Puerto Rico PEO & Employer of Record

WeHG provides an International PEO and vglobal Employer of Record service in Puerto Rico to companies willing to join the Puerto Rico market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Puerto Rico.  However our Employer of Record solution gives you a chance to start the operations in Puerto Rico within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf.

Puerto Rico fast facts

Population, million: 2,860,853
Land area, sq. km: 9,105 km²
Capital: San Juan
Local currency: United States Dollar (USD)

GDP per capita:$ 30,113.31
GDP in currency:$ 100.80 billion
Economic growth percentage: 0.4%
Inflation rate (consumer prices): 0.70%
Volume of export: $ 4450 million
Import of goods and services: $ 46 billion
Total population: 2,860,853
Population of working age (15-64): 40.10%

Puerto Rico, officially known as the Commonwealth of Puerto Rico, is an archipelago in the Greater Antilles located in the northeastern Caribbean Sea; it comprises a principal island with 78 municipalities, 8 senatorial districts, and a number of smaller islands (the largest of which are Mona, Vieques, and Culebra). The total area of the main island, measuring 170 km by 60 km, is 9,105 km2. The Puerto Rican climate is tropical, with varied ecosystems: coastal and marine, dry forests and rainforests, the karst region, and mountainous areas. The capital is San Juan, located on the northern coast of the main island.

Hiring, Negotiating and Doing Business in Puerto Rico

Necessity of written employment contract

In general, employment contracts do not have to be in writing. Certain specific, employment-related provisions – such as agreements with non-exempt employees to reduce the statutory meal period, alternate workweek or work schedule agreements, and non-compete agreements – require a valid written agreement, some with specific terms required for enforceability.

Puerto Rico Employment Contract

Types of employment agreements

Temporary employment contracts for fixed periods are permissible in Puerto Rico and, if valid, are an exception to the ‘just cause’ requirement under the Unjust Dismissal Act. Prior to the passage of Law No. 4, to be valid:

• the contract had to be in writing;
• the contract had to be for a fixed term or a fixed project, or for replacing a regular employee during a temporary absence;
• the purpose of the temporary contract and the duration of the employment period had to be expressly stated in the written contract; and
• the contract had to be signed during the employee’s first work day or, in the case of employees hired through a temporary employment services company, within the first 10 days of work.

After the passage of Law No. 4, written temporary agreements are no longer required (though are advisable).

There are no specific limitations as to the maximum duration of temporary contracts but, by their very nature, they must be ‘temporary’ and reasonably limited in duration. If the employee continues working after the end of the temporary period, he or she will become a regular employee.

The Act also recognises fixed-term employment contracts, defined as contracts for a specific period of time or for a particular project. Written agreements are not required (though are advisable). Although fixed-term contracts may be renewed, if the practices create an expectation of continuity, the relationship will not be interpreted as being for a fixed term. Fixed-term contracts not exceeding three years will be presumed to be valid and bona fide. In the case of exempt executive, administrative and professional employees, fixed-term contracts will be interpreted by the parties’ will as expressed in the contract.

Puerto Rico working hours

A standard working week is 40 hours and a workday is 8 hours.

Overtime

Non-exempt employees under the Fair Labor Standards Act (FLSA) receive 150% for hours worked in excess of 40 hours a week or 8 hours a day.

Vacation leave in Puerto Rico

Minimum of 6 days for first-year; minimum of 9 days after the first year until the fifth year; minimum 12 days after the fifth year; minimum 15 days after the fifteenth year.

Sick Leave

Paid sick leave for a minimum of 6 days for first-year; minimum of 9 days after the first year until the fifth year; minimum 12 days after the fifth year; minimum 15 days after the fifteenth year.  

As of April of 2020, Puerto Rico added 5 days of emergency sick leave for those suffering from COVID-19.

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.

Puerto Rico Maternity Leave

Maternity leave

8 weeks, consisting of four weeks before birth and four weeks after but can be arranged as one week before and seven weeks after.

Paternity Leave

Private sector employees can request up to 6 months unpaid leave. 

Parental Leave

No paid leave, but parents can request up to 12 weeks unpaid, job-protected leave. Under the Families First Coronavirus Response Act (FFCRA), valid from April 1 – Dec. 31, 2020, companies with less than 500 employees have to provide an additional 12 weeks, paid after the first 10 days.

Puerto Rico Severance Laws

Termination Process

Employers must have “just cause” to terminate an employee based on the employee’s job performance or behavior. If there is no just cause for dismissal, the employee receives severance pay.  

Notice Period

There is no notice period.  

Severance Pay

There is no severance pay if there is “just cause” for termination.  

If there is no just cause, the employee receives two months’ pay if the termination occurs within the first five years; three months pay if 5-15 years, and three months pay after 15 years.  

The employer must also pay an additional two weeks’ salary for each year of service, with a maximum of 9 months total severance. 

Probation Period

The probationary period is 9 months; 12 months for employees classified as “executives”, “administrators” and “professionals”.

Puerto Rico Tax

Employee Income Tax

0%  – Not over 9,000 USD

7% – 9,000-25,000 USD

USD 1,120 + 14% of the excess over USD 25,00 – 25,000-41,500USD

USD 3,430 + 25% of the excess over USD 41,500 – 41,500-61,500USD

USD 8,430 + 33% of the excess over USD 61,50 – Over 61,500 USD

Employer Payroll Tax

6.2% – FICA Social Security (Federal)

1.45% (0.9% Additional tax on over $200k) – FICA Medicare (Federal)

6.0% – FUTA (Federal Unemployment Tax)

1.4%-5.4% – SUTA (State Unemployment Tax)

2.9% – SUTA New Employer Tax

17.95%- 23.85% – Total Employment Cost

Employee Payroll Taxes

6.2% – FICA Social Security (Federal)

1.45% (0.9% Additional tax on over $200k) – FICA Medicare (Federal)

6.0% – FUTA (Federal Unemployment Tax)

13.65% – 14.55% – Total Employee Cost

Health Insurance Benefits in Puerto Rico

Additional Benefits in Puerto Rico

For employers with more than 21 or more employees, the law requires a 2% Christmas bonus or not more than $600.  

For employers with 20 or fewer employees, the bonus is 2% or not more than $300.

Puerto Rico Holidays

• New Year’s Day
• Epiphany
• Martin Luther King Jr. Day
• The Day of Illustrious Puerto Ricans
• Washington’s Birthday
• American Citizenship Day
• Emancipation Day (of Puerto Rico)
• Good Friday
• Birthday of José de Diego
• Memorial Day
• Independence Day
• Birthday of Don Luis Muñoz Rivera
• Labor Day
• Day of the Races
• Veterans Day
• Discovery of Puerto Rico Day
• Thanksgiving
• Christmas Eve
• Christmas Day

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.