Resignation, mutual termination and dismissal in Peru: choosing the right exit

Most employment relationships in Peru do not end in a courtroom. They end with a resignation letter, a signed agreement or the expiry of a contract. Yet the choice between those routes, and the way each is documented, determines whether the file closes cleanly or reopens months later as a claim for severance or reinstatement. For international companies used to termination by notice, the distinctions can look formal. In Peru they carry real legal weight.

This article compares the three main exits (resignation, mutual termination and dismissal), explains when each is appropriate, and sets out how to document a negotiated departure. For the full framework, see our guide to termination of employment in Peru.

The legal menu

Article 16 of the Productivity and Competitiveness Law (the consolidated text of Legislative Decree 728, or LPCL) lists the causes that end employment: death, resignation, completion of the work or service or expiry of a fixed term, mutual agreement, total permanent disability, retirement, dismissal in the cases and form permitted by law, and termination for objective causes. For day-to-day decisions, three of these matter most.

Other routes deserve a brief mention. Contracts subject to a specific term end on their expiry date, provided they have not become indefinite. Employees within the probationary period can be released without cause, subject to prohibited-motive rules; see probationary periods in Peru.

Resignation

A resignation is a unilateral decision of the employee. Under article 18 of the LPCL, the employee must give 30 days’ notice. The employer may waive that period on its own initiative or at the employee’s request. If the employee requests the waiver, the request is deemed accepted unless the employer rejects it in writing by the third day.

The key for employers is that a resignation must be genuinely voluntary. A resignation letter drafted by HR, presented for signature at the end of a meeting about performance, invites the argument that it was not the employee’s decision.

Mutual termination (mutuo disenso)

Article 19 of the LPCL recognizes termination by mutual agreement and requires it to be recorded in writing or in the final settlement of benefits. It is the natural route when the employer wants the relationship to end but has no just cause, for example when a position is eliminated in a reorganization. Our article on unfair dismissal in Peru explains why terminating without cause carries reinstatement risk that a genuine agreement avoids.

What a robust agreement contains

• Identification of the parties and the employee’s position and start date.
• A clear statement that both parties agree to end the relationship on a specific date.
• The exit incentive (if any), described as a voluntary, separate payment.
• Confirmation that statutory benefits will be paid in the final settlement, identified separately.
• The timing and method of payment.
• Return of company property and confidentiality obligations, drafted proportionately.
• Signature by the employee and by an authorized representative of the Peruvian employer.

Exit incentives

The law does not require an incentive, but in practice it is what makes an agreement possible. Many companies use the statutory severance formula (1.5 monthly salaries per year, capped at 12) as a reference point in the negotiation, since it reflects what the employee could claim if dismissed without cause. The incentive should be paid separately from, and in addition to, the final settlement, which is explained in final settlement on termination in Peru.

Illustrative scenario

Used as is, the template creates avoidable risk in Peru. The language suggests a waiver of statutory entitlements, which Peruvian law does not allow. The ten-day window and English-only wording support an argument of pressure or lack of informed consent. And “enhanced severance” mixes the concepts of incentive and statutory benefits.

A Peru-adapted version would be a Spanish-language convenio de mutuo disenso stating the termination date and the incentive as a separate voluntary payment, identifying the statutory benefits to be paid in the settlement, and giving employees reasonable time to consider it and ask questions. Communication should make clear that declining the offer carries no adverse consequence.

Choosing the route: a practical sequence

When a business unit abroad asks the Peruvian subsidiary to “exit” an employee, the local team should work through a short sequence before anyone speaks to the employee:

1. Is there a just cause? If there is documented serious misconduct or a proven capacity issue, a dismissal under the statutory procedure is available. It still requires a notice of charges, a response period and a dismissal letter.
2. Does another objective route apply? A fixed-term contract may be approaching its end date; the employee may still be on probation; the reduction may be large enough to justify a collective termination procedure before the Ministry of Labor and Employment Promotion (MTPE).
3. If none of the above, is a negotiated exit realistic? Most cases without cause end here. The company should define its negotiating range, the timing and who will lead the conversation.
4. What if the employee declines? The company must decide in advance whether it will keep the employee or accept the cost and risk of a dismissal without cause. Improvising at that moment is how pressure-based resignations happen.

Consequences of choosing badly

The consequences of misusing a route are asymmetric. A defective dismissal exposes the company to statutory severance and, in some cases, reinstatement with back pay. A resignation or agreement found to be involuntary is treated as a dismissal, with the same exposure plus the credibility cost of having documented the exit as something it was not. By contrast, a properly documented mutual termination rarely generates litigation, because the employee has consented, has been paid and has received the statutory benefits in full. The additional cost of doing it well (time, drafting, a reasonable incentive) is usually modest compared to the exposure of doing it quickly.

Checklist for a negotiated exit

• Confirm there is no protected condition that makes the exit sensitive (pregnancy, union role, recent complaint, serious illness).
• Define the business reason internally, even though it will not be stated as a dismissal ground.
• Prepare the agreement in Spanish; an English translation can be provided for reference.
• Separate the incentive from statutory benefits in the text and in the payment.
• Allow reasonable time for the employee to consider and seek advice.
• Keep a record of the meetings and of the employee’s questions.
• Coordinate the final settlement and the certificate the employee needs to withdraw CTS (a severance fund deposited twice a year in the employee’s bank account), which must be delivered within 48 hours of termination.
• Ensure the signatory for the employer has authority under the Peruvian entity’s powers.

Common mistakes

• Drafting the resignation letter for the employee.
• Calling a mutual termination a “dismissal with severance” in emails or payroll records, which muddies the characterization.
• Including waivers of statutory rights.
• Paying the incentive but delaying the final settlement.
• Pressing for a same-day signature.

Further procedural pitfalls are covered in mistakes that undermine a dismissal in Peru.

Bottom line

In Peru, the route matters as much as the outcome. Resignations must be the employee’s own decision; dismissals need a just cause and procedure; and mutual terminations, properly documented and freely agreed, provide the most predictable path when neither of the other two fits. Our terminations and exits practice prepares Peru-specific agreements and helps international teams adapt global separation programs to local rules.