Dear clients and friends,
The Labor Reserve Fund of Individual Capitalization Administered by the Private Contributions Regime (RAP) Act was enacted through Decree No. 47-2024, published in the Official Bulletin on May 28th.
This Decree amends the Private Contributions Regime (RAP) Act, making enrollment mandatory regardless of the number of employees hired by an employer, within 60 days of the new Act’s entry into force. Notice to RAP will also be mandatory within 60 days after the hiring or termination of any employee.
The Labor Reserve Fund of Individual Capitalization is formed by employee contributions to guarantee payment of severance or seniority benefits upon termination of a labor relationship. The contributions are equivalent to 4% of the monthly ordinary wage, with a limit of 3 minimum wages at its highest level.
Contributions made by the employer will not be part of taxable net income, and amounts received by employees will not be part of gross income for Income Tax purposes of each party.
When a labor relationship is terminated for any cause, the employee is entitled to receive from RAP the value accrued in their Individual Capitalization Labor Reserve.
Depending on the cause of termination, the amount received may receive different treatment:
i. In case of unjust dismissal: It will be deducted from the severance amount to be received by the employee. If the amount in the Labor Reserve if greater than the one corresponding to severance, the difference must also be granted to the employee.
ii. In case of resignation: 100% of the Labor Reserve will be granted as seniority payment.
a. For employees with over 15 years of seniority: If the amount in Reserve is lower than 35% of that which would correspond as severance, the employer must complete the amount up to said percentage.
iii. In case of death or total/permanent disability for causes different from labor risks: If the employee has seniority of 6 months or more, the employee or their beneficiaries will be entitled to a seniority payment of 100% of the amount in Labor Reserve.
a. If the amount in Reserve is lower than 75% of that which would correspond as severance, the employer must complete the amount up to said percentage.
iv. In case of termination for any cause other than unjust dismissal: The amount in Labor Reserve, and its returns, shall be paid to the employee as seniority payment.
Enrollment to RAP will not be mandatory for employees participating in:
i. The national pensions system for employees and officials of the Executive Branch.
ii. The national social security system for teachers.
iii. The national social security system for army personnel.
iv. The national social security system for employees of the National Autonomous University of Honduras.
v. Diplomatic delegations and international offices accredited in the country, when they have agreements for different treatment of insurance for their personnel.
At Mayora & Mayora, S.C., we respectfully offer our services to assist you in these and any other matters of your interest.
