El Salvador: An Overview
El Salvador: Investment, Regulatory and Labour Framework Overview
Overview
El Salvador has consolidated its position as a jurisdiction for foreign investment in Central America, supported by trade openness, incentives and a comprehensive legal framework that combines investment security with clear labour, regulatory compliance and governance rules. Over the past decade, the country has fostered an environment through institutional modernisation, digitalisation of key administrative procedures, and a regulatory agenda. These measures have reduced timelines, costs, and risks for investors, strengthening legal certainty and predictability.
This investment ecosystem is complemented by a structured labour and occupational health and safety framework, anchored in a Labour Code in force since 1972 and reinforced by the General Law on Risk Prevention in the Workplace enacted in 2012. Together, these regulations provide clarity on employment relations, predictability in labour costs, and technical standards aligned with the principles of the International Labour Organization. As a result, companies can plan operations efficiently, manage human resources effectively, and implement preventive systems that mitigate legal, financial, and operational contingencies.
At the same time, El Salvador has incorporated regulations addressing business models, including employment arrangements and legal regimes for sector innovation and digital assets. The combination of legal incentives, institutional oversight, alignment with international standards and regulatory modernisation positions the country as a competitive environment for long-term investment projects.
Investment legal framework
El Salvador stands out for its proactive investment promotion strategy, supported by a modern legal framework designed to facilitate domestic and foreign direct investment. This environment includes legally established tax incentives, a digital agenda, efficient inter-institutional co-ordination, a secure business climate and sustained public investment in connectivity and infrastructure. Collectively, these elements create optimal conditions for attracting capital and supporting investment projects across industries.
Digital transformation
The digitalisation and modernisation of public institutions have improved service quality, speed and transparency. Key entities involved in company incorporation and compliance, such as the Commercial Registry and the Ministry of Finance, allow procedures to be carried out digitally. This transformation has reduced registration timelines, simplified compliance processes and improved accessibility for investors, contributing to operational efficiency.
Tax incentives
The enactment of laws granting tax incentives to specific productive sectors has strengthened investor interest. These incentives target innovation, technological manufacturing, vertical real estate developments, high-value investments and projects located in the Historic Centre of San Salvador. In parallel, reforms governing free zones and international services have expanded available benefits, encouraging capital inflows and job creation.
Trade relations with the United States
The signing of the first reciprocal trade agreement between the United States and El Salvador aims to strengthen Salvadoran exports and facilitate the entry of US products into the Central American market. The agreement has driven modernisation of customs infrastructure and promoted investment in export-oriented, logistics and manufacturing industries, reinforcing integration into regional and global value chains.
Bitcoin and digital assets ecosystem
El Salvador has established a regulatory framework for the use of Bitcoin and the issuance of digital assets, supported by specialised supervisory authorities ensuring transparency, compliance and operational security. Several digital asset issuances have already been completed, including real estate-backed instruments. These initiatives, supported by tax incentives, have contributed to a dynamic ecosystem offering innovative alternatives for project financing.
Tourism infrastructure
Tourism development is a strategic priority. The government promotes the national brand and invests in the preservation of tourist destinations. Resources have been allocated to modernising the international airport and improving connectivity. These efforts are complemented by public safety and infrastructure improvements in key areas such as the Historic Centre of San Salvador and Surf City.
Labour and employment framework
The Labour Code regulates employment relationships, granting protection to permanent and temporary workers, particularly regarding social security coverage. It establishes provisions on ordinary and special working hours, including those classified as hazardous, in accordance with Articles 106 and 108 of the Labour Code.
The framework recognises multiple forms of wage determination, including payment by time, work performed, piecework, lump sum and commissions. It also regulates accrued employment benefits, including vacation and year-end bonus payments, whether paid fully or proportionally, as well as the additional bi-weekly payment effective in 2027.
The Labour Code establishes termination grounds, regulates collective rights and professional association, and provides safeguards that support employer compliance and financial planning.
Certainty for employers
Labour regulations consolidate employer obligations within a verifiable compliance framework. Administrative procedures carried out by the Ministry of Labour, together with technical inspections under the Law on the Organisation and Functions of the Labour and Social Welfare Sector, ensure transparency and consistency. These mechanisms regulate inspections, follow-up processes, and sanctions, providing legal predictability for long-term projects.
Occupational health and safety transformation
This has evolved from a reactive approach to a preventive management system. The General Law on Risk Prevention establishes technical, documentary and organisational obligations designed to anticipate workplace accidents and occupational diseases, aligned with international standards such as ILO Convention No 155.
Modern occupational health adopts a comprehensive approach addressing physical and social aspects of work. The regulatory framework incorporates principles of equality, non-discrimination and respect for human dignity, requiring participation across organisational levels in preventive measures.
Core employer compliance obligations
Effective safety management requires appropriate mechanisms and resources to prevent accidents and occupational disease and to ensure safe working conditions. Core obligations include occupational risk identification and assessment, implementation of a risk prevention management programme, accident and disease record-keeping, emergency planning, training, occupational medical surveillance, and occupational health and safety committees.
The law requires a written management programme to be made available to the competent authority, enabling continuous evaluation of preventive measures and control of occupational risks. Emphasis is placed on reproductive health protection and the investigation of accidents and hazardous incidents.
Institutional oversight
The Ministry of Labour supervises compliance through technical inspections and may impose penalties classified as minor, serious or very serious. Sanctions consider factors such as the number of affected workers and the employer’s economic capacity. This system promotes proactive compliance.
Economic and business impact
Effective occupational health and safety systems reduce accidents, lower absenteeism and improve productivity. Prevention is increasingly viewed as a strategic investment, as proper risk management reduces turnover, compensation costs and loss of talent, while strengthening corporate reputation and business continuity.
Alignment with international standards
El Salvador has ratified multiple ILO conventions on occupational safety, equality and decent work. This facilitates integration of multinational companies and supports adoption of international certifications such as ISO 45001.
Conclusion
El Salvador’s legal and regulatory framework provides a platform for foreign investment, supported by incentives, modernisation, and a labour and health and safety system. Alignment of investment promotion policies with structured labour regulations and oversight mechanisms allows investors to operate within a compliance environment, reducing risks.
The country’s transition toward regulatory models, including digitalised procedures, employment schemes and preventive occupational safety systems, enhances competitiveness and supports long-term projects. Alignment with international standards and specialised regulatory authorities strengthens institutional credibility.
Taken together, these elements position El Salvador as a reliable jurisdiction for sustainable investment, offering foreign investors a clear, adaptable and aligned regulatory environment.