Overview
Payroll Cycle
Employer Contributions
Employee Contributions
Minimum Wage
Hiring
Hiring Employees
Hiring Contractors
Hiring Expats
Background Checks
Employment Contracts
Onboarding
Employee Benefits
Social Security
Healthcare and Insurance
Leave Policy
Public Holidays
Work Permit and Work Visa
Probation Period
Notice Period
Termination and Severance
Personal Income Tax
Explore EOR services in Puerto Rico, where foreign employers can gain access to essential information and guidance on hiring and managing employees in the region. Discover valuable insights on employment regulations, payroll obligations, social security contributions, work permits, employee benefits, termination procedures, and the role of local labor authorities. Our comprehensive resources are designed to help you navigate the complexities of employment practices in Puerto Rico and ensure compliance with legal requirements. Whether you are establishing a presence in the market or expanding your workforce, our EOR services offer the support you need for a seamless and successful employment experience in Puerto Rico.
| Overview | |
| Continent | Americas |
| Country | Puerto Rico |
| Capital | San Juan |
| Time zone | UTC-4 |
| Total Time zones | 1 |
| Working hours per week | 40 |
| Working week | Monday–Saturday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | 15th Apr |
| Financial Year | July 1st to June 30th |
| Date format | mm/dd/yyyy |
| Currency | U.S. Dollar (USD) |
| VAT | the standard rate is 11.5% |
Employer Payroll Contributions in Puerto Rico
| Employers | % of Gross Salary |
| State Unemployment Tax (SUTA) | 1.4% to 5.4% |
| Federal Unemployment Tax (FUTA) | 6% |
| Medical Care (FICA) | 1.45% |
| Social Security (FICA) | 6.2% |
| New Employer Tax | 2.9% |
| Total Employment Cost | 17.95% to 22.85% |
- State Unemployment Tax (SUTA) is a payroll tax imposed by the government of Puerto Rico to fund the local unemployment insurance program. Employers in Puerto Rico are required to contribute to SUTA to provide benefits to eligible unemployed workers. The SUTA tax rate varies based on factors such as the employer's industry, employment history, and experience rating. The rate can range from 1.4% to 5.4% of the employee's taxable wages, up to a certain wage base. Employers must accurately calculate and report SUTA taxes, and timely payment is essential to fulfill their obligations. The specific regulations and procedures for SUTA contributions in Puerto Rico can be obtained from the local tax authorities or through consultation with a tax professional.
- The Federal Unemployment Tax (FUTA) is a payroll tax imposed by the U.S. federal government on employers to fund the federal unemployment insurance program. In Puerto Rico, employers are required to contribute to FUTA along with their other payroll obligations. The FUTA rate is set at 6% of the employee's taxable wages, up to a certain wage base. However, it's important to note that Puerto Rico has its own unemployment insurance program, and FUTA taxes paid by employers in Puerto Rico are used to support the federal program rather than the local program. Employers must accurately calculate and report FUTA taxes, and timely payment is crucial to remain compliant with federal regulations. Consulting with a tax professional or the appropriate tax authorities can provide further guidance on FUTA obligations in Puerto Rico.
- Medical Care (FICA) is a mandatory payroll tax in Puerto Rico that funds the Medicare program. Employers withhold 1.45% of an employee's gross salary for Medical Care and contribute an equal amount as the employer's share. The total FICA Medical Care tax rate is 2.9%. These funds are used to provide medical benefits to eligible individuals under Medicare. Employers must accurately calculate and withhold the tax from employees' wages and make timely payments to the IRS. Stay updated on any changes in tax rates or regulations through the IRS or a tax professional.
- Social Security in Puerto Rico is a mandatory payroll tax where both employers and employees contribute. The tax rate for both parties is 6.2% of the employee's gross salary, totaling 12.4% overall. These contributions fund retirement, disability, and survivor benefits. Employers must ensure accurate withholding and timely payment of Social Security taxes to meet legal requirements and provide employees with the necessary benefits. Stay informed about any updates or changes to the tax rates or regulations to ensure compliance.
- In Puerto Rico, there is a New Employer Tax that applies to newly established businesses. The tax rate for this category is 2.9% of the employer's gross salary payments. This tax is imposed on employers for a specific period of time and is designed to support various government programs and initiatives. It is important for new employers to be aware of and comply with this tax obligation to fulfill their financial responsibilities and contribute to the local economy.
Employee Payroll Contributions in Puerto Rico
| Employees | % of Gross Salary |
| Unemployment (FUTA) | 6% |
| Social Security (FICA) | 6.2% |
| Medical Care (FICA) | 1.45% |
| Total Employee Cost | 13.65% to 14.55% |
Minimum Wages in Puerto Rico
| Minimum Wage | |
| Minimum Wage | The minimum wage in Puerto Rico is 6.55 USD per hour. |
Payroll Cycle in Puerto Rico
| Payroll | |
| Payroll Cycle | Bi-Weekly |
| 13th Salary | The mandatory Christmas Bonus is reduced to 2% of the total salary, with a $600 cap for employees who work 1,350 hours that year, and up to $300 if the employer has twenty (20) employees or less. |
Personal Income Tax in Puerto Rico
| Income Tax | |
| Less than 9,000 USD | 0% |
| 9,000 - 25,000 USD | 7% of the excess over 9,000 USD |
| 25,000 - 41,500 USD | 1,120 USD plus 14% of the excess over 25,000 USD |
| 41,500 - 61,500 USD | 3,430 USD plus 25% of the excess over 41,500 USD |
| Over 61,500 USD | 8,430 USD plus 33% of the excess over 61,500 USD |
Important Update on Statutory Benefits and Entitlements for Employees in Puerto Rico
On March 3, 2023, the U.S. District Court for the District of Puerto Rico issued a decision declaring Law 41-2022 null and void. This decision effectively reinstates the prior state of many of Puerto Rico's employment statutory entitlements. As a result, there are changes to employees' statutory benefits and rights, impacting various aspects such as vacation pay and sick leave, meal periods, holiday bonuses, and statutory severance pay.
Employers in Puerto Rico are advised to review and revise their employment practices and policies to align with the state of the law as it was prior to July 20, 2022 (the effective date of Law 41-2022).
Here is a summary of the key statutory benefits and entitlements affected by the March 3, 2023, decision:
Vacation and Sick Leave:
- Nonexempt employees will accrue vacation leave based on years of service, ranging from one-half day to one-and-one-quarter days per month, depending on the size of the employer.
- Nonexempt employees will now accrue sick leave at a rate of one day per month, regardless of the number of employees employed by the employer.
- Part-time nonexempt employees are no longer entitled to accrued vacation or sick leave.
- Nonexempt employees can request payment for accrued vacation days exceeding ten days.
Meal Periods:
- Nonexempt employees must be granted a meal period no earlier than the end of the second hour of work.
- The agreement to reduce the meal period from one hour to thirty minutes can be revoked by the employee or the employer after the first year of employment.
Christmas Bonuses:
- The working hours eligibility threshold for Christmas bonuses has been reverted to 1,350 hours per year for employees hired after January 26, 2017, who work for employers with twenty-one or more employees.
- The 900-hour threshold for employees of micro-enterprises and small and medium enterprises has been nullified.
Statutory Severance and Probationary Periods:
- Severance pay for employees with fifteen years of service or more is reduced to three months plus two weeks for each year of service.
- The probationary period is now nine months for exempt employees and one year for nonexempt employees.
- The severance pay is subject to a nine-month cap for employees hired after January 26, 2017.
Statute of Limitations:
- The statute of limitations for causes of action related to employment contracts, vacation leave, sick leave, and unjust termination is now one year, reduced from three years under Law 41-2022.
It is crucial for both employers and employees in Puerto Rico to be aware of these changes to ensure compliance with the reinstated statutory benefits and entitlements. Employers may need to update their policies and practices accordingly, while employees should familiarize themselves with their revised rights and benefits under the previous legal framework.