Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On April 29, 2016, Venezuelan President Nicolás Maduro announced a 30% increase in the monthly minimum wage, effective May 1, 2016. President Maduro also announced an increase in the meal benefit, which will now be three and a half tax units1 per day.
Minimum Wage Increase
The new minimum wage has been set at 15,051.15 Venezuelan bolivars (VEF 15,051.15) per month (currently, approximately $39.88 USD in accordance with the government rate and approximately $13.49 USD in accordance with the exchange rate established by the market through foreign exchange agencies), and 501.71 bolivars (VEF 501.71) per day (currently approximately $1.33 USD in accordance with the government rate and approximately $0.46 USD in accordance with the exchange rate established by the market through foreign exchange agencies).
Cash Payment
The minimum wage must be paid in cash. No other type of payment can be counted as part of the salary.
Fixed Amount for Mixed Salary
The fixed amount for an employee who receives a mixed salary2 cannot be less than the new minimum wage. For example, if an employee receives a fixed salary plus a variable salary or a fluctuating salary, this amount must not be lower than VEF 15,051.15 per month.
Minimum Amount for Pensions
The new minimum wage will also apply to pensions paid by the Venezuelan public administration and the Venezuelan Social Security Institute (“Instituto Venezolano de los Seguros Sociales” or IVSS).
Part-Time Work
An equivalent fraction for time worked will be paid pursuant to Article 172 of the Venezuelan Labor Law (known by “LOTTT,” the labor code’s acronym in Spanish).
Impact over Social Contributions and Employee Benefits
The economic impact of the minimum wage increase on social contributions and employee benefits under the Venezuelan labor regime is as follows:
|
Benefits |
Caps for Benefits |
March 1, 2016 |
|
Day Care |
Five times the minimum wage |
Workers who earn a monthly salary equivalent to or lower than VEF 75,255.75 are entitled to a daycare benefit. Employers must pay 40% of the minimum wage per month, which is the equivalent of VEF 6,020.46, in order to comply with the benefit. Payments are made directly to the institution providing the child care and are not deemed part of the employee’s salary. |
|
Contributions |
Caps for Contributions |
March 1, 2016 |
|
Social Security |
Five times the minimum wage |
Both employers and employees must contribute monthly to IVSS. The employer is required to withhold and pay the employee’s contributions. All contributions are computed as a percentage of the employee’s normal salary up to a maximum of five minimum monthly salaries (VEF 75,255.75). Employees are obliged to contribute 4% of their salary and employers between 9% and 11%, according to the occupational risk the law assigns to the employer’s business. |
|
Unemployment Insurance |
10 times the minimum wage |
Contributions are also calculated based upon the employee’s monthly salary. Employers must contribute an amount equal to 2% of the employee’s normal salary and must withhold the employee’s contribution, which is 0.5%. The maximum taxable base for these purposes is 10 minimum monthly salaries (VEF 150,511.50). |
Sanctions
Payment of a salary lower than that established by the Decree, or payment after the weekly or bi-weekly pay schedule, will result in a minimum fine of 120 tax units (VEF 21,240.00) to a maximum of 360 tax units (VEF 63.720,00).
Increase of the “Meal Benefit” Calculation Base
The new calculation base for the payment of the "Meal Benefit" is the equivalent of three and a half tax units (3.50 UT) per day times 30 days per month, or one hundred and five tax units (105 UT) per month. This represents a single daily amount of 619.50 bolivars (VEF 619.50) and a single monthly amount of 18,585.00 bolivars (VEF 18,585.00).
The “Meal Benefit” for Workers Law provides that the employer's failure to grant this benefit will result in a fine of 10 tax units (VEF. 1,770.00) or 50 tax units (VEF 8,850.00) for each worker affected.
1 A "tax unit" is an amount that links benefit increases to tax rates and penalties, instead of fixing them in local currencies and subjecting them to inflation indexes. One tax unit is equivalent to 177.00 bolivars (VEF 177.00).
2 A "mixed salary" includes two components: (1) an hourly wage, commonly called a “fixed wage” or “fixed part” because the wage typically is kept at the same value and can vary only if the employee has worked a large amount of overtime, and (2) an amount set by piecework. The latter component is commonly called a “variable wage” or “variable part.”
