Hire in Puerto Rico
Here’s where you get started with human resources best practices and hiring in Puerto Rico.
Puerto Rican Currency
United States Dollar (USD)
The Capital of Puerto Rico
Time Zone in Puerto Rico
Important Facts About the Country of Puerto Rico
Introduction to Puerto Rico
Puerto Rico, officially the Commonwealth of Puerto Rico, is an island in the Caribbean and an unincorporated territory of the United States. It has a population of about 3.2 million people and San Juan, the capital and most populous city, is where most live. From the mid-20th century, the U.S. government and the Puerto Rico Industrial Development Company initiated a series of economic projects to turn Puerto Rico into an industrial, high-income economy.
What to Know about Puerto Rico's Geography
Puerto Rio has an area of 9,104 square kilometers. It is located in the northeast Caribbean Sea, approximately 1,600 km southeast of Miami, Florida, between the Dominican Republic and the U.S. Virgin Islands. It includes the eponymous main island and several smaller islands, such as Mona, Culebra and Vieques.
Climate in Puerto Rico
Puerto Rico has a tropical rainforest climate. Temperatures range from warm to hot all year, with an average temperature of about 29 C in the lowlands and 21 C in the mountains. All year long, trade winds from the east blow across the island. The hurricane season in Puerto Rico lasts from June until November.
The Culture of Puerto Rico
Modern Puerto Rican culture is a unique mix of European, African and, more recently, some North American and many South American influences. Many Cubans and Dominicans have moved to the island in the last few decades. The Spanish gave Puerto Rico the Spanish language, the Catholic religion and most of its cultural values and moral traditions. The US brought the English language, the university system along with some holidays and traditions.
Religions Observed in Puerto Rico
Spanish colonists brought Catholicism to Puerto Rico and, over time, it became the island’s main religion. Protestantism was banned by the Spanish government, but it has come back since the United States took over. This has made Puerto Rico more religiously diverse than in the past. However, Catholicism remains the dominant religion there, with approximately 70% of the population adhering to it.
Languages Spoken in Puerto Rico
Spanish and English are the official languages of the executive branch of government, though Spanish predominates and is spoken by nearly 95% of the population.
Puerto Rican Human Resources at a Glance
Employment Law Protections in Puerto Rico
Puerto Rico is a jurisdiction that, in general, protects employee rights. As an unincorporated territory of the US, Puerto Rico is subject to US federal laws, including those pertaining to work and employment.
In addition to the Puerto Rico Constitution, the employment relationship is also governed by a number of laws, rules and court decisions, such as the following:
- Law No. 80 of 30 May 1976 (the Unjust Dismissal Act)
- Various anti-discrimination and anti-retaliation provisions
- Extensive wage and working hours laws and regulations
- Statutory leaves of absence;
- A workers’ accident compensation statutory scheme
The Labor Transformation and Flexibility Act (Law No. 4) of January 26, 2017 brought significant changes and more flexibility to Puerto Rico’s job market. Law No. 4 was the island’s first major labor law change in decades.
Any Puerto Rico employment law or regulation similar to a US law or regulation must be interpreted the same way, unless Puerto Rico law specifies a different interpretation.
Employment Contracts in Puerto Rico
In Puerto Rico, a written employment contract is not required for establishing an employer-employee relationship. It is acceptable to have a verbal agreement, unless a special law provides otherwise.
However, it is always advisable to sign a written employment agreement that states the terms and conditions of the job, such as the base salary, benefits, responsibilities and job expectations. The employment contract can be written in any language as long as it is understood by the employee. If an employee signs an employment contract, it is assumed the employee understands the language.
Even though the 2017 Labor Reform gave more freedom and made it less critical to have written employment agreements, some obligations can still only be legally set through the written format. For example, some restrictive covenant agreements, like non-compete clauses and other restrictions, must be concluded in writing.
Exempt and non-exempt employees
Regulation No. 13 of the Puerto Rico Minimum Wage Board defines the administrative, executive and professional exemptions to overtime requirements. This mirrors the current regulations under the US Fair Labor Standards Act (FLSA). Regulation No. 13 also recognizes the outside sales exemption and that certain computer professions may qualify for the professional exemption and all exemptions under the FLSA.
Puerto Rico's Fixed Term Contract
In Puerto Rico, employees can be hired on indefinite or definite terms. Act 80 defines the “temporary employment contract” and the “term employment contract.” If valid, these contracts for fixed periods form an exception to the “just cause” requirement of the Unjust Dismissal Act. Though a written contract is not required it remains advisable.
A temporary employment contract is required if the engagement is to perform a specific project, a certain work, to replace an employee during a leave of absence, or to carry out extraordinary or short-term tasks.
A term employment contract is required if the engagement is to be for a fixed term. The contract must expressly state the purpose of the temporary contract and the duration of the employment period.
There are specific limits on the maximum duration of term contracts. A term employment contract will now be presumed valid and bona fide if it is for a term not exceeding three years in its initial term or in the aggregate of its renewals. Although the contract can be renewed, if the practice, circumstances and frequency of the renovations are of such that they tend to indicate the creation of an expectation of indefinite continuity of employment, it will be understood that employment is established without a defined term.
Exempt and Non-Exempt Employees
Regulation No. 13 of the Puerto Rico Minimum Wage Board defines the administrative, executive and professional exemptions to overtime requirements, as long as employees make at least $455 USD weekly. This mirrors the current regulations under the US Fair Labor Standards Act (FLSA). Regulation No. 13 also recognizes the outside sales exemption and that certain computer professions may qualify for the professional exemption and all exemptions under the FLSA.
Puerto Rico's Guidelines Regarding Probation Period
The probationary employment period will be set for an automatic term of 9 months for non-exempt employees or 12 months for exempt employees. During this period, employment can be terminated at-will with no notice required. After this period, employees are protected from unjust termination by Act 80.
Regulations and Rules Regarding Working Hours in Puerto Rico
In Puerto Rico, the average working day is eight hours long and the workweek is 40 hours long.
An employer and employee can agree in writing to set up an alternate work week in which the employee works ten regular hours over four days each week without the employer having to pay daily overtime. The four days do not need to be consecutive. However, if an employee works more than ten hours per day under the alternate working week schedule, the employee is owed overtime. Agreements about alternate work weeks must be voluntary and made in writing.
There are specific rules about meal breaks in Puerto Rico. Non-exempt employees must be given a set meal break of at least one hour. By written agreement, a shorter break of at least 30 minutes is possible for certain professions (e.g., nurses, security guards and croupiers). The meal break must happen between the third and sixth hours of work. The employer and employee can agree in writing that the meal break will come after the second hour of work.
Employees who work less than six hours a day can no longer skip their meal breaks. Those who work more than ten hours have a right to a second meal break. If the total hours worked do not add up to more than 12 hours, the second meal break can be disregarded as long as the worker agrees in writing and has his or her meal during the first break.
Puerto Rican Laws Regarding Overtime
Employees who are not exempt from overtime pay and work beyond 40 hours per week or 8 hours on a given day, must receive payment for their overtime hours. Alternatively, the employer can choose to establish a 24-hour cycle other than a traditional calendar day, as long as it meets specific requirements. Overtime also applies on the seventh consecutive day of work, regardless of the day of the week or of how many hours of work were completed on the previous six days.
Employees who work overtime are paid 1.5 times their regular rate. Employees cannot contractually waive the right to overtime pay.
Record Keeping & Timesheets
Timesheets are required to be kept for non-exempt employees, which include identifying information about the employee, hours worked, wages earned, etc.
Pre Employment Checks
The Puerto Rico Equal Pay Act prohibits employers covered under the Act from asking a job applicant or the applicant’s current or former employer about the applicant’s current or past compensation rate. This restriction is subject to the following exceptions:
- If a job applicant voluntarily discloses their current or past wages, the potential employer may confirm or allow the applicant to confirm the information.
- The potential employer may inquire into or confirm an applicant’s current or past wages if it negotiated the compensation rate with and offered employment to the applicant.
Employers in Puerto Rico can perform background checks (including criminal and credit checks) on job applicants. This must be done in line with federal regulations, including the Fair Credit Reporting Act, and recent guidance from the Equal Employment Opportunity Commission concerning the potential disparate impact of background checks.
Rules Regarding Bonus and 13th Month Pay in Puerto Rico
Employers with over 20 employees must provide employees who worked at least 1,350 hours from October 1 to September 30 of the following year a bonus equivalent to 2% of their annual salary, capped at $600.
Employers with fewer than 20 employees for the same 12-month period must provide employees who worked at least 1,350 hours within that period a bonus equivalent to 2% of the annual salary, capped at $300.
During the first year of employment, the required bonus payment is 50% of the above amount.
The total amount of the bonus must not exceed 15% of the annual net profit of the employer. The bonus is to be paid typically between November 15 and December 15 of each year.
Puerto Rico law requires that employers have “just cause” to terminate the employment of an employee hired for an indefinite period of time after the probation period. If it is determined that there is no just cause, the discharged employee is entitled to a statutory severance under Act 80 known as the mesada. “Just cause” refers to those reasons affecting the good and normal operations of the employer, including improper conduct on the employee’s part and the following “business necessity” reasons:
- Full, temporary or partial closing of the operations of the employer;
- Technological or reorganization changes;
- Layoffs are made necessary by anticipated reduction in production, sales or profits or with the purpose of increasing competitiveness.
If an employer decides to terminate an employee based on any of the three aforementioned reasons, they must retain employees who have higher seniority, unless there is clear evidence that comparable employees are more competent.
All employment terminations are assumed unjust and termination is discriminatory if there is no just cause. The employer has the burden of proving that dismissal was fair according to the standard set by the Puerto Rico Unjust Dismissal Act and that the job was terminated for legitimate business reasons that did not involve discrimination. In addition, under the Act, employees have one year to file a lawsuit for wage, vacation and sick leave claims or a breach of an employment contract.
Puerto Rico's Requirements Regarding Notice Periods
The US Worker Adjustment and Retraining Notification Act (WARN) applied in Puerto Rico requires written notice at least 60 days before a plant closing or mass layoff to affected workers or their representatives. For other termination scenarios on the employer’s part, there is no formal “notice period” requirement.
Under WARN, pay in lieu of notice may be provided in certain circumstances. Puerto Rico does not have a local WARN statute.
Severance Pay in Puerto Rico
The statutory severance is three months of salary plus two weeks for each completed year of service. This is capped at nine months.
For calculating statutory severance, if there was an interruption in service of more than two years, prior tenure does not count.
Severance payments are free of income tax up to the statutory severance amount. Excess is subject to taxation.
For a non-compete clause to be enforceable in Puerto Rico, it must meet the following general requirements:
- It must be in writing and voluntary.
- The duration of the covenant should not exceed one year.
- Adequate consideration is required. Continuing to work is not enough of a reason for an employee to agree to the restriction. Instead, the employee must get something else in return for agreeing to the new condition.
- The restriction must be clearly necessary to protect the legitimate interests of the employer.
- The geographic area must be specified and limited to those needed to prevent true competition between the employer and the employee.
- Any client limitations must be specified and should be limited to those previously serviced by the employee.
The Constitution of Puerto Rico guarantees the right to privacy for all individuals, including employees of private companies. This means employers are required to maintain the confidentiality of employee files, as stated in Articles 1, 8 and 16 of the Constitution.
However, when it comes to the obligation to provide notice, US federal law is applicable. For instance, before implementing an employee surveillance program, employers are required to provide prior notice to their employees.
Tax and Social Security Information for Employers in Puerto Rico
Employers in Puerto Rico are responsible for withholding contributions to the following from employees’ wages:
- Income tax
- Taxes under US FICA, or Federal Insurance Contributions Act (i.e., Social Security and Medicare taxes)
- US FUTA (Federal Unemployment Tax Act)
- State Unemployment tax (SUTA)
- Non-Occupational Disability tax
- Puerto Rico’s chauffeurs’ social security and workers’ compensation funds
Severance payments are subject to Medicare and Social Security deductions, not US federal or local income taxes.
Personal Income Tax in Puerto Rico
Puerto Rican residents are taxed in Puerto Rico on their worldwide income, no matter where the income is sourced. Puerto Rican non-residents are only taxed in Puerto Rico on their Puerto Rico-sourced income.
The following are the current regular tax rates:
|Net taxable income||Tax|
|Not over 9,000||0%|
|Over 9,000, but not over 25,000||7% of the excess over 9,000|
|Over 25,000, but not over 41,500||1,120 + 14% of the excess over 25,000|
|Over 41,500, but not over 61,500||3,430 + 25% of the excess over 41,500|
|Over 61,500||8,430 + 33% of the excess over 61,500|
Social Security in Puerto Rico
Puerto Rico is included in the US social security system, which means employers on the island must comply with the obligations set forth in various federal laws. This includes fulfilling duties under the Federal Insurance Contributions Act (FICA), which includes Social Security and Medicare taxes, as well as the Federal Unemployment Tax Act (FUTA), chauffeurs’ insurance and the disability insurance program.
|Type||Employee Contribution (%)||Employee Contribution (%)||Salary Cap (USD)|
|FICA – OASDI||6.2||6.2||160,200 (annual)|
|Federal Unemployment Tax Act (FUTA)*||0||0.6 – 6||NA|
*All persons who employ at least one individual during any 20-week period or pay USD 1,500 or more in salaries during any trimester of the calendar year are subject to the FUTA tax. The employer is solely responsible for the payment of the tax. The rate is 6.0% on the first USD 7,000 of total wages paid during the calendar year to each employee. However, a credit of 5.4% is granted for the Puerto Rico unemployment tax paid. Therefore, the effective tax rate is 0.6% (6.0% less 5.4%).
Every employer having one or more drivers is subject to the Chauffeurs’ insurance. It also applies to an employer whose employees are usually or regularly required or allowed to operate a motor vehicle as an inherent part of their work. The tax is imposed on both the employer and the employee as follows:
- Every employer must pay USD 0.30 per week or a fraction thereof for each covered employee.
- Every employee must pay USD 0.50 per week or a fraction thereof.
Additional Medicare Tax applies to an individual’s Medicare wages that exceed a threshold amount based on the taxpayer’s filing status. Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual’s wages paid in excess of $200,000 in a calendar year without regard to filing status. An employer must begin withholding Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee and continues to withhold it each pay period until the end of the calendar year. There’s no employer match for Additional Medicare Tax.
The SUTA rates in Puerto Rico range from 1.0-5.4% of gross salary. There is no withholding from employee salary and this is paid by the employer only. The additional SUTA (also paid by the employer) is equal to 1% of the wages, subject to unemployment tax. The Department of Labor has the discretion to increase or decrease taxes for that year.
*The above rates serve as a broad guideline. Actual rates charged will differ.
Important Information for Puerto Rican Employees
Employees in Puerto Rico receive their pay on a weekly, bi-weekly or semi-monthly basis. The standard payday for employees is either the 15th or 30th of the month (or the last day of the month – whichever of the two comes first).
Employees have the right to choose their preferred payment method. The primary methods of payment of salaries in Puerto Rico include:
- Direct deposit
- Electronic transfer of funds
- Payment to a payroll card
There are no requirements for payslips in Puerto Rico, but it is recommended employers issue a statement of wages (often known as a pay stub) on or before the day of the related salary payment.
Timesheets & Record Keeping
There are no requirements for timesheets in Puerto Rico but it is recommended employers keep certain records for each non-exempt employee. This includes identifying information about the employee,, hours worked, wages earned, etc.
In Puerto Rico, the total working hours required to accrue vacation leave are 130 hours a month. Annual leave can only be taken after one year of employment, and vacation benefits are not accrued during the first six months of employment; however, once an employee completes six months of employment, they will accrue vacation leave retroactively to the first day of employment. The minimum monthly accrual is as follows:
- 0.5 days during the first year of employment
- 0.75 days after the first year of employment through the fifth year of employment
- 1 day after the fifth year of employment until completing 15 years of employment
- 1.25 days after the 15th year of service
For Puerto Rico resident employers with 12 employees or fewer, the minimum monthly accrual for annual leave is 0.5 days per month.
Puerto Rico observes all official U.S. holidays as well as a number of local holidays. On those holidays, every government office must close and many firms also choose to shut down. Seventeen public holidays are observed in Puerto Rico.
Sick leave is accrued from the beginning of employment, and the accrual rate is as follows:
- The monthly accrual rate for paid sick leave is 1 day if the employee works at least 130 hours a month.
- The monthly accrual rate for paid sick leave is 0.5 day if the employee works at least 20 hours per week and fewer than 130 hours a month.
Additionally, employees who have been employed for over one year with certain severe illnesses (e.g. AIDS, tuberculosis, and chronic kidney diseases) are entitled to a special paid sick leave of 6 days annually.
Pregnant employees are entitled to eight weeks of paid maternity leave, four weeks before childbirth and four weeks after. Maternity leave benefits must be paid in full when the employee begins her prenatal leave.
In computing maternity leave pay, the average salary the employee receives during the six months immediately preceding the start of leave is used as the basis for payment.
Nursing mothers are entitled to lactation breaks for one hour each day. This period can be broken into two 30-minute periods or three 20-minute periods.
Female employees who adopt children aged 5 or younger who are not enrolled in school are entitled to a five-week paid leave.
The leave for adopting mothers starts when she receive the child at home. To claim the leave, the employee must notify her employer about her intention of adopting a child at least 30 days before taking the leave, assert her intention of returning to work after using the adoption leave, and provide evidence of the adoption procedure. Employees receive their full salary from the employer during the leave.
Employees can take up to 15 days of unpaid leave per year for instances of gender or domestic violence, abuse of minors, sexual harassment in employment, sexual assault, lewd acts or aggravated stalking. This special leave also extends to family members and allows employees to request reasonable accommodations or flexible work conditions to address these situations.
Employees affiliated with the Armed Forces of the United States, the National Guard, the Commission of the United States Public Health Services and other groups specified by the President of the United States can take unpaid leave during a time of war or emergency when called to serve, whether voluntarily or involuntarily.
Benefits to the Employee in Puerto Rico
Puerto Rican Statutory Benefits
Statutory benefits include, among others, vacation time, paid leaves of absence (e.g., sick leave and maternity leave), compensation for medical and disability expenses resulting from traffic accidents and an annual bonus.
Further, employers are legally required to provide social security and Medicare, insurance against unemployment and disability, etc.
Employers have the authority to determine other job benefits offered to employees, such as paid vacation days, commercial health insurance, education assistance, wellness programs, childcare assistance and other similar perks.
Rules Regarding Visas and Foreign Workers in Puerto Rico
Puerto Rico is governed by US federal immigration laws when it comes to employing foreign workers, so there is no separate visa specifically for Puerto Rico. Generally, there are two ways for an individual to work in the US, either as a temporary employee (requiring a US non-immigrant visa) or as a sponsored/permanent employee (requiring an Immigrant Visa).
Nationals eligible for the US Visa Waiver Program do not need to apply for a visa to travel to the US or Puerto Rico. However, they are required to obtain Electronic Authorization (ESTA) if they arrive by air or sea. They can stay for up to 90 days in the US or Puerto Rico.
For US citizens, traveling to and working in Puerto Rico is similar to traveling or working in any other state. A valid driver’s license is sufficient documentation for US citizens to travel to and work in Puerto Rico.
Public Holidays Recognized by Puerto Rico in 2023
|1||New Year’s Day||01.Jan.2023|
|3||Martin Luther King Jr. Birthday||16.Jan.2023|
|13||Day of the Race||09.Oct.2023|
Note: Puerto Rico recognizes all U.S. federal holidays.