Venezuela Announces New Minimum Wage And Meal Benefit Increases

Author:Mr Daniel Jaime
Profession:Littler Mendelson
 
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On February 17, 2016, Venezuela's President Nicolás Maduro announced a 20% increase in the monthly minimum wage, effective March 1, 2016. President Maduro also announced an increase in the meal benefit, which will now be two and a half tax units1 per day.

Minimum Wage Increase

The new minimum wage has been set at 11,578.80 Venezuelan bolivars (VEF 11,578.80) per month and 385.96 bolivars (VEF 385.96) per day.

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 11,578.80 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

5 times the minimum wage

Workers who earn a monthly salary equivalent to or lower than VEF 57,894.00 are entitled to a daycare benefit. Employers must pay 40% of the minimum wage per month, which is the equivalent of VEF 4,631.52, 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

5 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 57,894.00). Employees are obliged to contribute with 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...

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