Payroll and Benefits Guide Puerto Rico

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee Income Tax

General

Puerto Rico’s minimum wage increases to 9.50 USD per hour on July 1, 2023, for all employees covered by the Fair Labor Standards Act.
Exceptions include agricultural workers, all government and municipal employees, judicial and legislative branch employees, as well as administrators, professionals, and executives, as defined by Regulation 13 of the Puerto Rico Minimum Wage Board.

Employees covered by a collective bargaining agreement that provides for higher wages than those set by the law or by decree will also be excepted. Those receiving tips will be entitled to the federal minimum wage that added to their tips, must reach the Puerto Rico minimum wage established by either law or decree.

Payroll Cycle

In Puerto Rico, the payroll frequency is bi-weekly, monthly or semi-monthly. An employer must make the salary payments on the 15th of the month.

13th Salary

In Puerto Rico, 13th-month payments are mandatory. Employers with a workforce in excess of 21 employees must by law pay a 13th-month salary in December equating to 2% of the employees’ wages or not more than 600 USD. Employers with less than 21 employees must pay an additional 2% or no more than 300 USD in December.

General

The standard working week in Puerto Rico consists of 40 hours a week, 8 hours per day.

Overtime

10 overtime hours can be worked in a week (2 hours per day), paid at a rate of 150% salary. Any amount over 2 hours per day is paid at a rate of 200% salary. Exemptions in place for certain workers/industries.

Employees who work more than 10 hours in a particular day must also be permitted to enjoy a second meal period, with certain exceptions.  If an employee is required or permitted to work during the meal period or if the meal period is enjoyed outside this time frame, the employee will be entitled to payment for said period or fraction thereof, at a rate of time and a half.

In cases in which the total hours worked in a day does not exceed six hours, the meal period may be waived.

Working Week

Monday–Friday

Paid Time Off

The annual leave entitlement in Puerto Rico is dependent on the seniority of the employee as follows:

• If an employee has been employed for one year they will be entitled to six days of annual leave
• If an employee has been employed between one and five years, they will be entitled to nine days of annual leave
• If an employee has been employed between five and 15 years, they will be entitled to 12 days of annual leave
• If an employee has been employed for more than 15 years, the employee receives the maximum entitlement of 15 days of annual leave

Public Holidays

Certain public holidays falling on a Sunday are usually moved to the following Monday as a day off in lieu.

Sick Days

Following 12 months of consecutive service at a company, an employee is entitled to six days of paid leave for severe diseases.
Employees receive 12 days of paid sick leave which is accrued at the rate of one day per month following the commencement of at least 130 hours in that month.

Maternity Leave

An employee in Puerto Rico is entitled to a maternity leave of eight weeks, four weeks of which is generally taken before the birth and four weeks after. An employee can start maternity leave as late as one week before their predicted due date and can return just two weeks after the child’s birth provided the employee can present a medical certificate.

Maternity leave can be extended to 20 weeks following a pregnancy-related complication, however, the additional 12 weeks will be unpaid.
Adoptive mothers are entitled to the same maternity benefits as those of a mother who gives birth, providing the adoptive child is below the age of 6.

Paternity Leave

Private sector employees can choose to take six months of job-protected unpaid leave.

Parental Leave

Employers with a workforce of 50 employees or more can provide their employees with 12 weeks of unpaid leave for the birth of a new-born child, the placement of an adoptive/foster child, to care for an immediate family member, or to take medical leave when an employee is unable to work under the U.S. Federal Family and Medical Leave Act (FMLA).

Other Leave

Special paid leave of up to 6 months for an employee with one of the serious diseases of catastrophic character listed by the Special Coverage of the Health Insurance Administration of Puerto Rico.

Termination Process

The termination process varies according to the employment agreement or collective agreement in place and is based on the type of contract and reason for termination. Employers must have just cause to dismiss an employee based on the employee’s conduct or behavior.

Notice Period

In Puerto Rico, notice periods are not mandatory.

Severance Pay

Severance pay is only required if there is termination without just cause at an amount of 12 weeks’ salary + 2 weeks of salary for each full year of service, capped at 36 weeks of pay.

Probation Period

The probation period is only allowed for indefinite contracts and the period is dependent on the employee’s job role. For employees classified as executives, administrators, and professionals, the probation period is 12 months. The probation period for general employees is nine months.

VISA

Foreigners who wish to work in Puerto Rico must comply with Puerto Rico immigration requirements. According to U.S. visa law, citizens of approximately 40 countries worldwide must have an approved ESTA to visit the country for short stays.

The ESTA was introduced in 2009 for all nationalities included in the U.S. visa waiver program. It’s a travel authorization system that allows those who register multiple entries to Puerto Rico, mainland USA, and all incorporated territories of the United States, including the District of Columbia and the U.S. Virgin Islands during its validity.

Once approved, an ESTA for Puerto Rico allows a stay of 90 days within a 180-day period with each entry to U.S. territory and it is valid for a total of 2 years from the date of issue. A Puerto Rico ESTA is usually processed within a few business days and is electronically linked to the traveler’s passport once approved, removing the need to present additional documents upon arrival at U.S. border control.

For a foreigner to visit Puerto Rico for other purposes or more extended periods of stay, visa waiver citizens must apply for a Puerto Rican embassy visa from a U.S. diplomatic government office and obtain a visa that authorizes the chosen employment.

Over 190 nationalities need to apply for a visa from an embassy no matter the intended duration of stay or travel purpose.

General

The standard rate of VAT in Puerto Rico is 11.50%.