• Insights

What’s ahead in 2020 for employers in Venezuela?

Written by
D'Empaire, leading full-service law firm in Venezuela with a strong labour and employment practice.
This article sets out some pointers for employers in Venezuela for the year ahead.

Lawmakers and courts

In the midst of the political dispute for control of the National Assembly, the prospect of enacting game-changing labour laws for the year 2020 seems remote. In matters of labour law, there were no significant regulations on employment matters during 2019, other than Executive orders raising the statutory minimum wage by amounts that failed to keep up with the rapidly growing inflation rates (just during the years 2018 and 2019 alone, the statutory minimum wage was raised nine times). The statutory minimum monthly wage was recently increased for January 2020 to VEB 250,000, that is approximately USD 4.00 at the current exchange rate.

The same can be said for labour court matters. Characterised by understaffing, lack of resources and operating at a reduced schedule, the courts’ case law production has decreased alarmingly in the last three years (the Supreme Court Social Chamber decreased its production rate from 1457 decisions in 2016 to 496 decisions in 2019). This means labour disputes are mostly resolved through out-of-court settlements. We anticipate this will continue to be a tendency in 2020.

Economic context

As hyperinflation rates continue to rise (albeit with a slower pace than 2018 due to the relaxation of exchange control regulations that allow the exchange of goods and services in foreign currency), employers have found offering compensation schemes in foreign currency, the best way to incentivise and keep personnel. However in structuring their compensation scheme, employers are advised to keep a mixed scheme and single out certain benefits to be paid in bolivars in order to avoid major impacts in their labour costs.

Another element to look out for is the’“petro’, a cryptocurrency issued by the government, which is supposed to be backed by the country’s oil and mineral reserve (although it’s actually a fixed value in bolivars which is set from time to time, by the government). The Executive continues with efforts to promote its implementation; it has even started paying some bonuses to public sector employees in petros.  Even though there are currently no specific regulations that order employers to pay labour benefits in petros, the Executive aims to achieve a widespread use of this currency.

Looking ahead…

In facing the challenges ahead for 2020, employers should consider the following:

  • Employers and employees must try to keep a flexible approach in negotiating work conditions.
  • Consider implementing variable pay schemes with strict conditions to either incentivise work productivity or reduce work absenteeism.
  • Payments in foreign currency are a must.
  • Restructuring will be less costly for employers, as the labour freeze protection should expire on December 2020, which would give employers a certain degree of leverage in negotiating agreed terminations of employment. However, it is likely that the labour freeze will be extended.
Biba Arciniegas
Partner - Venezuela
Alejandro Disilvestro
Partner - Venezuela