TLDR
Honduras payroll requires paying employees in lempiras (HNL) on legally mandated schedules, withholding income tax (ISR) across progressive brackets, contributing to social security (IHSS) up to a ceiling of L 11,903.13, funding two distinct RAP obligations created by the 2024 reform, and paying the INFOP training levy. Employers must also issue mandatory 13th and 14th month salaries, which are only tax-exempt up to a cap that most competitor guides get wrong. This guide covers every calculation, deadline, and pitfall grounded in primary Honduran law and 2024 through 2026 updates.
What Honduras Payroll Means in Practice
Honduras payroll is the process of calculating and disbursing wages in lempiras, withholding employee income tax (ISR) and social security contributions (IHSS), funding employer-side obligations to IHSS, RAP, and INFOP, and issuing the mandatory 13th salary in December and 14th salary by June 30. Every element, from pay frequency to contribution ceilings, is governed by the Honduran Labor Code and a series of decrees updated as recently as 2024.
Getting this wrong carries real consequences. If employer contributions fall behind, employees can lose access to healthcare. If the 13th/14th month tax exemptions are miscalculated, the company faces SAR (tax authority) penalties. And the 2024 RAP reform introduced entirely new funding flows that many payroll vendors haven’t caught up with yet.
For companies exploring nearshore outsourcing and its tradeoffs, understanding Honduras payroll complexity is essential before making a hiring commitment.
How Honduras Payroll Is Calculated
Running payroll in Honduras follows a specific order: determine gross pay, apply IHSS withholdings up to the ceiling, calculate RAP contributions (two separate flows), add the INFOP levy on the employer side, and compute ISR withholding on the remaining taxable income. Here is each piece.
Income Tax (ISR): 2026 Brackets
Employers withhold ISR from every payroll run based on annualized salary estimates. The 2026 progressive brackets, last reviewed by PwC on February 27, 2026, are:
| Annual Income (HNL) | Rate |
|---|---|
| Up to L 228,324.32 | 0% (exempt) |
| L 228,324.33 to L 348,154.10 | 15% |
| L 348,154.11 to L 809,660.75 | 20% |
| Above L 809,660.75 | 25% |
These thresholds are adjusted annually for inflation under SAR rules tied to the consumer price index. Monthly withholding is calculated by projecting the annual liability and dividing by the number of remaining pay periods, then adjusting each month as actual earnings accrue.
A critical detail most vendor guides miss: the 13th and 14th month salaries are exempt from ISR only up to ten times the average minimum wage. Any amount above that cap is taxable under the ISR Law, Article 10. Payroll teams that treat these bonuses as fully exempt will under-withhold and create year-end problems.
For broader context on how cross-border tax obligations work in Latin America, the Mismo guide to remote employee taxes covers adjacent scenarios.
IHSS (Social Security): 2025 Rates and Ceiling
Law 48-2024 (Decree published May 28, 2024) restructured IHSS contributions and set a new ceiling. For 2025, the IHSS ceiling for both IVM (disability, old age, death) and EM (illness, maternity) regimes is L 11,903.13 per month.
Contribution rates applied up to that ceiling:
| Regime | Employer | Employee |
|---|---|---|
| IVM (Invalidez, Vejez, Muerte) | 3.5% | 2.5% |
| EM (Enfermedad, Maternidad) | 5.0% | 2.5% |
| Total | 8.5% | 5.0% |
An additional occupational risk (Riesgos Profesionales) contribution of approximately 0.2% falls on the employer, though the exact rate varies by industry risk classification. Confirm your company’s classification directly with IHSS.
The 2026 ceiling may change based on IHSS board decisions. Check every January.
RAP: Two Separate Obligations Since 2024
This is the single biggest area where competitor payroll pages are outdated or flat-out wrong. Decree 47-2024 split RAP obligations into two distinct flows starting June 1, 2024:
1. Reserve Labor Fund (Fondo de Reserva Laboral), 4% employer-only:
The employer deposits 4% of the employee’s ordinary monthly salary into an individual Reserve Labor Fund managed by RAP. This fund covers (and complements) severance and seniority payments at termination. It is capped at three times the highest minimum wage level. This is not deducted from the employee’s pay.
2. RAP Savings Above the IHSS Ceiling, 1.5% + 1.5%:
For the portion of ordinary monthly salary that exceeds the IHSS IVM ceiling (L 11,903.13 in 2025), the employer withholds 1.5% from the employee and adds a matching 1.5% from its own funds. These go to RAP as individual savings.
These are two completely separate line items. Many vendor country pages still show a single “RAP” percentage or conflate it with IHSS. If your payroll system only has one RAP field, it needs updating.
Practitioners on Reddit report confusion among employees about what happens to the 4% Reserve at exit. One thread noted that workers often expect immediate full access to the Reserve fund upon termination, but the withdrawal rules and timing differ from the old severance norms. HR teams should clarify payout paths and timelines in offer letters and offboarding checklists.
INFOP Training Levy: 1% Employer
Companies with five or more workers must pay 1% of total monthly wages to INFOP, the national vocational training institute. This cannot be deducted from employees. Payment is due within ten business days after month-end.
Payroll Math at a Glance
For quick reference, here is who pays what in Honduras payroll:
Employee deductions:
- IHSS: 5% on salary up to L 11,903.13
- RAP savings: 1.5% on salary above L 11,903.13
- ISR: per 2026 bracket table (annualized, then monthly)
Employer costs (on top of gross salary):
- IHSS: 8.5% on salary up to L 11,903.13 (plus ~0.2% occupational risk)
- RAP Reserve: 4% on ordinary salary (up to 3x highest minimum wage cap)
- RAP savings match: 1.5% on salary above L 11,903.13
- INFOP: 1% on total wages (if 5+ employees)
- 13th salary accrual (December) and 14th salary accrual (June)
Dates, Pay Periods, and Currency
Pay Frequency Rules
Many payroll vendor pages state that Honduras payroll runs monthly. That is only half right. The Labor Code, Article 368, sets maximum pay intervals by job type:
- Manual workers: paid at most weekly
- Intellectual/office workers and domestic workers: paid at most monthly
This distinction matters for overtime accrual calculations, attendance tracking, and cutoff policies. A tech company paying software engineers monthly is compliant. A manufacturing firm paying line workers monthly is not.
All wages must be paid in lempiras (HNL), the country’s legal tender. Companies can index contracts to foreign currency exchange rates through the Central Bank (BCH), but the actual payment must settle in lempiras.
For companies building nearshore development partnerships across multiple LATAM countries, these per-country currency and frequency rules need to be mapped before the first payroll run.
13th and 14th Salary Deadlines
- 13th month (Aguinaldo): paid in December. The statutory reference is flexible on exact date by agreement, but December is the legal default per Decree 112.
- 14th month: paid by June 30.
Both are proportional if the employee hasn’t worked the full accrual period. And both are ISR-exempt only up to ten times the average minimum wage. Amounts above that threshold are taxed at the employee’s marginal ISR rate.
Accrue these monthly. Companies that don’t set aside reserves face a cash crunch in December and June, especially with larger teams.
Minimum Wage: 2026 Status
As of early 2026, EY reports that the government has not yet defined a new general minimum wage increase for most sectors. The 2025 minimums established under Executive Agreement SETRASS-109-2024 (published March 21, 2024) remain in effect. This matters because several payroll caps and exemption thresholds are indexed to minimum wage levels.
Understanding the tech talent trends shaping Latin America can help companies benchmark compensation well above these floors while staying compliant with the legal structure.
Overtime, Night, and Holiday Premiums
These premiums feed directly into Honduras payroll calculations:
- Overtime: 50% premium on the regular hourly rate
- Night work (between certain hours): 20% premium
- Overtime at night: both premiums stack
- Work on paid holidays: double the daily rate, proportional to time worked (Article 340)
For monthly-salaried office staff, non-worked holidays are already embedded in their pay. But if they work the holiday, the double-rate calculation still applies.
Example Calculation: L 50,000 Monthly Salary
Here is a worked example for a Honduras payroll run on a monthly office employee earning L 50,000. This uses the 2025 IHSS ceiling and 2026 ISR brackets.
Employee Deductions
IHSS (5% on salary capped at L 11,903.13):
0.05 × 11,903.13 = L 595.16
RAP savings (1.5% on salary above the IHSS IVM ceiling):
0.015 × (50,000 − 11,903.13) = L 571.45
ISR (monthly withholding estimate):
Annual gross = L 600,000. After subtracting annual IHSS/RAP deductions and applying the exempt band (L 228,324.32), the taxable portion falls across the 15% and 20% brackets. The monthly withholding would be approximately L 4,500 to L 5,000 depending on 13th/14th accrual treatment. (Use the PwC bracket table and your payroll engine for precision.)
Total approximate employee deductions: ~L 5,667 to L 6,167
Employer Costs (On Top of Gross Salary)
IHSS employer (8.5% on ceiling):
0.085 × 11,903.13 = L 1,011.77
RAP Reserve Labor Fund (4% on ordinary salary):
0.04 × 50,000 = L 2,000 (confirm this falls within the cap of 3x highest minimum wage)
RAP employer savings match (1.5% above IVM ceiling):
0.015 × (50,000 − 11,903.13) = L 571.45
INFOP (1%, assuming 5+ employees):
0.01 × 50,000 = L 500
Total employer cost above gross: approximately L 4,083 per month, plus 13th/14th accruals of roughly L 8,333/month (two extra months divided across twelve).
This means the true monthly cost of a L 50,000 employee is closer to L 62,400 when you include all mandatory employer contributions and bonus accruals.
13th/14th ISR Exemption Example
Suppose the employee’s 13th month payment equals L 50,000. If ten times the average minimum wage equals roughly L 130,000 (hypothetical, varies by sector blend), the full L 50,000 is exempt. But for a highly paid executive receiving L 200,000 as their 13th month, only L 130,000 would be exempt and the remaining L 70,000 would be taxed at their marginal ISR rate per the ISR Law.
What Changed Since 2024
Three reforms reshaped Honduras payroll between 2024 and 2026:
-
RAP Reserve Labor Fund (Decree 47-2024, effective June 1, 2024): Created the 4% employer-only Reserve and the separate 1.5%+1.5% savings above the IHSS ceiling. This replaced the prior single-flow approach and directly affects severance calculation at termination.
-
IHSS ceiling update (Law 48-2024, published May 28, 2024): Set the 2025 ceiling at L 11,903.13 for both IVM and EM regimes. The previous ceiling was lower, so payroll systems needed reconfiguration.
-
ISR bracket inflation adjustments: The 2026 brackets shifted upward from 2025 levels, reflecting SAR’s annual CPI-based adjustment. Payroll engines that aren’t updated annually will over-withhold from lower earners and under-withhold from higher earners.
If your payroll provider hasn’t updated for these changes, that is a red flag.
Common Pitfalls and Practitioner Insights
IHSS Planilla Timeliness
Practitioners on Reddit flag a painful real-world consequence of late IHSS filings: employees can be blocked from accessing healthcare until planillas show as paid. This goes beyond a fine. It means a worker who needs medical attention could be turned away because their employer didn’t submit on time. Build internal controls to verify monthly postings, not just payments.
Dual Employment and Double Deductions
Workers in Honduras who hold two jobs will have IHSS contributions from both employers. There is no netting or offset. Practitioners report that employees sometimes interpret the second set of deductions as an error. Proactively communicate to staff that concurrent deductions are legally correct, and reconcile year-end certificates accordingly.
RAP Withdrawal Expectations
The 4% Reserve Labor Fund is employer money set aside for the employee’s benefit at termination. But it does not work like a savings account the employee can tap at will. Confusion around withdrawal timing and conditions is common, and HR teams that don’t set expectations early will face frustrated departing employees. Include clear language about RAP Reserve mechanics in offer letters and exit documentation.
Part-Time Contracts Still Require Full Registration
Local HR consultants on LinkedIn warn that part-time employment contracts still require IHSS, RAP, and INFOP registration. There is no exemption for reduced hours. Companies that treat part-time workers as casual labor risk compliance violations.
Pay Frequency Misclassification
Several top-ranking pages for “Honduras payroll” state that payroll runs monthly, period. This is wrong. If you have manual workers on a monthly cycle, you are violating Article 368 of the Labor Code. Audit your workforce classification and align pay frequency accordingly.
Quick Compliance Checklist
Before Your First Honduras Payroll Run
- Register the company and every employee with IHSS. Confirm employer and employee rate tiers and the current ceiling.
- Enroll with RAP. Set up both the 4% Reserve Labor Fund flow and the 1.5%+1.5% over-ceiling savings flow as separate line items.
- Register with INFOP if you have five or more employees. Calendar the monthly 1% payment (due within ten business days after month-end).
- Load the current ISR brackets into your payroll system. Verify that the engine handles the 13th and 14th month ISR exemption cap correctly.
- Classify all roles as manual or intellectual/office to determine correct pay frequency.
Every Monthly Run
- Pay in lempiras. No exceptions.
- Apply correct frequency caps: weekly for manual workers, monthly maximum for office roles.
- Accrue 13th and 14th month salaries to avoid December and June cash crunches.
- Verify IHSS planilla submission and payment confirmation.
- Reconcile RAP deposits (both flows) against the monthly payroll register.
Key Annual and Semi-Annual Deadlines
- June 30: 14th month salary due.
- December: 13th month salary (Aguinaldo) due.
- January each year: Check for IHSS ceiling updates, new ISR brackets, and minimum wage changes.
- April 30: Annual ISR filing deadline for individuals (relevant for reconciling employer withholding accuracy).
For companies building engineering teams across Latin America, having a guide to hiring offshore talent that covers these country-specific requirements is the difference between smooth operations and compliance fire drills.
Frequently Asked Questions
Can I pay Honduras employees in USD?
No. The Labor Code requires wages to be paid in lempiras (HNL), Honduras’s legal tender. You can structure employment contracts with a USD-indexed reference and convert at the Central Bank (BCH) exchange rate each pay period, but the actual disbursement must be in lempiras.
Do independent contractors require IHSS, RAP, and INFOP registration?
Not if they are genuinely independent. These obligations apply to employees. However, misclassification risk is real in Honduras, as it is throughout Latin America. If a contractor works fixed hours, uses company equipment, reports to a manager, and has no other clients, Honduran labor courts can reclassify the relationship as employment, triggering retroactive contributions and penalties. Get local legal counsel before relying on contractor arrangements.
Is the 13th month salary fully exempt from income tax?
No, and this is one of the most common Honduras payroll errors. The 13th and 14th month salaries are exempt from ISR only up to ten times the average minimum wage. Any amount above that cap is taxable at the employee’s marginal rate. Payroll teams must calculate this threshold each year based on current minimum wage figures and apply it correctly in December and June.
What happens if my company is late filing IHSS contributions?
Beyond fines from IHSS, late filings can result in employees being denied access to medical care until the planilla shows as current. This creates both a legal liability and a serious employee relations problem. Treat IHSS filing deadlines with the same urgency as payroll itself.
How does the new 4% RAP Reserve differ from the old severance system?
Under Decree 47-2024, the 4% Reserve Labor Fund is deposited monthly by the employer into individual accounts at RAP. At termination, these accumulated funds cover (or complement) the severance and seniority payments the employer would otherwise owe. It is not a replacement for severance rights, but a funding mechanism. The withdrawal conditions and timing differ from what employees may expect based on prior norms, so clear communication during onboarding and offboarding is essential.
Does Honduras payroll apply differently to part-time employees?
The contribution obligations (IHSS, RAP, INFOP) still apply to part-time employees. Local advisors have emphasized that reduced hours do not exempt employers from registering workers and making the required contributions. The amounts will be proportional to wages, but the registration and filing requirements are identical.
Will the IHSS ceiling change in 2026?
Possibly. The 2025 ceiling of L 11,903.13 was set under the Law 48-2024 framework, and adjustments are subject to IHSS board decisions. Check for updates each January. Running Honduras payroll with an outdated ceiling means either over-deducting from employees or under-contributing as an employer, both of which create compliance exposure.
Managing Honduras payroll correctly requires tracking multiple agencies, two distinct RAP flows, annually shifting ISR brackets, and IHSS ceilings that can change with board decisions. For companies that want to hire engineers in Honduras or elsewhere in Latin America without absorbing that compliance burden directly, Mismo handles end-to-end payroll, benefits, and compliance through local entities. See how that works in practice through the Revinate case study, or explore building a nearshore development partnership to get started.
