Termination in Peru

Navigating employment termination in Peru requires a thorough understanding of local labor laws, which are designed to protect employees and ensure fair treatment. The process is highly regulated, particularly concerning dismissals for cause, and strict adherence to procedural requirements is essential to avoid legal challenges and potential liabilities for the employer.

Peruvian labor legislation emphasizes job stability, meaning termination without a legally recognized cause is generally prohibited unless the employer is prepared to treat it as a wrongful dismissal and pay the corresponding severance. Employers must follow specific steps and provide clear documentation when terminating an employment relationship, especially when alleging employee misconduct or other valid grounds.

Notice Period Requirements

Peruvian law does not mandate a standard notice period for termination when there is a valid cause for dismissal. The termination takes effect after the required disciplinary procedure is completed.

However, if an employer terminates an employee without a valid cause (which is generally not permitted unless treated as wrongful dismissal), there is no specific notice period required by law. Instead, the focus is on the compensation due for the wrongful dismissal.

For specific contract types or mutual agreement terminations, notice periods might be agreed upon, but these are not standard requirements for disciplinary dismissals.

Severance Pay Calculations and Entitlements

Severance pay in Peru is primarily associated with wrongful dismissal (despido arbitrario), which occurs when an employee is terminated without a legally recognized cause or without following the correct procedure.

The calculation for severance pay for employees under indefinite-term contracts is based on their length of service and remuneration.

Component	Calculation
Severance Amount	1.5 monthly salaries per full year of service
Partial Year	Calculated proportionally by months and days
Maximum Severance Cap	12 monthly salaries

Notes:

• The "monthly salary" used for calculation includes the basic salary plus all regular, non-occasional remuneration components.
• For employees on fixed-term contracts, the severance for wrongful dismissal is calculated as 1.5 monthly salaries for each month remaining on the contract, up to a maximum equivalent to the remuneration they would have received if they had completed the contract term.

Severance is typically paid in a single lump sum upon termination due to wrongful dismissal.

Grounds for Termination

Peruvian law specifies limited grounds for lawful termination with cause. These grounds are broadly categorized into those related to the employee's conduct and those related to the employee's capacity.

Grounds Related to Conduct (Cause for Dismissal):

• Serious misconduct (falta grave), including:
  • Failure to fulfill essential job duties.
  • Repeated unjustified absence or tardiness.
  • Serious insubordination or disobedience.
  • Intentional damage to company property.
  • Theft or misappropriation of company assets or funds.
  • Disclosure of confidential information.
  • Habitual drunkenness or drug use affecting performance.
  • Acts of violence, serious disrespect, or harassment.
• Conviction for a criminal offense involving a prison sentence.

Grounds Related to Capacity (Cause for Dismissal):

• Physical or mental disability that prevents the employee from performing their duties, provided reasonable accommodations cannot be made.
• Poor performance (rendimiento deficiente) despite adequate training and warnings.
• Refusal to undergo medical examinations required by law or company policy.

Termination Without Cause:

Termination without a valid cause is generally considered wrongful dismissal (despido arbitrario) and entitles the employee to severance pay or, in some cases, reinstatement. Economic, technological, or structural reasons (collective dismissals) have separate, stringent requirements and procedures.

Procedural Requirements for Lawful Termination

Terminating an employee for cause in Peru requires strict adherence to a specific legal procedure to be considered valid. Failure to follow these steps can render the dismissal wrongful.

Step	Description	Documentation Required
1. Notification of Charges	Employer sends a written letter to the employee detailing the specific charges (grounds for dismissal) and providing evidence.	Letter of Notification of Charges
2. Employee's Response Period	Employee has a minimum of six calendar days to respond in writing to the charges. This period can be extended.	Employee's Written Response (if provided)
3. Employer's Evaluation	Employer evaluates the employee's response and the evidence presented by both parties.	Internal notes/records of evaluation
4. Termination Letter	If the employer decides to proceed, a final written termination letter is issued, stating the grounds for dismissal and the effective date.	Termination Letter
5. Final Settlement Payment	Payment of all outstanding wages, benefits, vacation pay, and other entitlements upon termination.	Liquidation of Social Benefits (Liquidación de Beneficios Sociales)

Common Pitfalls:

• Failing to provide a detailed and specific notification of charges.
• Not allowing the employee the full response period.
• Terminating the employee before the response period expires or before issuing the final termination letter.
• Not having sufficient evidence to support the alleged grounds for dismissal.
• Failing to pay the final settlement promptly.

Employee Protections Against Wrongful Dismissal

Peruvian law provides significant protection against wrongful dismissal. If an employee is terminated without a valid cause or without following the correct procedure, they have the right to challenge the dismissal.

The primary remedies available to an employee who has been wrongfully dismissed are:

• Reinstatement: The employee can request to be reinstated to their position with back pay. Reinstatement is typically ordered in cases of null dismissal (despido nulo), such as dismissal based on discrimination, pregnancy, union activity, or filing a complaint against the employer.
• Severance Pay: In cases of arbitrary dismissal (despido arbitrario - termination without cause or procedure, but not falling under null dismissal grounds), the employee is entitled to receive the statutory severance pay as calculated based on their length of service.

Employees can pursue these remedies by filing a claim with the Ministry of Labor or initiating legal action in the labor courts. The burden of proof to demonstrate that the dismissal was for a just cause and followed the correct procedure lies with the employer.