Fixed-term hiring is one of the first tools a foreign company reaches for when it sets up in Peru. It seems prudent: a new subsidiary, an uncertain pipeline, a project with a defined life. Peruvian law does allow fixed-term employment, but on narrower terms than many investors expect. It is not a general option available to any employer that prefers flexibility. It is an exception to the presumption of indefinite employment, and it only holds if the contract fits one of a closed list of statutory types and rests on a real, documented reason.
This article sets out how contratos sujetos a modalidad (fixed-term contracts subject to a statutory justification) work, what each type is for, the formalities that apply and the points where international employers most often go wrong. It forms part of our guide to employment contracts in Peru.
Legal framework
The rules sit in Title II of the Labor Productivity and Competitiveness Law (the consolidated text of Legislative Decree 728, or LPCL), articles 53 to 83, with further detail in its implementing regulations (Supreme Decree 001-96-TR). The essential points are these:
- Permitted purposes (art. 53). Fixed-term contracts may be used when required by market needs or increased production, or by the temporary or accidental nature of the service or work to be performed. They may not be used for work that is permanent in nature, except within the specific types the law allows.
- Form (art. 72). The contract must be in writing, in triplicate, and must state its duration and the objective causes that justify the fixed term, together with the other terms of employment.
- Registration (art. 73). A copy must be filed with the Autoridad Administrativa de Trabajo (the labor authority, operating through the Ministry of Labor and Employment Promotion, or MTPE) within 15 calendar days of signature, for information and registration. The filing is made through the MTPE’s online platform.
- Aggregate cap (art. 74). Fixed-term contracts may be renewed or combined, but together they cannot exceed five years with the same employee.
- Conversion (art. 77). Where the rules are breached, the contract is deemed indefinite.
- Equal treatment (art. 79). Fixed-term employees enjoy the same rights and benefits as indefinite employees.
Key point
A fixed-term contract in Peru stands or falls on its objective cause. The contract must explain, in concrete terms, why this particular need is temporary. A generic reference to “business needs” is not enough.
The nine contract types
The MTPE groups the nine statutory types into three families. The table summarizes their use and maximum duration.
| Family | Contract type | Typical use | Maximum duration |
|---|---|---|---|
| Temporary | Start-up or increase of activity (art. 57) | A new business activity or an increase in an existing one | 3 years |
| Temporary | Market needs (art. 58) | A temporary, non-cyclical increase in production or demand | 5 years |
| Temporary | Business restructuring (art. 59) | Technological or structural conversion of the business | 2 years |
| Accidental | Occasional (art. 60) | Transitory needs different from the usual activity | 6 months per year |
| Accidental | Replacement (art. 61) | Covering a permanent employee whose contract is suspended | Duration of the absence |
| Accidental | Emergency (art. 62) | Needs arising from unforeseeable events or force majeure | Duration of the emergency |
| Project | Specific work or service (art. 63) | A defined project or service with a predetermined object | As long as the work requires |
| Project | Intermittent (art. 64) | Needs that recur in a discontinuous way | Tied to the intermittent need |
| Project | Seasonal (art. 67) | Work that arises only in certain seasons | Tied to the season |
Two of these types are used far more often than the rest by companies entering or expanding in Peru, and each deserves separate treatment: the contract for new or increased activity and the contract for market needs. The project contract (specific work or service) is also common in engineering, construction-related services and consultancy, where a client engagement gives the need a clear beginning and end.
Writing the objective cause
The objective cause is where most fixed-term contracts fail. In our practice we recommend drafting it so that a third party, reading only the contract, could answer three questions:
- What is the temporary need? A named project, a new plant or branch, a specific client contract, a documented demand peak, the absence of an identified employee.
- Why can it not be covered by permanent staff? Because the need will end, because it is outside the usual activity or because it is tied to an event with a foreseeable end.
- How does the employee’s role connect to that need? The job description should relate directly to the stated cause.
The cause should also be supported outside the contract. Inspectors from SUNAFIL, Peru’s national labor inspection authority, apply the primacy-of-reality principle and will ask for evidence: the client contract, the project schedule, the business plan for the new activity, sales data showing the increase. A cause that exists only in the contract text is vulnerable.
Watch out
Copying the same objective cause into every fixed-term contract, or reusing last year’s cause for this year’s renewals, is one of the patterns inspectors and courts look for when assessing whether a fixed term is genuine.
Renewals, the five-year cap and expiry
Renewals are permitted, provided each one respects the maximum term for its type and the overall five-year limit. Each renewal should be signed before the current term expires and should restate or update the objective cause. If the employee continues working after the term (or the last renewal) expires with no new written contract, the relationship becomes indefinite.
At expiry, the employer does not need a just cause to end the relationship; the contract simply ends. A written notice confirming non-renewal is still good practice. The final settlement of benefits applies in the usual way.
Ending a fixed-term contract early, without a just cause, is a different matter. The LPCL entitles the employee to 1.5 monthly salaries for each month remaining until the agreed end date, capped at 12 monthly salaries. Long terms therefore carry a cost if plans change, which argues for terms that track the real duration of the need rather than the maximum the law allows.
Registration and other formalities
Filing within 15 calendar days is an administrative obligation. Under the majority view, failure to register is a formal infringement that can lead to a fine but does not, on its own, convert the contract into an indefinite one. It is still worth taking seriously: a missing filing is one of the first things an inspector notices, and it often opens a broader review of whether the fixed terms are justified.
Fixed-term employees are otherwise treated like any other employee. They must be registered in the T-Registro electronic payroll by their first day, receive the same statutory benefits, including CTS (a severance fund the employer deposits twice a year into a bank account in the employee’s name) and gratificaciones (statutory bonuses paid in July and December), and are protected against dismissal during the term.
Illustrative scenario
Illustrative scenario: a Canadian engineering firm’s Peruvian subsidiary wins a two-year design contract for a port expansion and needs twelve engineers. It uses specific-work contracts that name the client engagement, describe the deliverables each engineer supports and set terms aligned with the project schedule. The contracts are filed with the MTPE within the statutory period. Eighteen months in, the client extends the engagement, and the subsidiary signs renewals before the original terms expire, referencing the amended client contract. When the project ends, the engineers who are not redeployed leave on expiry. Had the subsidiary instead used generic one-year contracts “subject to business needs” and kept renewing them, several engineers could have argued that their relationship was indefinite all along.
Common mistakes
- Choosing a fixed term because it seems more flexible, when the role is permanent.
- Using the wrong contract type for the cause (for example, a market-needs contract for a seasonal peak, which has its own type).
- Leaving the objective cause vague or generic.
- Signing renewals after the expiry date, or not at all while the employee keeps working.
- Losing track of the five-year aggregate across different contract types.
- Missing the 15-day filing window.
- Setting a term far longer than the need, which increases the cost of early termination.
Preventive recommendations
- Decide on the contract form only after identifying the business need and its expected duration.
- Keep a file for each fixed-term employee with the contract, filings, renewals and the evidence supporting the objective cause.
- Maintain a calendar of expiry dates and the five-year cap per employee, and review it at least monthly.
- Audit fixed-term contracts periodically; our article on reclassification risk sets out the signals worth checking.
- Revisit the approach when a temporary project turns into a permanent line of business. At that point, indefinite contracts are usually the correct and safer answer.
Our employment contract drafting work includes selecting the contract type, drafting the objective cause and setting up renewal controls. For the general framework on contract forms, see employment contracts in Peru: elements, forms and risk.
Key takeaways
Fixed-term contracts are useful in Peru, but only for genuinely temporary needs that fit a statutory type. The objective cause must be concrete and provable, the contract written and filed, renewals signed on time and the five-year cap respected. Companies that treat fixed terms as a structured exception, rather than a default, keep the flexibility the law allows without building a hidden population of indefinite employees.