Employer of record in Puerto Rico
We make it easy and painless to expand your business into Puerto Rico. Forget about dealing with local regulations, confusing tax laws and international payroll management. We take care of all that so you don't have to.
Accelerate your growth into Puerto Rico compliantly and hassle-free
How we can help you expand in Puerto Rico
As your EOR in Puerto Rico we’d help you expand by hiring employees and running their payroll without establishing a local branch office or subsidiary.
Your candidate is hired by a PEO in Puerto Rico provider in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. Shortly after, your new employee will be working for you, just like any other member of your team.
Expand to Puerto Rico with Serviap Global
Through our PEO and EOR services, you can hire qualified talent in your industry without the trouble of opening your own legal entity.
In just a few days, you can easily and safely build a presence in Puerto Rico, being sure that your staff will be hired in compliance with labor and tax regulations
Quick facts
Currency:
United States Dollar (USD)
Capital:
San Juan
Payroll cycle:
Weekly, Bi-weekly, or Semi-monthly
Languages:
Spanish, English
The economy
Puerto Rico’s economy is competitive and evolving. It offers businesses an advantage in the fields of pharmaceuticals and hi-tech industries. This country is focused on educating, and creating attractive business opportunities, for the tech industry. Other industries include manufacturing, energy, agriculture and tourism.
Small and medium businesses
Small and medium sized businesses (SMEs) receive a warm welcome and exceptional support in Puerto Rico. The United States Department of the Treasury and the Federal Internal Revenue Service (IRS) designated that 98% of Puerto Rico is a Zone of Opportunity, under the Federal Act for Work and Tax Reduction (Tax Cuts and Jobs Act). These zones were created to promote local, national and international investment, create jobs and generate economic development in disadvantaged communities.
Population
Puerto Rico’s population is approximately 2.8 million people. 1.1 million of them are people 16 years of age and over. Its excellent education systems turns out high numbers of engineers. The University of Puerto Rico (UPR) ranks 1st in graduating Hispanic engineers, 2nd in graduating female engineers, and 1st graduating chemical engineers.
English is one of the two official languages of the island. Though Spanish is the most widely used, a large portion of the population has basic English language skills. In the professional business sector English and Spanish are both spoken. A large percentage of the technical and medical working population is bilingual.
Economic opportunities
Puerto Rico’s workforce has a great deal of experience in process development, quality control, manufacturing automation, and other work ancillary to the STEM fields. Any highly technical, scientific business or business that would benefit from a bilingual workforce should consider outsourcing to Puerto Rico.
Key sectors of the national economy
Human talent
Puerto Rico is a massive manufacturer of a variety of common household goods. The island’s economy relies on manufacturing several different products, such as electronics, medicines, and textiles, for a large portion of its yearly income.
Prominent cities for business
Puerto Rico has many enticing perks for an outsourced business. Many of its cities make for an attractive option for a business center. Some examples include:
- San Juan:
This largest city recently built a new business development and leisure center for the island, attracting both tourists and business travelers.
- Dorado:
Located 25 miles away from San Juan, Dorado is a highly desirable residential location and home to a large English-speaking population.
- Ponce:
This walkable city hosts vibrant nightlife, making it a great option for younger residents and businesses seeking a younger workforce.
Technological ecosystem
Puerto Rico is an established hub for technology innovators and scientific research. The tech industry has boomed under the Puerto Rico Science, Technology & Research Trust, which seeks to invest in tech and advance Puerto Rico’s economy. This trust has operated since 2004 to stimulate and create jobs in multiple sectors, including:
- Life sciences:
Puerto Rico is home to many pharmacy and medical concerns and is regarded as a prime location for this industry given its climate and ease of trade with the US.
- Alternative energy:
Puerto Rican workers offer extensive experience creating renewable energy for both commercial and residential purposes.
- Environmental and agricultural sciences:
Puerto Rico has several land grants and experimental stations on the island, which offer a hotbed for developing alternate agriculture tech.
- Computer science and information technology:
Many Puerto Rican colleges offer advanced degrees in the information technology discipline, creating tens of thousands of graduates each year.
Puerto Rico is a well-known hub for medicine and pharmaceutical production. The population is well-educated and highly STEM-focused, there is a large scientific industry on the island.
The largest scientific industries include:
- Biotechnology
- Medical Devices
- Aerospace
- Agricultural Sciences
Facilities for foreign investment
Puerto Rico offers the stability of operating in a U.S. jurisdiction plus offers an array of special tax incentives for foreign direct investment. These include a fixed corporate income tax rate, tax exemptions and deductions. Short-term capital gains are subject to the regular gradual tax rates. Long-term capital gains are taxed at 15% for non-resident US citizens and 25% for non-resident foreign nationals.
Deductions:
- Charitable contributions
- Education and medical expenses
- Mortgage interest
- Contributions to retirement funds
- Casualty losses
Gastronomy
When enjoying Puerto Rican food expect a lot of flavor. Rice, beans and meats are generally a little salty and often pack a satisfying crunch.
The best known dish across all of the island is mofongo. It’s made with deep-fried plantain, bits of pork and butter. Served as a main dish it can be stuffed with chicken, steak, crab, octopus or other seafood.
General highlights
Capital | San Juan |
Num. States / Province | 78 Municipalities |
Principal cities | Bayamón, Carolina, San Juan |
Language | Spanish and English |
Local currency | U.S. Dollar |
Date format | DD/MM/YYYY |
Thousands separator format | 999,999,999.99 |
Country dial code | +1 |
Time zone | GMT-4 |
Population | 3,221,789 (2022) |
Border countries | Haiti and the Dominican Republic to the west, separated by the Mona passage |
Continental surface | 9.104 km² |
Fiscal year | Calendar year before April 15 of the following year |
VAT % | 11.5% |
Minimum wage | US$9.50 per hour |
Taxpayer identification number name in the country | ITIN |
What you need to know about employing personnel in Puerto Rico:
Laws and agencies that regulate labor relationships
| Laws | Brief description |
| Constitution of the commonwealth of Puerto Rico |
Signed in 1952 |
| Constitution of the commonwealth of Puerto Rico |
The government enacted a far reaching labor reform in 2017 |
Tax code | Residents of Puerto Rico pay tax on all income generated inside and outside of Puerto Rico’s territory. Non-residents are only required to pay taxes on income generated in Puerto Rico. |
| Social Security | OASDI or old age, survivors, disability insurance |
Key tax and labor authorities
| Bureau of income tax | Tax office |
| Puerto Rico Department of Labor and Human Resources | This is responsible for putting public policies in place for occupational safety, labor relations, unemployment insurance benefits, HR training and re-employment services. |
Labor contracts
| Employment contract | The contract is a written or verbal agreement between two people, namely the employer and the employee. |
| Contracts | • Name and address of employer. • Name and address of employee. • Job title. • Job description. • Salary. • Agreed Deductions from salary. • Pension or Provident fund benefits, rules. • Medical Aid benefits, rules and contributions. |
Probationary employment contract (Article 8 of Act No. 80) | Once the probationary period is over, then the employee is protected from unjust dismissal. Automatic periods are 9 months, or 12 if the employee is classified as an executive, administrator or professional. You can find the definitions under the Fair Labor Standards Act. You may change the time period to be shorter, but this should be put in writing for everyone’s protection. |
Work hours (Act No. 379) | 8 hours per day and a regular workweek of 40 hours per week. |
Independent contractor (Act 4) | If a contractor is independent they must fit within the following criteria: • Have an EIN or SS • File taxes independently • A written contract • The independent must have certifications, or permits to operate the business, and any education/license required by law |
Basic requirements
Medical Aid benefits, rules and contributions:
- 20% FICA Social Security (Federal) (Maximum US$142,800)
- 45% FICA Medicare (Federal)
- 90% FICA Medicare (Federal- additional for excess of US$250,000 (for a married couple filing a joint return), US$125,000 (for a married individual filing a separate return), and US$200,000 (for all other employees)
- 00% FUTA (Federal Unemployment Tax)
Payroll
Legal benefits in Puerto Rico
| Minimum wage | US$9.50 per hour |
| Wages | • Average wages are typically around US$20,000 per year or approximately US$9 per hour. • Businesses may pay more on average if the jobs being outsourced are more technical. • Some employers may pay a special rate below the Puerto Rican minimum wage if they can prove that paying minimum wages would stall employment in their industry. |
| Overtime | If the employee works more than 10 hours in a given day, the employee is entitled to overtime pay based on the formula 1.5 times the normal hourly wage. |
| Occupational risk insurance | The Puerto Rico Occupational Safety and Health Administration (PR OSHA) is part of Puerto Rico’s Department of Labor and Human Resources. |
Vacations or PTO | Every employee shall be entitled to a minimum accrued leave after working at least 130 hours per month. Minimum monthly vacation leave accrual rate shall be: 1/2 day during the first year of service. 3/4 of a day after the first year of service through the fifth year of service.1 day after the fifth year of service through the fifteenth year of service. 1 1/4 day after the 15th year of service. The minimum monthly accrual for sick leave shall be one (1) day for each month. |
Leaves of absence Employees have the right to paid absences for the following things: | • Unpaid Leave: Employees may be eligible to take unpaid, job-protected leave under the Family Medical Leave Act (“FMLA”). • Sick Leave: The minimum monthly accrual for sick leave shall be 1 day for each month. It begins to accrue from the start of the employee’s probationary period. Up to five days of medical leave may be used in connection with the illness or medical treatment of a child, parent, spouse, elderly or disabled person, or person in the employee’s custody or guardianship. Sick leave pay shall be equivalent to at least the regular hourly rate earned by the employee during the month in which such leave was accrued, except in the case of employees whose salary is based on non discretionary commissions or other incentives. • Voting Leave: All public and private sector employees who are registered voters and are scheduled to work on a voting date. Employees who do not know their work schedule ahead of time will be entitled to 2 hours paid leave during the work day to vote. • Maternity leave: Employees are entitled to 8 weeks of maternity leave. A medical certificate must be presented stating the employee is pregnant and the estimated date of birth. The leave consists of 4 weeks of prenatal leave and 4 weeks of postnatal leave. If postnatal complications arise, maternity leave may be extended up to an additional 12 weeks of unpaid leave. • Breastfeeding: Employers must provide full-time breastfeeding mothers with unpaid breaks for breastfeeding or expressing breast milk for 1 hour each day, which may be divided into two 30-minute periods or three 20-minute periods. • Adoption leave: Mothers who have an infant five years of age or younger who was not yet enrolled in school. They will be entitled to the same eight- week paid maternity leave benefit granted to birth mothers. Older infants six years of age or older will be entitled to up to 5 weeks of paid maternity leave. • Caregiver leave: 5 days of medical leave in connection with the illness or medical treatment of a child, parent, spouse, elderly or disabled person, or person in the employee’s custody or guardianship. • Catastrophic Illness Leave: An employee who has worked for the same employer for more than 12 months, 130 hours per month on average shall be eligible for catastrophic illness leave with pay of up to a maximum of six (6) working days per year, in addition to those to which the employee is already entitled by law. • Military Leave: Employees are entitled to unpaid leave for private sector employees who are members of the Puerto Rico Military Forces. • Jury Duty Leave: Any person working for a private employer, who has been summoned to serve as a juror in a court of law, shall be entitled to take paid leave from his or her employer up to a maximum of 15 days. • Domestic Violence Victim Leave: An employee may use Special Leave to seek counseling, obtain a restraining order or court order, seek and obtain legal assistance, and seek and obtain housing or safe space in a shelter. • Special Paid Leave: Athletic Leave Athletes, coaches and other sports participants certified by the Olympic Public Relations Committee are entitled to 30 days of unpaid leave per year to participate in training or competition (if participation is certified by the Olympic Public Relations Committee). |
Employers contribution or labor cost
Annual taxable income
Regular taxable income is not taxed under US$9000 a year. Tax rates begin at 7% and progress up to 33% in the highest tax bracket.
After regular income tax is paid, alternate basic tax is calculated. Alternate basic tax calculates taxable in- come by adding back certain exempt items from regular income tax. This tax rate begins at 1% and maxes out at 24% on any income over $250,000.
Corporate tax rates
Tax rates start at 18.5%, and an additional tax known as a ‘graduated surtax’ is added based on income.
| Graduated surtax in US$ | Tax rate and US$ |
| 75,000 | 5% |
75001-125,000 125,001-175,000 | 15% and 3,750 16% and 11,250 |
| 175,001-225,000 | 17% and 19,250 |
| 225,001-275,000 | 18$ and 27,750 |
| 275,001-and above | 36,750 and 19%-37.5% |
Disability
The worker has the right to have a safe workplace. The Puerto Rico Occupational Safety and Health Act, Act 16 of 1975 outlines regulations.
Public holidays
Holidays observed in Puerto Rico:
| Date | Holiday name |
1 January 6 January | New Year’s Day Epiphany |
| 11 January | Birthday of Eugenio Mar. |
| 18 January | Martin Luther King, Jr. Day |
| 15 February | Presidents’ Day |
| 22 March | Emancipation Day |
| Friday before Easter Sunday | Good Friday |
| 19 April | Jos de Diego Day |
| 11 October | Columbus Day |
| 11 November | Veteran’s Day |
| 19 November | Discovery of Puerto Rico Day |
| 25 November | Thanksgiving Day |
| 25 December | Christmas Day |
Termination
The LTFA expressly allows waivers of Act 80 rights and settlement of the severance payment once the termination of employment has occurred or the intention to terminate has been notified. The waiver must be made pursuant to a valid settlement transaction agreement that complies with legal requirements.
| Type of termination | Brief description |
| Justified dismissal | The employer must have the reason for the cause of dismissal, which may be for conduct or behavior. |
Unjustified dismissal “Labor Transformation and Flexibility Act” | An amount equivalent to three (3) months’ salary must be paid as severance pay– provided that the applicable probationary period as provided in this Act, or the different probationary period stipulated by the parties, has been completed. An amount equivalent to two (2) weeks’ salary for each full year of service after this. In no case shall the compensation required under this Act exceed the salary corresponding to nine (9) months’ salary. The nine (9) month cap shall not apply to employees hired prior to the effective date of the “Labor Transformation and Flexibility Act”. |
Other forms of compensation upon termination include action to claim unjustified dismissal, which has a one year term to fill from the date of dismissal and must be filed with the Department of Labor and Human Resources.
The statute of limitations for these claims prior to the passage of the Labor Reform was 3 years. This law does not preclude other claims related to the dismissal, such as, for example, discrimination in any of its aspects.
Severance pay grades are based on the following table:
Length of employment (in years) | Severance amount |
| 0 – 5 | 2 months + 1 week for each year of service |
| 5 – 15 | 3 months + 2 weeks for each year of service |
| 15+ | 6 months + 3 weeks for each year of service |
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