Peru's Congress has enacted Law No. 32353, a regulation that redefines the legal framework for the formalization, development, and competitiveness of Micro and Small Enterprises (MSE). This law aims to boost the economy and ensure a more favorable environment for this sector by simplifying processes and improving working conditions.

What Defines a Micro and Small Enterprise (MSE)?

The law classifies companies based on their annual sales:

• Micro-enterprise: Up to 150 Tax-Based Units (UIT).
• Small enterprise: Up to 1,700 UIT.

Simplification for Formalization and Access to Labor Justice

Micro-enterprises are not required to be established as a legal entity and can be run directly by their individual owner.

If an owner chooses to form a legal entity, the law facilitates the process and allows monetary contributions to be accredited via a sworn statement. It also establishes a simplified formation and registration procedure for capital that does not exceed 4 UIT.

The formal establishment of MSEs can be done digitally, with the online process expected to be completed in under 48 hours. 

Access to Markets, Financing, and Social Security

• Peru's Development Finance Corporation (COFIDE) is tasked with designing financial products, assessing risk, and channeling resources. Funds are allocated for guarantee and venture capital funds, facilitating access to credit.
• The law authorizes MSEs to transfer their creditor rights to regulated financial institutions in state contracting processes, which helps ensure prompt payment.
• It also promotes MSEs' access to national and international markets through business associations, state purchases, and export promotion.
• The retention of the full performance guarantee is authorized as an alternative in state contracts. 

Improved Labor Conditions for MSE Workers

The law creates a special labor regime for MSE employees, guaranteeing:

1. Minimum wage
2. Eight-hour workday
3. Weekly rest and vacation
4. Protection against unfair dismissal
5. Benefits like Complementary Risk Work Insurance (SCTR), life insurance, collective rights, profit sharing, and Compensation for Time of Service (CTS).
6. A differentiated severance pay for unfair dismissal: Micro-enterprise workers will join a partially subsidized, semi-contributory regime of the Comprehensive Health Insurance. Small enterprise workers will be regularly insured by ESSALUD.
7. A mandatory Social Pension System is established for workers and owners of micro-enterprises under 40. It features gradual contributions and a state recognition bonus.