Peru gives employees strong statutory protections, and the obligations on an employer at the point of termination go well beyond a final paycheck. Just-cause dismissal requires a documented procedure and the right to a written defence. Termination without cause triggers severance of 1.5 months’ salary per year of service, capped at 12 months total. And regardless of how employment ends, the CTS (Compensación por Tiempo de Servicios) balance must be fully paid out every time. This guide covers each termination type, the notice rules that apply, what you owe at exit, and the documentation you need to get the process right.
Termination types at a glance
The table below summarises the four routes to ending employment in Peru. Notice requirements and payment obligations differ significantly depending on which applies.
| Termination type | Notice required | Severance (indemnización) | CTS payout |
|---|---|---|---|
| Resignation (employee-initiated) | 30 calendar days (employer may waive) | None | Full balance paid to employee |
| Termination with cause (employer-initiated) | Written notice with right to defend (see below) | None | Full balance paid to employee |
| Termination without cause (employer-initiated) | None legally required | 1.5 months’ salary per year of service, capped at 12 months | Full balance paid to employee |
| Mutual termination agreement | None; parties agree on exit date | Not statutory, but parties may negotiate a payment | Full balance paid to employee |
Probation period exits
Peru allows probation periods to be set by written agreement. The standard maximum is three months for most employees. This can be extended to six months by written agreement for roles requiring significant training or responsibility, and to one year for management and trust positions. All extensions must be documented in writing before the probation period begins.
During probation, the employer can terminate without triggering the full just-cause or without-cause procedures that apply to confirmed employees. The employer doesn’t owe severance for a termination during probation, though all wages and accrued benefits up to the exit date must still be paid. CTS accrues from day one of employment, so a CTS balance is payable even on probationary exits if contributions have been accumulating.
If probation is extended without a written agreement, courts will treat the extension as invalid and apply the standard three-month rule. Document probation terms at the point of hire, not after the fact.
Resignation
When an employee chooses to leave, they’re required to give 30 calendar days’ written notice. You can accept an early resignation and waive all or part of that notice period, but you can’t shorten it unilaterally. If the employee leaves before the notice period expires without your agreement, you can deduct the shortfall from the final payment.
What the employee receives on resignation
Resignation doesn’t trigger severance. The departing employee receives:
- Outstanding salary for all days worked up to the final date
- Accrued unused vacation calculated on a pro-rata basis
- Proportional bonuses (Fiestas Patrias and Christmas bonuses), pro-rated to the months worked in the relevant calendar period
- Full CTS balance released and paid directly to the employee
Everything must be paid on the last working day. There’s no grace period.
Termination with cause
Peru’s labour law allows employers to dismiss an employee immediately if there are documented grounds for serious misconduct. The threshold is high, and the procedure is specific. A dismissal that lacks proper grounds or skips the required steps is treated as an unjustified termination, which means severance becomes payable.
Valid grounds for just-cause dismissal
The main grounds that Peruvian law recognises include:
- Consistent breach of workplace rules
- Preventive custody exceeding 30 days
- Medical inability to perform the contracted duties
- Declining performance (sustained and documented)
- Theft, fraud, or dishonesty
- Serious misconduct
- Absenteeism without justification: more than 3 consecutive days, more than 5 days in any 30-day period, or more than 15 days in any 180-day period
- Conviction for a fraud-related crime
- Repeated intoxication at work
- Acts of violence or serious disciplinary breaches
- Intentional damage to company property
- Disclosure of confidential information
The conduct needs to be serious enough that continuing the employment relationship is unreasonable. Minor infractions, or a single incident that doesn’t meet this standard, won’t support a just-cause dismissal.
Notice rules for just-cause dismissal
The notice requirement depends on the nature of the grounds:
- Misconduct: No prior notice is required if the conduct is serious enough to make continuing the relationship unreasonable. You issue the written dismissal notice at the point of termination, specifying the grounds.
- Incapacity or performance issues: You must give either 6 calendar days’ written notice (allowing the employee to submit a written defence) or 30 calendar days’ written notice giving the employee time to demonstrate competence and correct deficiencies.
In all cases, the written dismissal notice must specify the grounds in enough detail for the employee to understand what they’re being dismissed for. A vague or generic notice is a procedural failure.
What the employee receives on just-cause dismissal
Severance isn’t payable on a justified dismissal. The employee still receives:
- Outstanding salary up to the termination date
- Accrued unused vacation (pro-rata)
- Proportional bonuses (Fiestas Patrias and Christmas)
- Full CTS balance
You must also issue a final settlement receipt (liquidación) itemising each payment, and a certificate of employment (Certificado de Trabajo). All amounts are due on the last working day.
Termination without cause
If you’re ending employment for economic or organisational reasons, or simply because the role is no longer needed, Peruvian law classifies this as a termination without cause. No prior notice is legally required before you initiate it. The trade-off is that severance becomes mandatory.
Grounds for termination without cause
Typical grounds include economic difficulties, company restructuring, organisational changes, and reductions in workforce driven by financial conditions. You don’t need to establish employee misconduct, but you should document the business rationale. If the termination is ever challenged, courts will look at whether the reasons were genuine.
Severance calculation
Severance (indemnización) is calculated at 1.5 months of the employee’s monthly salary per completed year of service. Partial years are pro-rated. The total is capped at 12 months’ salary, regardless of how long the employee has worked.
For example, an employee earning S/ 5,000 per month who has completed four years of service would receive 6 months’ salary in severance, totalling S/ 30,000. An employee with 10 years of service would be capped at 12 months’ salary, totalling S/ 60,000.
Severance is calculated on base salary. Confirm whether the employment contract includes variable components that form part of contractual remuneration. If they do, those components may also factor into the calculation.
What the employee receives on termination without cause
- Severance (indemnización): 1.5 months’ salary per year of service, capped at 12 months
- Full CTS balance (paid out in addition to severance, not instead of it)
- Outstanding salary up to the termination date
- Accrued unused vacation (pro-rata)
- Proportional bonuses (Fiestas Patrias and Christmas)
All amounts are due on the last working day.
Mutual termination agreements
A mutual termination agreement (MTA) allows both parties to negotiate an exit on agreed terms, without either side triggering the formal dismissal procedures. It’s a written agreement signed by both the employer and the employee, setting out the termination date and any agreed payments.
How it works
There’s no mandatory notice period under an MTA. The parties agree on when employment ends and document that in the agreement. An MTA can’t be imposed: if the employee doesn’t genuinely consent, the agreement won’t hold up if challenged.
There’s no statutory severance under an MTA, but parties often negotiate a payment to secure the employee’s agreement. That negotiated amount is separate from the mandatory benefits, which can’t be waived regardless of what the agreement says.
What must still be paid under an mta
An MTA doesn’t reduce the employer’s obligations on mandatory benefits. The following must be paid regardless of any negotiated terms:
- Full CTS balance
- Accrued unused vacation
- Proportional Fiestas Patrias and Christmas bonuses
- All outstanding wages up to the agreed termination date
- Pension and social security contributions remitted up to the termination date
Document the agreement carefully and ensure it specifies that mandatory benefits have been paid in full. A signed MTA that omits or undervalues mandatory payments won’t protect you from a subsequent labour claim.
Cts at exit: how the balance is calculated and released
CTS (Compensación por Tiempo de Servicios) is Peru’s mandatory employment savings fund. Employers contribute to a CTS account held in the employee’s name throughout employment, and the balance accumulates over time. On any form of exit, whether resignation, dismissal, or MTA, the full CTS balance must be released and paid to the employee.
How cts accrues
CTS contributions are deposited twice a year: in May (covering January to April) and in November (covering May to October). Each deposit covers approximately half a month’s salary for the relevant period, calculated on the employee’s ordinary remuneration plus one-sixth of any bonuses received in that period.
Cts balance at exit
The CTS balance held in the employee’s account is released immediately on termination. If there’s also a proportional CTS amount that has accrued since the last deposit date but hasn’t yet been deposited, that amount must be calculated and paid directly to the employee as part of the final settlement.
CTS and severance are separate obligations. On a termination without cause, the employee receives both the CTS balance and the severance indemnización. Don’t net one against the other.
Final settlement obligations
Every termination in Peru requires a formal liquidación (final settlement receipt). This document itemises every payment being made at exit and serves as the official record that the employment relationship has been closed correctly.
What the liquidación must cover
- All salary owed up to the termination date
- Accrued unused vacation (pro-rata)
- Proportional Fiestas Patrias bonus (pro-rated to months worked in the first half of the year)
- Proportional Christmas bonus (pro-rated to months worked in the second half of the year)
- CTS balance (and any proportional CTS not yet deposited)
- Severance (indemnización) where applicable, meaning for terminations without cause
The employee must sign the liquidación to acknowledge receipt. Keep a copy on file.
Payment deadline and late payment consequences
All amounts in the liquidación must be paid on the employee’s last working day. There’s no grace period. If payment is late, the employer becomes liable for interest at the rate set by the Banco Central de Reserva del Perú, and the labour authority (SUNAFIL) can impose additional administrative sanctions. Calculate the full settlement before issuing the termination notice, not after, so the payment is ready to make on the final day.
Other exit documents
In addition to the liquidación, you must provide:
- Certificate of employment (Certificado de Trabajo): Confirms the employment period, role held, and (at the employee’s request) the reason for the end of employment.
- Written dismissal notice: Required for all employer-initiated terminations, specifying the grounds.
- Written MTA: Required for mutual termination exits.
Employee protections
Peruvian law restricts the circumstances in which certain employees can be terminated. These protections operate independently of the termination type: even a technically justified dismissal can be challenged if it falls within a protected period.
Maternity leave: An employee on maternity leave can’t be terminated. The protection applies for the duration of the leave. Any dismissal that takes effect during maternity leave is void.
Certified sick leave: Employees on certified sick leave have limited termination protection during that period. The scope of the protection depends on the medical certification and whether the incapacity is temporary or permanent. If you’re considering terminating an employee who is currently on sick leave, take local legal advice before proceeding.
Union representatives and employees who have filed labour complaints may also have additional protections under Peruvian law. Document your rationale carefully for any termination involving an employee in one of these categories.
Immigration compliance
When a foreign national’s employment ends in Peru, you have active obligations to the immigration authorities, not just the labour authorities.
Peru’s work visas and residency authorisations tied to employment lose their legal basis when the employment relationship ends. The employee can’t remain in the country in a work capacity on a visa that’s no longer supported by active employment.
As the employer, you must notify the Superintendencia Nacional de Migraciones of the termination. Failing to make this notification creates compliance exposure for the company, even if the employment was terminated correctly under labour law. Notify promptly after the termination date and keep a record of that filing.
You must also provide the employee with a certificate of employment (Certificado de Trabajo) for immigration and visa purposes. This is a standard exit document under Peruvian labour law, but it takes on additional importance for foreign nationals who need to demonstrate their employment history when applying for future visas or residency in Peru or elsewhere.
Frequently asked questions
Do we need to give notice before terminating without cause?
No. Peruvian law doesn’t require you to give prior notice before a termination without cause. The mandatory payment is severance, not a notice period. You issue the termination notice and pay severance and all other entitlements on the final working day.
Can we negotiate a CTS waiver as part of a mutual termination agreement?
No. The CTS balance is a mandatory benefit and can’t be waived in any termination agreement. The same applies to accrued vacation, proportional bonuses, and outstanding wages. An MTA can include a negotiated severance payment on top of these, but it can’t reduce or eliminate them.
What happens if a just-cause dismissal is successfully challenged?
If a court finds the dismissal wasn’t justified or that the procedure was deficient, the termination is reclassified as a termination without cause. That means the full severance indemnización becomes payable: 1.5 months’ salary per year of service, capped at 12 months. The employee may also be entitled to reinstatement in some circumstances. Strong documentation throughout the process is your main defence.
How is the Fiestas Patrias bonus calculated at exit?
The Fiestas Patrias bonus is an annual statutory payment due in July. At exit, it’s paid on a pro-rata basis for the months worked in the January-to-July period of the current year. If the employee leaves in April, they’re entitled to four-twelfths of the bonus. The Christmas bonus works the same way for the August-to-December period.
What is SUNAFIL and can it inspect our termination process?
SUNAFIL (Superintendencia Nacional de Fiscalización Laboral) is Peru’s labour inspection authority. It has the power to audit employer compliance with labour law, including termination procedures, payment of CTS, severance calculations, and final settlement documentation. Administrative sanctions for non-compliance can be significant, particularly for repeat violations or where multiple employees are affected.
How RemotePass handles terminations in peru
Managing a compliant termination in Peru requires getting the grounds, procedure, notice, severance calculation, CTS release, final settlement, and immigration filing all correct at the same time. An Employer of Record (EOR) takes on those obligations as the legal employer on record in Peru. The EOR handles the dismissal process, calculates the severance indemnización and CTS balance, prepares the liquidación, and coordinates the Migraciones notification for foreign employees.
RemotePass provides EOR services in Peru and manages the full offboarding workflow, from the written termination notice through to final payment on the last working day. If you’re planning a termination or want to understand your obligations before the decision is made, Book a RemotePass demo to see how it works.
