another 1/12 of the prior year's gross salary
- December: the remaining 10/12, plus any holiday and vacation adjustments
Budget for this from day one. The full aguinaldo equals one month's salary, but the cash flow hits three times a year.
Income tax withholding
Employers withhold income tax (ISR) from each payroll run. Rates are progressive, from 0% up to 25% depending on the employee's annual income bracket. The employer remits this directly to the tax authority (SAR) on the employee's behalf.
Statutory contributions
Both employer and employee pay into IHSS (Instituto Hondureño de Seguridad Social), which covers health insurance, pension, and workplace risk. Rates vary by salary level and risk classification. Employers also pay a professional training levy.
| Contribution | Employer rate | Employee rate |
|---|---|---|
| IHSS health | 5.0% | 2.5% |
| IHSS pension | 7.25% | 2.0% |
| IHSS workplace risk | 0.5–3.25% (sector-dependent) | 0% |
| Professional training (INFOP) | 1.0% | 0% |
| Total (approximate) | 13.75–16.5% | 4.5% |
Note: IHSS health contributions are capped at a salary ceiling set by IHSS. Contributions above the ceiling are not subject to the percentage. Confirm current ceilings before running your first payroll.
Total employer cost
On top of gross salary, budget roughly 14 to 17% for statutory contributions, plus the aguinaldo (one month's salary spread across the year). A rough planning figure: gross salary multiplied by 1.20 to 1.25 covers most mandatory employer costs for a standard office role.
Honduras has no national severance fund like Brazil's FGTS. Severance obligations arise at termination, not through ongoing contributions.
What Employ Latam handles
When you hire through Employ Latam, we run payroll in lempiras, file IHSS contributions, withhold ISR, and schedule the three aguinaldo installments. Pricing starts from $349 per employee per month. You approve hours and salaries; we handle the rest.
Mandatory benefits, vacation, and parental leave
Honduras sets its benefit floor in the Labor Code (Decreto No. 189). Every employee on an indefinite or fixed-term contract is entitled to the same statutory minimums. There is no room to negotiate these away.
Leave entitlements
| Leave type | Entitlement | Paid by |
|---|---|---|
| Annual leave | 10 days after year 1; 12 days after year 4; 14 days after year 8 | Employer (100% salary) |
| Sick leave | Employer covers first 3 days; IHSS pays up to 52 weeks at 75% salary from day 4 | Employer (days 1-3); IHSS (day 4 onward) |
| Maternity leave | 6 weeks before birth, 6 weeks after (12 weeks total) | IHSS (employer may top up) |
| Paternity leave | 4 days | Employer |
| Public holidays | 14 to 16 days per year (includes Semana Santa, Independence Day, others) | Employer (double pay if employee works the day) |
A few things worth noting:
- Vacation accrues from the employee's start date, not the calendar year. Track it per worker.
- Mothers also have protected breastfeeding time during the workday after returning from maternity leave. This is a legal right, not a courtesy.
- Working on a public holiday triggers double pay. Swapping the day off does not satisfy the obligation unless the employee agrees in writing.
13th-month bonus (aguinaldo)
Honduras does not pay the aguinaldo in one December lump sum. The law splits it into three installments:
- April: 1/12 of the prior year's salary
- August: another 1/12
- December: the remaining 10/12, adjusted for any outstanding vacation or holiday balances
Budget for this from day one. It is not a discretionary bonus.
Social security (IHSS)
Employer contributions to IHSS run approximately 12.75% to 18.5% of gross salary, depending on the sector risk classification. This covers health, pensions, and occupational risk. The employee contributes 5% to 7.75% on their side. Both amounts are mandatory and must be remitted monthly.
Honduras does not have a severance savings fund equivalent to Brazil's FGTS. Severance obligations fall directly on the employer at the point of termination.
What Employ Latam handles
When you hire through Employ Latam, we issue a locally compliant employment contract, run payroll in Honduran lempiras, calculate and remit IHSS contributions, and manage the three aguinaldo installments on the correct schedule. Pricing starts from $349 per employee per month. You manage the work; we handle the compliance.
Severance, termination, and notice periods
Honduras operates under the Labor Code (Decreto No. 189). Termination rules depend on whether the dismissal is with or without cause, and on how long the employee has worked for you.
Notice requirements
For indefinite-term contracts, the employer must give one month's written notice before termination, or pay one month's salary in lieu. Fixed-term contracts and specific-task contracts end automatically at their natural conclusion with no notice required. Probationary employees (up to 60 days) can be let go without notice or severance.
Without-cause termination: what you owe
Terminating an indefinite-contract employee without documented just cause triggers several obligations:
- Severance pay: one month's salary per year worked, with a minimum of 25 days' wages
- Seniority premium: 15 to 25 days' wages for employees with at least four months of service
- Proportional 13th-month bonus (aguinaldo): accrued portion for the current year
- Accrued vacation: any unused days paid out at 100% of salary
- Other proportional bonuses owed under the employment contract
There is no severance fund in Honduras (no equivalent to Brazil's FGTS). These amounts are paid directly by the employer at the time of separation.
Severance table
| Tenure | Notice period | Severance owed (without cause) |
|---|---|---|
| Under 1 year | 1 month (or pay in lieu) | 25 days minimum + seniority premium if 4+ months served |
| 1 to 3 years | 1 month (or pay in lieu) | 1 month's salary per year worked |
| 3 to 5 years | 1 month (or pay in lieu) | 1 month's salary per year worked |
| 5+ years | 1 month (or pay in lieu) | 1 month's salary per year worked, seniority premium applies |
All calculations use the employee's average salary over the final six months of employment.
Just-cause termination
Honduras law permits termination without severance if the employer can document a valid cause: serious misconduct, repeated insubordination, dishonesty, or similar grounds defined in the Labor Code. Written notice stating the specific cause is required. Courts apply a two-year limitation period on unfair dismissal claims, so documentation matters from day one.
Practical notes
- Severance disputes go to labor courts. Undocumented dismissals are treated as without cause by default.
- Always confirm accrued aguinaldo installments (paid in April, August, and December) when calculating final pay.
- Foreign employees on work permits tied to an employment contract require special attention at termination: the work authorization lapses when the contract ends.
Recent regulatory changes
Honduras labor law moves slowly. The core framework, the Labor Code (Decreto No. 189) and the Social Security Law, has been in place for decades. That said, employers hiring in Honduras right now need to track two recurring annual changes and watch for executive-level decrees that can take effect quickly.
What changes most often
Minimum wage. The Secretariat of Labor issues minimum wage tables each year, typically in January. Rates differ by sector and region, so a manufacturing worker in San Pedro Sula and a services employee in Tegucigalpa are not on the same schedule. Missing an update means underpaying from day one.
IHSS contribution rates. The Instituto Hondureño de Seguridad Social periodically adjusts employer and employee contribution percentages. Employers currently contribute roughly 12.75 to 18.5 percent of gross salary, depending on payroll risk tier. Any rate change affects your cost-per-hire calculation immediately.
Changes in the past 24 months
| Date | Change | Impact on employers |
|---|---|---|
| January 2024 | Minimum wage tables updated across all sectors and regions by the Secretariat of Labor | Payroll must reflect new sector-specific floors from the first pay cycle of the year |
| January 2023 | Annual minimum wage revision issued; increases varied by sector (averaging 5 to 7 percent) | Contracts and offer letters referencing the prior year's floor required updates |
| 2023 (ongoing) | IHSS enforcement activity increased around employer registration compliance | Unregistered or late-registered workers exposed employers to back-contribution liability |
No major structural reforms to the Labor Code, severance rules, or parental leave entitlements were enacted in this period. The 13th-month bonus structure, termination rules, and notice periods remain unchanged.
What to watch
The Honduran government can issue executive decrees that adjust labor obligations outside the standard legislative cycle. Sector-specific rules (construction, agriculture, export processing zones) are especially prone to targeted adjustments. Employers in those sectors should review Secretariat of Labor bulletins at least quarterly.
If you are hiring through Employ Latam, statutory contribution changes and minimum wage updates are applied automatically. Your payroll stays compliant without you tracking government gazettes.
Frequently asked questions
- Do I need a local entity to hire someone in Honduras?
- No. Using an employer of record means you do not need to incorporate a Honduran legal entity. The EOR employs the worker on your behalf, handles the contract registration, runs payroll in lempiras, and manages statutory contributions, while you direct the day-to-day work.
- What is the most common employment contract in Honduras?
- The indefinite-term contract is the standard for most hires. It has no fixed end date, carries full statutory protections, and is what the Labor Code assumes unless you have a documented reason to use something else. Fixed-term and task-based contracts are valid options but must be justified by the nature of the work, and misusing them to limit benefits creates legal exposure.
- What is the total employer cost on top of gross salary in Honduras?
- Expect roughly 14 to 17% of gross salary in statutory contributions (IHSS health, pension, workplace risk, and INFOP training levy), plus the aguinaldo equivalent to one additional month's salary paid across April, August, and December. A planning multiplier of 1.20 to 1.25 times gross salary covers most mandatory employer costs for a typical office or tech role. Workplace risk rates vary by industry, so higher-risk sectors will sit toward the top of that range.
- How long is paid maternity leave in Honduras?
- Employees are entitled to 12 weeks of maternity leave in total: 6 weeks before the expected birth date and 6 weeks after. IHSS funds the benefit, though the employer may be responsible for any gap if the employee is not yet enrolled or contributions are not current. Breastfeeding protections extend beyond the leave period itself.
- How much severance is owed for terminating an employee without cause in Honduras?
- The baseline is one month's salary for each year worked, with a floor of 25 days' wages for shorter tenures. On top of that, you owe a seniority premium of 15 to 25 days' wages (if the employee has at least four months of service), proportional aguinaldo for the current year, and any accrued unused vacation. There is no government-held severance fund, so the full amount comes directly from the employer at the time of separation.
- What are the most recent labor law changes in Honduras that affect payroll?
- The most impactful recent changes are the annual minimum wage revisions issued each January by the Secretariat of Labor, which set sector- and region-specific floors. Employers also need to monitor IHSS contribution rate adjustments, since these affect the total employer cost per worker. No major structural reforms to the Labor Code or benefit entitlements occurred in 2023 or 2024. Verifying current rates directly with the Secretariat of Labor before finalizing an offer is always good practice.
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