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Venezuela

January 25, 2021

By John Tucker

Back to International Employment Law

Venezuela

KEY DEVELOPMENTS FOR 2020


 

Payment of wages and benefits in multiple currencies

Inflation continues to be a problem in Venezuela as the value of the local currency, the Bolivar, continues to decrease rapidly, thereby increasing the costs of goods and services. In an attempt to control the rate of inflation, the Venezuelan Government allowed the use of foreign currencies for the payment of goods and services in 2019. As a result, employers are now required to pay their staff using foreign currency and these payments must be made in cash, given that many employees do not have offshore bank accounts. This has also opened the market for offshore pre-paid credit cards, which employers may give to employees for use in the country. The biggest concern with these payments is whether they constitute salary for the purposes of determining the statutory benefits applicable under Venezuelan law.


 

Workforce reductions

As the economic conditions in Venezuela continue to deteriorate, many businesses have resorted to reducing their workforce, even though this is technically prohibited by law and requires prior approval from the Government. However, the Government and Labour Inspector Offices have been more open to receiving and approving requests for workforce reductions and protecting businesses from collective bargaining claims in 2020. These requests allow for the suspension of jobs without pay, as well as the suspension of certain benefits under collective bargaining agreements.


 

Hiring of independent professionals continues to increase

The use of independent professionals continues to increase, and many offshore companies are hiring independent professionals to work remotely and paying them in foreign currency. It is also becoming more common for employers to pay benefits in multiple currencies, as well as with crypto-currencies.

 

KEY DEVELOPMENTS FOR 2019


 

Surge in inflation rates

The International Monetary Fund predicts that inflation in Venezuela could increase by 10 million % in 2019. This will result in frequent changes to the minimum wage and an increase of statutory benefits such as food stamps. As a result of inflation, it is becoming more and more common to purchase goods and services in US Dollars instead of using local currency. The Venezuelan Government still need to issue further regulations and clarifications relating to the payment in US Dollars as it is now necessary for almost every employer to provide some type of remuneration to their employees in US Dollars.


 

Enactment of special bar against dismissals

On 28 December 2018, the Government enacted a Decree on Special Bar Against Dismissals which will remain in place for two years until 28 December 2020. The decree prevents employers from dismissing an employee without just cause and prior authorization from the Office of the Labour Inspector. Failure by an employer to comply with these provisions will give an employee the right to claim reinstatement and payment of unpaid wages.


 

Increase in the independent professionals

Companies use of independent professionals continues to increase as a means to lower their costs. Many offshore companies are hiring independent professionals to work remotely and paying them in foreign currency.

With thanks to John Tucker of LEĜA Abogados for his invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department
Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department
Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department