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.
Through Decrees N° 3.068 and 3.069, published in the Official Gazette N° 41.231 on September 7, 2017, Venezuela’s President Nicolás Maduro increased the monthly minimum wage by 40% and "the meal benefit” calculation base to 21 tax units1 per day. As we previously reported in May, the meal benefit (known as “Cestaticket Socialista”) must be paid out in cash or credited to workers’ payroll accounts. Both increases, which apply to the private and public sectors, became effective on September 1, 2017.
Minimum Wage Increase
The new minimum wage has been set at 136,544.18 Venezuelan bolivars (VEF) per month and VEF 4,551.47 per day. The minimum wage for apprentices has been set at VEF 102,408.14 per month and VEF 3,413.60 per day.
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 or fluctuating salary, this amount must not be lower than VEF 136,544.18 per month.
Minimum Amount for Pensions and Special Bonus for Pensioners
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). Additionally, pensioners will receive a special bonus (known as the “economic war” bonus) of VEF 40,963.25. Therefore, pensioners’ minimum income is set at VEF 177,507.43.
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:
Caps for Benefits
September 1, 2017
5 times the minimum wage
Workers who earn a monthly salary equivalent to or lower than VEF 682,720.90 are entitled to a daycare benefit. Employers must pay 40% of the minimum wage per month, which is the equivalent of VEF 54,617.67, 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.
Caps for Contributions
September 1, 2017
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 5 minimum monthly salaries (VEF 682,720.90). Employees are obliged to contribute 4% of their salary and employers must contribute between 9% and 11%, according to the occupational risk the law assigns to the employer’s business.
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 1,365,441.80).
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 36.000,00) to a maximum of 360 tax units (VEF 108.000,00).
Increase to the “Meal Benefit” Calculation Base
The new calculation base for the payment of the "meal benefit" is 630 tax units per month (i.e., the equivalent of 21 tax units per day times 30 days per month). This represents a single daily amount of 6,300.00 bolivars (VEF 6,300.00) and a single monthly amount of 189,000.00 bolivars (VEF 189,000.00).
Payment in Cash or Credit of the Meal Benefit
Pursuant to the “Meal Benefit for Workers Law,” the employer is required to provide a balanced meal to its employees every work day. Although this obligation may be satisfied by providing the meal through a dining service, the law also allows the employer to provide it through coupons, tickets or electronic meal cards. At a minimum, the electronic meal cards must equal the single monthly amount mentioned above.
However and in addition to increasing the single monthly amount, Decree N° 3.069 establishes that the meal benefit will be paid out in cash or credited to a worker’s payroll account, as established in May 2017. On a separate pay stub, employers must notify employees of the meal benefit amount that is being credited or paid in cash and the working days to which it corresponds, also noting that this benefit is not part of the worker’s salary. Further, employers cannot deduct any amount from the meal benefit, unless the employee has authorized such reduction.
Additional Payment for Companies with Dining Service
Starting August 2016, companies that provide the meal benefit through a dining service are also required to pay to employees an additional monthly amount of VEF 189,000.00. This amount is said to be temporary, for an indefinite period of time and until the economic emergency ceases to exist in Venezuela. Although this requirement continues to exist under the recently issued Decree N° 3.069, the payment must be made in cash or credited to workers’ payroll accounts.
The “Meal Benefit for Workers Law” provides that an employer's failure to pay this benefit will result in a fine of 10 tax units (VEF. 3,000.00) or 50 tax units (VEF 15,000.00) per affected worker.
1 Under Venezuelan law, the “tax unit” is a metric used to determine the amount of tax assessments or penalties, instead of fixing the rates in local currencies and subjecting them to inflation indexes. The amount that the tax unit represents is updated on an annual basis by the federal executive branch and published on the Official Gazette.
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.”