#Honduras🇭🇳 #BDS_Article: The Importance of Mandatory Registration with the Private Contributions Regime (RAP) for Employers and Companies

On May 28, 2024, the Law on the Individual Capitalization Labor Reserve Fund, administered by the Private Contributions Regime (RAP in Spanish), was enacted and came into effect. This new legislation marks a significant milestone in the regulation of contributions to the labor reserve and housing fund in Honduras, establishing an unavoidable obligation for all companies, without exception, to register and make the corresponding contributions on behalf of their workers.

Mandatory Contributions:

1. Mandatory Labor Reserve Fund: All companies must establish the labor reserve with mandatory employer contributions equivalent to 4% of their workers' monthly ordinary salary. This contribution has a cap of three minimum wages, which amounts to L 50,568.75 for 2024, and may be adjusted at the discretion of the regulatory entity.
   
   
2. Mandatory Housing Fund: This fund is reactivated and formed with combined contributions from both workers (1.5%) and employers (1.5%). Its objective is to improve the quality of life and socio-economic conditions of affiliates through financial services, including housing financing and personal loans at better interest rates than those offered by traditional banks.

Registration Obligation 

All companies whose labor relations are governed by the Honduran Labor Code are required to register with the RAP. This includes companies with fewer than 10 workers and those operating in free trade zones, duty-free zones, or under any special regime, eliminating any possible exceptions.

Moratorium for Compliance 

The Private Contributions Regime has granted a three-month moratorium to allow all employers to register and adjust their systems to the new mandatory contribution requirements. This moratorium is a crucial opportunity for companies to comply with the law and avoid potential future penalties, including fines for non-compliance, considering that the three-month moratorium period ends in August of this year (2024).

Registration with the RAP and compliance with these obligations are not only a legal requirements but also a commitment to the well-being of workers and the country’s economic development. The RAP-managed funds provide a financial safety net and contribute to the growth and stability of the Honduran workforce.

Marielos Acosta

Labor Law Specialist Attorney