CTS stands for Compensación por Tiempo de Servicios, translating to "Compensation for Time of Service." It is a unique Peruvian employment benefit that functions as a forced savings program, designed to provide workers with a financial cushion when their employment ends.
How CTS Works
Employers must deposit CTS into a bank account chosen by the employee twice per year: by May 15 (covering November to April) and by November 15 (covering May to October). Each deposit equals roughly one-twelfth of the employee's monthly compensation for each month worked, plus one-sixth of the most recent gratificación.
Withdrawal Rules
Employees can withdraw CTS funds that exceed four monthly gross salaries while still employed. The full balance becomes available upon termination of employment. CTS deposits earn interest in the employee's bank account, and employees can choose to hold the funds in local currency (soles) or US dollars.
EOR Relevance
An EOR in Peru handles CTS calculations and ensures deposits are made to each employee's designated bank account by the legal deadlines. Late CTS deposits result in automatic interest penalties, making timely compliance essential.