Supply Chain Innovation

Short-term Contracts in Peru

Publication date: 
Monday, November 3, 2014

 Since the late 1970s, Peruvian law has authorized companies producing “non-traditional manufactured goods” to employ workers on short-term contracts to work on specific purchase orders for export. 

Originally designed to stimulate investment build a stronger export market in Peru, Decree Law 22342 requires companies to export at least 40 percent of their annual production to entitle them to hire workers on a short-term basis. Temporary workers hired under this law must be working on a specific purchase order, and the hiring company must notify the Ministry of Labor and Employment Protection that it is using short-term labor.

However, because the law allows employers in the apparel and textile export sector to re-hire the same workers repeatedly, employers can undermine the original intent of the law, and in so doing, deny their workers the benefits of full-time employment. Repeated hiring of “temporary” workers creates a precarious workforce, and denies workers their health care benefits, social security, and other benefits associated with their seniority. A perpetually “temporary” workforce is easier to terminate, and is less able to exercise its rights of freedom of association and collective bargaining. 

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