Labor Implications of Supreme Decree No. 5503: New Minimum Wage and Free Wage Negotiation
Supreme Decree No. 5503 (the “Decree”), enacted on December 17, provides that, as of January 2, 2026, the National Minimum Wage (Salario Mínimo Nacional or “SMN”) will be set at Bs 3,300. This 20% increase compared to the prior year will reshape companies’ cost structures.
The new SMN automatically increases the cost of the seniority bonus and employer contributions to the social security system.
Its application is mandatory for the private sector, under strict oversight by the Ministry of Labor.
Article 107 of the Decree introduces free wage negotiation between employers and employees, either individually or collectively, which, in our view, constitutes the most significant change in labor policy, moving away from the annual percentage increases imposed by the State.
The Decree requires that agreements be made in writing, comply with the SMN, and safeguard all non-waivable rights. The Ministry of Labor must act as a watchdog to ensure that wage negotiation does not disguise practices that undermine job stability.
In addition, to mitigate the SMN increase, the Decree provides a tax benefit under which companies may use 50% of the employer contributions actually paid (housing, occupational risk, and health) as a VAT credit. This benefit applies to new employment contracts registered through March 2026, for salaries not exceeding four (4) times the SMN, and will remain in force until the end of next year.
Author: Antonio Sanjines
