El Salvador: Mandatory provision of daycare by larger employers

Employer Action Code: Act

New legislation effective January 2023 will require private-sector companies with 100 or more employees to provide daycare services for the children of employees by mid-2024. The Growing Together Law approved on June 22, 2022, provides a legal framework for daycare centers (Centros de Atención a Primera Infancia – CAPIs), sets employers’ requirements on daycare services, and clarifies and enhances the role of the state in children’s and teenagers’ healthcare and education. The new law repeals and replaces an employer daycare mandate that was approved in 2018 but never implemented due to the COVID-19 pandemic.

Key details

Notable aspects of the Growing Together Law include:

• The mandate will apply to the children of employees between the ages of 45 days and four years. Employers may not limit the number of participating children per employee nor exclude children with a disability.
• Daycare services may be arranged via company-owned CAPIs (for a single employer), joint CAPIs (for multiple employers) or independent CAPIs (i.e., private providers or free public childcare services). Employees opting to use daycare services not provided by their employer will not be entitled to employer reimbursement of expenses.
• Expenses incurred for setting up, maintaining or contracting daycare services will be tax-deductible for employers.
• Though the law on employer-paid daycare services takes effect on January 1, 2023, private companies will have 18 months from that date to establish the benefit (an earlier deadline applies for public companies). Further regulations on the new requirements will be issued by the end of 2022.

Employer implications

The government has been looking to implement mandatory daycare services for almost four years, so the new requirement does not come as a surprise. That said, as companies currently, in general, don’t provide daycare or childcare benefits, the mandate will add to labor costs for affected employers. Employers should start considering how they will comply with the new requirements as well as reviewing their benefit budget planning for 2023/2024.