Most outsourcing arrangements that fail in Peru were not designed to fail. They were set up correctly, often under a carefully negotiated global agreement, and then changed shape over months of ordinary operations. A client manager starts assigning tasks directly because it is faster. The contractor’s supervisor stops coming to site. Contractor staff are added to the client’s internal chat channels, shift rosters and performance reviews. None of these steps looks significant on its own. Together, they can turn an outsourced service into a disguised employment relationship.
Peruvian law calls this desnaturalización (loss of the arrangement’s legal nature), usually rendered in English as recharacterization. For a foreign group, it is one of the less visible sources of employment liability in the country, because it sits in procurement and operations rather than in HR. This article explains how it happens, how it is detected and what it costs. The full framework is set out in our guide to outsourcing and staffing in Peru.
The legal test behind recharacterization
Law 29245 allows outsourcing when the contractor carries out the activity at its own account and risk, with its own financial, technical or material resources, is responsible for results and keeps its workers under its exclusive subordination. The characteristic indicators include plurality of clients, own equipment, capital investment and payment by work or service. These requirements are discussed in outsourcing requirements under Peruvian law.
Legal note
Under article 5 of Law 29245 and its regulations, outsourcing that does not meet these requirements, or that involves the mere provision of personnel, is recharacterized. The displaced workers are deemed to have a direct, indefinite-term employment relationship with the client company, without prejudice to administrative sanctions.
Two further rules reinforce the test. Article 4 of the Productivity and Competitiveness Law (the core statute for private-sector employment, consolidated by Supreme Decree 003-97-TR) presumes an indefinite-term employment contract wherever there is personal, paid and subordinated work. And Law 28806, the General Labor Inspection Law, lists primacy of reality among the principles that guide inspections. Put simply, the question an inspector asks is: who really directs these people?
What changed after the court ruling
Supreme Decree 001-2022-TR had added new recharacterization grounds, alongside its prohibition on outsourcing core activities. The Supreme Court declared the decree null in a popular action, a proceeding used to challenge regulations that exceed the law. According to the official newspaper El Peruano, the nullity is total, so those additional grounds no longer apply and the pre-2022 framework governs again. The status of the ruling, including the date from which it has general effect, should be checked before any restructuring relies on it. What did not change is the statutory core: lack of autonomy and supply of personnel remain grounds for recharacterization.
The warning signs
The indicators below are those that tend to appear in multinational operations. None is conclusive on its own; inspectors weigh them together.
| Warning sign | Why it matters | Where it tends to appear |
|---|---|---|
| Client managers assign daily tasks to named contractor staff | Points to subordination to the client | IT vendors with on-site developers embedded in client squads |
| Contractor staff in the client’s attendance or leave systems | Shows the client controls working time | Facility management and logistics sites |
| No contractor supervisor on site | Removes the contractor’s direction in practice | Long-running, low-margin service contracts |
| Pricing per head or per hour with no deliverable | Suggests the client buys labor, not a service | Global frameworks priced by FTE |
| Contractor uses only client tools, badges, emails and uniforms | Weakens the “own resources” requirement | Shared service centers, help desks |
| Contractor has one client and no assets in Peru | Weakens plurality and capital investment indicators | Local vehicles created to serve one group |
| Client evaluates, rewards or disciplines contractor staff | Direct evidence of employer powers | Performance programs rolled out globally |
Key point
The strongest evidence is rarely in the contract. It is in emails, chat messages, rosters and access logs showing who gave the instructions. That is also what an inspector will ask to see.
How recharacterization is usually detected
Recharacterization typically surfaces in one of three ways. The first is a SUNAFIL inspection. SUNAFIL, Peru’s national labor inspection authority, can open an inspection following a complaint, an internal decision or an order from another authority, and inspectors may enter workplaces without prior notice, request documents and interview workers. Facts recorded in an infringement report are presumed true unless proved otherwise, which places the burden on the company to rebut them.
The second is a lawsuit. A contractor employee who is dismissed, or whose contract ends when the vendor changes, may sue the client, arguing that the real employer was always the client.
The third is a transaction. In due diligence, buyers may review the vendor base of a Peruvian target, and a finding of disguised employment can affect price or require specific indemnities.
Illustrative scenario
Illustrative scenario
Illustrative scenario: a Canadian mining services group contracts a regional IT provider for application support at its Lima office. The agreement defines service levels and a monthly fixed fee. Over three years, the eight on-site engineers become part of the client’s internal teams: they attend the client’s daily stand-ups, receive work directly from the client’s IT manager, request leave through the client’s HR portal and are included in its annual performance review. The provider’s account manager visits twice a year. When the provider’s contract is not renewed and the engineers are let go, two of them file claims against the client. On these facts, a court or inspector could well conclude that the engineers were subordinated to the client, and that their relationship should be treated as direct, indefinite-term employment with it.
What the exposure includes
Recharacterization is expensive because it looks backwards. The items that typically need to be sized are:
- Employment status. Workers deemed direct, indefinite-term employees of the client, with the job protection that status carries under Peruvian law.
- Pay and benefit differences. Any gap between what the contractor paid and what the client pays comparable employees, plus statutory benefits such as CTS (a severance fund deposited twice a year into a bank account in the employee’s name) and gratificaciones (two statutory bonuses paid in July and December).
- Administrative fines. Under Law 28806, fines are capped at 50, 100 and 200 UIT for minor, serious and very serious infringements, with an overall ceiling of 300 UIT for all infringements detected. The UIT is S/ 5,500 in 2026.
- Health and safety. Failing to verify that contractors and intermediaries comply with health and safety rules is classified as a serious infringement under article 27.16 of Supreme Decree 019-2006-TR.
Separately, even without recharacterization, article 9 of Law 29245 makes a client that receives continuously displaced contractor staff jointly liable for their labor and social security entitlements during the displacement and for one year after it ends. A method for turning these items into a figure that finance can provision is described in identifying and sizing employment liabilities.
Watch out
Ending the vendor relationship does not end the exposure. Joint liability survives for a year after the displacement, and claims based on recharacterization look at the whole period during which the workers served the client.
If you already see the warning signs
Where an internal review shows that an arrangement has drifted, a measured response is usually better than an abrupt one. As a professional recommendation:
- Preserve and review the evidence of how the service actually works, including communications between client managers and contractor staff.
- Restore the contractor’s role: an on-site supervisor, contractor-owned rosters and a single client contact for requests.
- Redesign the contract to price deliverables rather than headcount, and to include audit rights over payroll and registrations.
- Assess whether some roles belong in-house. Where the client genuinely needs to direct the work, direct hiring or, in the limited cases allowed, a staffing agency may be the correct model.
- Quantify the historical exposure before deciding whether to regularize, renegotiate or terminate.
Changing how managers behave is often the hardest part. Practical rules for that are in managing outsourced personnel without creating employment, and our outsourcing and staffing advisory supports groups through the review and restructuring.
Common mistakes
- Relying on a “no employment relationship” clause in the global agreement.
- Terminating the contractor abruptly once risk is identified, which can prompt the very claims the company wants to avoid.
- Treating recharacterization as a procurement issue and not informing legal or finance.
- Assuming that the court ruling on the core-business prohibition solved the problem.
Key takeaways
Recharacterization in Peru is driven by facts, not labels. The legal test has been stable for years, and the annulment of Supreme Decree 001-2022-TR has not changed it: contractors must be autonomous, and clients must let them direct their own people. For multinational groups, the risk is concentrated where global operating habits, such as embedded vendor teams or unified performance systems, meet local contractor staff. Periodic reviews of how outsourced services actually run are the most reliable way to keep a compliant structure from quietly becoming an employment relationship.