How do you terminate an employee in Peru in 2026?

Peru's dismissal regime sits in the Ley de Productividad y Competitividad Laboral (DS 003-97-TR). To end a permanent contract for free, you must prove a cause tied either to the worker's conduct or to their capacity. Without that proof, the dismissal is treated as arbitrary and the indemnity falls due.

Conduct causes

• Serious misconduct, including theft, fraud, breach of good faith, and refusal to follow lawful instructions
• Repeated unjustified absence or persistent lateness after warnings
• Damage to company property done on purpose or through gross negligence
• A criminal conviction for an offence connected to the role

Capacity causes

• Falling short of agreed performance, measured against the worker's own past output or the team standard
• A detriment that stops the worker doing the job, where no reasonable adjustment fixes it
• Loss of a licence or qualification the job depends on

Conduct dismissals carry a procedural step you cannot skip. You must hand the worker a written charge and give them at least six calendar days to answer it before you decide (Art. 31). Performance and capacity cases run on a 30-day window to improve. Get the step wrong and a labour court can rule the dismissal arbitrary, which puts you back on the indemnity.

Some dismissals are illegal whatever the cause. Firing a worker for pregnancy, union activity, filing a complaint, or a protected personal characteristic is a null dismissal. A court can order the worker reinstated, not just paid off. These protections run from day one.

1. Pin down the cause

   Anchor the dismissal to a conduct or capacity ground in the labour law. No proven cause means the arbitrary-dismissal indemnity falls due instead.

2. Serve the written charge

   For conduct cases, hand the worker a written statement of the charge. Give them at least the legal defence window to answer it in writing before you decide.

3. Decide and document

   Weigh the worker's defence on the record, then issue a written dismissal letter setting out the cause. The paper trail is what defends the dismissal in court.

4. Run the final liquidacion

   Settle the CTS fund, pay out unused leave, prorate the July and December gratifications, and add the indemnity if no cause was proven. File the exit through PLAME to SUNAT.

5. Use mutual agreement where you can

   Where both sides are willing, a signed mutuo disenso ends the contract without an indemnity or a cause fight. The worker still keeps every earned sum.

This is the surprise for employers used to a UK or German model. There is no four-week or three-month notice clock to run down before someone leaves. Peru replaces the time with a payment. The cost of letting someone go without cause is the indemnity, not weeks of garden leave.

The six-day defence window

For a conduct dismissal, Article 31 gives the worker a written charge and no fewer than six calendar days to answer it in writing. This is a defence window, not paid notice. Skip it and the dismissal is exposed as procedurally unfair.

Peru runs two payments that get confused for one. Keep them apart and the maths is clear.

1. Arbitrary-dismissal indemnity

This is the penalty for ending a permanent contract without a proven cause. Article 38 of DS 003-97-TR sets it at 1.5 months ordinary monthly salary for each complete year of service, with part-years paid in twelfths and thirtieths, all the way up to a ceiling of 12 months salaries.

The cap bites early. Because the rate is 1.5 months salary a year, the 12 months-salary ceiling is hit at eight complete years. A 20-year employee and an 8-year employee on the same pay cost the same to dismiss without cause.

2. CTS, the severance savings fund

The Compensacion por Tiempo de Servicios sits separately from the indemnity. Under the CTS Law (DS 001-97-TR), you deposit half a computable monthly salary into the worker's CTS account in the first half of May, and another half in the first half of November. Over a year that adds up to about one monthly salary. The worker owns the fund and keeps it whatever ends the employment, including a clean resignation.

Two further sums are always due at exit on top of the above: any unused annual leave, which the law sets at 30 days per complete year, and the proportional share of the two yearly gratifications, each worth 1 month salary, paid in July and December.

The collective route under Articles 46 to 52 of DS 003-97-TR exists for genuine business reasons that hit a group of workers at once. The grounds include force majeure, economic or technical causes, and the dissolution or insolvency of the company. The threshold and the procedure are set by the labour authority rather than a fixed headcount in the statute.

What the filing has to do:

• Set out the objective ground and the evidence behind it
• Inform the affected workers and any recognised union
• Open a consultation period to look at alternatives
• Submit the case to the Ministry of Labour for review
• Wait for the authority's decision before the exits take effect

Treat a group exit as a regulated process, not a batch of individual dismissals. The authority can reject a collective case it finds unfounded, which pushes you back to individual dismissals and the indemnity per worker.

Mutual termination, the mutuo disenso, lets both sides agree to end the relationship in writing. It is the most predictable exit in Peru because it sidesteps the arbitrary-dismissal indemnity and the risk of a null-dismissal claim. The agreement should record the end date, the full final-pay breakdown, and any extra sum the parties choose to add.

Typical components of a Peru mutual exit:

• CTS settlement, releasing the savings fund the worker already owns
• Accrued annual leave, the unused balance from the 30 days yearly entitlement, paid in cash
• Proportional gratifications, the July and December bonuses worth 1 month salary each, prorated to the exit date
• An agreed extra payment, where the parties want to settle above the legal minimum
• A mutual waiver, drafted so the worker does not later file an arbitrary-dismissal claim

Note on final pay timing: Peru does not fix a single statutory deadline counted in days for the full settlement, the liquidacion de beneficios sociales. Practice is to settle promptly after the last working day. CTS deposits run on the fixed May and November dates regardless. Get the mutual exit signed before the last day so the payment timing is not itself a source of dispute.

Real HR and legal experts handle your Peru hires, from the first contract through every monthly payroll run and statutory deduction. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.

The split of responsibilities under EOR for Peru terminations:

Peru's twin-payment structure trips up employers who expect a single severance line. Teamed keeps the indemnity and the CTS apart on every exit, so the bill is right the first time.

EOR, contractors, and entity employees all live on one platform. An employee hired through Teamed's Peru network can graduate to your own Peruvian legal presence when headcount makes entity formation the right call, until it isn't. Run the Crossover Calculator to see when the model flips. Start from the Peru hiring overview.

Key sources: Ley de Productividad y Competitividad Laboral (DS 003-97-TR), CTS Law (DS 001-97-TR), and Ministerio de Trabajo y Promocion del Empleo.