Employer of Record Puerto Rico
Skuad’s Puerto Rico EOR solutions can help you expand your business into the country without the hassle of setting up an entity worrying about compliance issues with the Puerto Rican employment laws and regulations. Engaging Skuad’s Puerto Rico EOR solution allows you to focus on managing your business while we take care of all your hiring, staffing and employee lifecycle management needs.
Lying in northeastern parts of the Caribbean Sea to the south of Florida is the Commonwealth of Puerto Rico. It is an archipelago resided mostly by indigenous Taino people. Puerto Rico has been part of the US since 1898, where residents can freely move from the island country to the US mainland. However, the archipelago is disenfranchised and is an unincorporated territory. Many works have happened on the island since the 20th century, thanks largely to the Puerto Rico Industrial Development Company and the US Government. As a result, the island country is a high-income economy, marked as a developed economy by the IMF. On the Human Development Index, the archipelago is ranked at 40.
If you are on your global development plan and targeting to enter Puerto Rico, it can do wonders for your business since the island country is one of the world's developed regions. In addition, there are various ways of setting up your business in the island country – you can incorporate a legal identity here or take the assistance of an Employer of Record in Puerto Rico. An EOR like Skuad becomes your HR partner, recruiting, hiring, onboarding, and training employees to work for your business on our payroll. It means that we are responsible for meeting the payroll taxation, HR administrative functions, and other compliances with the local labor laws in Puerto Rico for you to carry on your business hassle-free and seamlessly. Please book a demo with us to understand the scope of work and how we can add value to your business.
If you are keen to know more about our operations, book a demo today.
Puerto Rico at a Glance
Estimated Population: 3,285,874 (2020 Census)
Currency: USD/ United States Dollar
Capital: San Juan
The number of officially recognized languages spoken: 2
Languages frequently used: Spanish and English
GDP: USD 112.273 billion (PPP) (2021 estimate)
Employment In Puerto Rico
Employment in Puerto Rico is highly regulated. The constitution provides different statutes, provisions, regulations, and judicial doctrines to cover every aspect of Puerto Rico's labor laws. Presenting a summary of the various subjects covered under the Puerto Rico employment laws.
| Puerto Rico's labor laws |
The Act No. 4 of the Labor Law was signed on 26th January 2017 to establish the Labor Reforms of 2017.
The new local law is called the Labor Transformation and Flexibility Act or LTFA.
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| The essence of the employment contract |
The employment contract in Puerto Rico is regulated by:
- Puerto Rico Civil Code
- State Labor Statutes, and
- Federal Labor Statutes.
Since both the local and federal laws apply in Puerto Rico, whichever law is favorable for employees will apply. Again, it is because the jurisdiction in Puerto Rico is very protective of employee rights.
The employment contract has been defined by Act 4 as the basis of established employment relations between the employer and the employee.
As per the Puerto Rico Labor Laws, it doesn't need to be a written contract. The contract can be established verbally too.
- If the contract does not speak of the termination date, it is taken for granted that it is for an indefinite period.
- The employment contract can be in any language that the employee is comfortable with.
- Act 4 mentions that the employee signature in the contract establishes that the employee knows the contract's language.
- There is an employee handbook in Puerto Rico that details the rights and responsibilities of employees.
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| Administrative responsibility |
- The PRDL HR or the Puerto Rico Department of Labor and Human Resources oversees labor and employment-related legislation.
- The Department is also responsible for administering other labor-related aspects like human resources training, occupational safety, unemployment insurance benefits, re-employment services.
- For filing administrative claims, employees can approach the Bureau of Employment Norms and the Office of Mediation and Adjudication. They can also approach the Anti-Discrimination Unit, which is the state counterpart of the US Equal Employment Opportunity Commission.
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Some other laws related to employment issues in Puerto Rico
| Working Women's Bill of Rights |
- Article-No. 9, known as the Working Women's Bill of Rights, is the law that regulates women's rights in the public and private sectors
- It addresses issues like wrongful termination, breastfeeding periods, a working environment free of discrimination, sexual harassment, domestic violence, maternity leave, etc.
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| Families First Coronavirus Response Act |
The FFCRA is a US Federal Law where employers need to provide paid sick leaves to employees on the grounds listed in the Act.
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Various clauses mentioned in the Puerto Rico Labor Laws
| Wage and Overtime Laws in Puerto Rico |
- While many clauses match the US FLSA or Fair Labor Standards Act, there are certain differences too.
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| New Puerto Rico Labor Law |
The new law has the grandfather clause. As per this clause, employees working with the said employer before 26th January 2017 will benefit. The grandfathered employee rights are mentioned below.
- Overtime – when employees work overtime, the employer needs to pay the employee at 1.5 times the regular pay rate.
- Meal Period penalty – if employees are made to work during the meal period, they need to pay the employees at 1.5 times the regular pay rate.
- Leave Accrual - Employees entitled to vacations and sick leave at a higher accrual rate than the LTFA will continue to enjoy such privileges as long as he works for the employer.
- Christmas Bonus – employees hired before 26.01.2017 will receive a bonus if they have worked 700 hours. However, employees hired on 26.01.2017 or after will need to work for 1,350 hours to be eligible for a bonus.
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| Minimum wage |
- The minimum wage has been set at $7.25 per hour.
- For tips, the employee must be paid at least $2.13 as direct wage per hour and $7.25 as wage and tips per hour.
- The wages are required to be paid on a weekly, biweekly basis.
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| Regular working hours |
- The regular working hours for non-exempt workers are eight hours daily and forty hours weekly.
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| Overtime pay |
- The overtime pay = $10.88 per hour.
- The overtime pay is 1.5 times the regular pay rate for every hour worked beyond eight hours every day.
- The overtime pay is double the regular payments on statutory rest days.
- The overtime pay is double the regular pay for every hour worked beyond 40 hours every week.
- The last clause differs from the Federal FLSA.
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| Workers who are entitled to overtime pay |
- All types of workers are eligible for overtime in Puerto Rico when they work for more than 8 hours a day or 40 hours a week.
- However, employees who get a minimum of $455 every week as salaries like managers and executives are exempted from overtime pay.
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| Weekly rest day |
- For non-exempt employees, the rest day is the seventh day after six consecutive working days.
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| Meal period |
- As per the Puerto Rico employment laws, employers must give a break to their employees after five hours of consecutive work.
- The meal break can be between the second hour of work and until the fifth hour.
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| Christmas Bonus |
- The Christmas Bonus Act mentions that workers must be paid an annual bonus. Any employee who has worked for seven hundred hours or more and has been associated with the employer for a consecutive period of twelve months is eligible for the annual bonus.
- Employers employing fifteen employees need to pay 6% of the salary or $600 as a bonus.
- Employers employing more than fifteen employees must pay a bonus of 3% of the salary of $300.
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Holidays and Leaves in Puerto Rico
| Public Holidays in Puerto Rico |
- 1st January - New Years Day
- 6th January - Epiphany
- 11th January - Birthday of Eugenio Mar
- 18th January - Martin Luther King, Jr. Day
- 15th February - Presidents' Day
- 22nd March - Emancipation Day
- 2nd April - Good Friday
- 19th April - Jos de Diego Day
- 31st May - Memorial Day
- 4th July - US Independence Day
- 19th July - Luis Muoz Rivera's Birthday
- 25th July - Constitution Day
- 27th July - Jos Celso Barbosa's Birthday
- 6th September - Labor Day
- 11th October - Columbus Day
- 11th November - Veteran's Day
- 19th November - Discovery of Puerto Rico Day
- 25th November - Thanksgiving Day
- 25th December - Christmas Day
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This was just a brief summary of the Puerto Rico Labor Laws. The entire gamut and scope are far more complex and intricate. Therefore, it can be challenging for a new business to cover all aspects and interpret the entire scope upfront. However, when an Employer of Record in Puerto Rico works on your behalf, hiring and recruiting employees and managing the HR domain for your organization in a 360-degree mode, things can be easier and more seamless than working it all out on your own. Skuad, beyond any doubt, is one of the best in this context. To get more details, contact our experts.
Contractors vs. Full-time Employees
The employment contract law in Puerto Rico differentiates between full-time employees and contractors differently. Therefore, employers could attract penalties if they wrongly classify employees as contractors or vice versa. Misclassification happens when business entities treat their employees as contractors and generally avoid all legal obligations. Full-time employees are eligible for various benefits like minimum wages, overtime pay, pension, health insurance, social security, etc., as per the employment contracts in Puerto Rico.
As per the LTFA, an independent contractor is one who:
- Has an employer social security or identification number
- Files his business' income tax returns
- Just like the employment agreement in Puerto Rico, there is a written contract with the contractor too.
- The contractor has the required permits and licenses.
- Proof of discretion over the engagement
Skuad is a leading EOR service provider assisting you in ensuring that your business works and operates in complete compliance with the employment contract law in Puerto Rico, thereby reducing misclassification risks and penalties. Call us today to book a demo.
Hiring in Puerto Rico
To hire employees in Puerto Rico, incorporating your business in Puerto Rico is mandatory. Alternatively you can work with a registered EOR like Skuad so that your entry in the Puerto Rico region becomes smooth and barrierless. HR is one of the most challenging domains for a new business entity, but an EOR can help tide and navigate through the HR spectrum seamlessly.
If you choose to establish your legal identity in Puerto Rico, you can take the help of professional hiring companies in Puerto Rico. Some of the top job portals in Puerto Rico are Indeed, CareerBuilder, Dice.com, and GRC Executive. But, hiring from these portals means that you can access credible resumes and applications from candidates, but the major work of hiring needs to be done by your HR department. Plus, your organization needs to work out the payroll, taxation, employee health benefits Puerto Rico, social security, etc. With Skuad, you have a trusted partner handling the legal compliances and HR activities so that you can work on growing your business. Request for a demo today!
Probation & Termination
| A probationary period in Puerto Rico |
- The standard probation period in Puerto Rico for managerial staff and executives is 12 months.
- Other staff members and workers go through standard nine months of probation.
- Employers can terminate employees without cause and no liability towards severance pay, as per Act 80.
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| Termination of employment Puerto Rico |
- Act 80 determines the termination of employees working with an employer for an indefinite period.
- When the employees are terminated without a just cause, employers need to pay a statutory discharge indemnity.
- The grounds for dismissal of an employee are as follows:
- Disorderly conduct
- Negligent behavior
- Violation of security standards
- Inability to meet the required standards of employer
- Complaints received from customers
- Violations of written rules
- Partial, full, or temporary closure of business.
- Reorganization
- Due to changes in production volumes or low profits, the need to reduce employees.
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| Discrimination |
All kinds of discriminatory actions are prohibited in Puerto Rico due to sex, age, race, marital status, political belief, religious beliefs, color, disability, union affiliation, pregnancy, genetic information, sexual orientation, social origin, veteran status, victims of domestic violence, stalking, and sexual aggression.
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EOR Solution
Hence, the employer of record EOR offers end-to-end support in recruiting, hiring, shortlisting, interviewing, confirming, onboarding, preparing the employment contract, ensuring compliance with the labor laws in Puerto Rico for payroll, taxation, and benefits. In addition, the EOR handles the entire backend administrative work related to HR.
Skuad is one of the topmost employers of record companies in Puerto Rico, offering automated solutions powered by the latest technology and tools. We are the best solution provider for companies that wish to expand in Puerto Rico but do not want to incorporate a business there or are in a rush to launch products in the Puerto Ricon market and do not have the time for going through the incorporation processes. To get more information, speak to our experts today.
Types Of Visas In Puerto Rico
| Types Of work Visas In Puerto Rico |
- Residents from 40 countries do not need any visa to enter Puerto Rico
- They need to have the US ESTA visa waiver, however, to travel to Puerto Rico.
- On this visa, the foreigners can come to the nation for business or leisure.
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| Types of Puerto Rico work visas |
- Residency Permit
- L1 Visa for working in the country. It is a non-immigrant temporary work visa with a term period of 2 to 3 years.
- L2 work visa for the spouse and kids of a non-immigrant worker in Puerto Rico to stay and work in the country.
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| Puerto Rico work visa requirements |
- Detailed paperwork is required to obtain the L1 and L2 visas. Therefore, it is best to take the help of a professional Employer of Record in Puerto Rico to take care of work visas of foreign employees.
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Work Permit
Puerto Rico work permit for foreigners
The employer must apply for a work permit in Puerto Rico when hiring foreigners as employees.
It is impossible legally to obtain a Puerto Rico work permit without a job offer. However, with Skuad by your side, you or your staff need to worry about arranging work visas and work permits because our centralized platform will do all that for you. Book a demo today.
Payroll & Taxes in Puerto Rico
| Puerto Rico employer payroll taxes
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The employer tax is about 16.10% of the salary paid to the employees
| Tax head |
Percentage |
| Social security and medicare |
6.2% |
| Additional Medicare |
0% |
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| Puerto Rico Payroll tax rates for employees |
| Tax head |
Percentage |
| Social security and medicare |
6.2% |
| Additional Medicare |
0.9% |
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| Employee Income tax |
| Income range |
% tax |
| Less than 9.000 USD |
0% |
| Between 9,000 – 25,000 USD |
7% over and above 9,000 USD |
| Between 25,000 – 41,500 USD |
USD 1,120 + 14% over and above USD 25,000 |
| Between 41,500 – 61,500 USD |
USD 3,430 + 25% on over and above USD 41,500 |
| Over 61,500 USD |
USD 8,430 + 33% over and above USD 61,500 |
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Consider using the automated platform of Skuad for effective payroll outsourcing in Puerto Rico. Speak to our trained experts today for more information. Talk to us.
Incorporation
To start your business in Puerto Rico, you can start by incorporating a holding company in Puerto Rico.
There are various advantages of expanding your business in Puerto Rico. From enjoying low corporate tax rates to 100% tax deduction claims, you can benefit substantially. You also benefit from forming a holding company, international trade, asset protection, intellectual property, special purpose entities, and international trade. However, working as an incorporated entity can be tough and quite daunting in the country. To make use of exciting business opportunities in Puerto Rico, it is highly recommended that you work with a futuristic EOR like Skuad. While you strategize your business plans, we are here to take care of all payroll and admin-related tasks to ensure smooth business flow. Talk to us to learn more.
Professional Employer Organization (PEO)
Similar to the EOR, a professional employer organization in Puerto Rico will help you with hiring, payroll admin, taxation compliance, and other statutory compliances with Puerto Rico Labor Laws. However, in contrast to an EOR, a PEO is a collaborator and co-employer of your business. Therefore, it means that you need to register your legal entity in Puerto Rico to take the help of a PEO. An EOR, on the other hand, is a registered legal entity in Puerto Rico and takes care of all your HR needs independently. As long as your requirements are streamlined, Skuad’s unified employment platform can help you save money, time, and resources for smooth operations on this Caribbean island. Get in touch to learn more.
Conclusion
When entering Puerto Rico, it is wise to hire Skuad, one of the country's leading EOR service providers. Skuad is one of the leading employers of record service providers in Puerto Rico, offering end-to-end services that take care of all legal and functional aspects of your HR needs. Book a demo today.
FAQs
1) What is an employer of record in Puerto Rico?
An Employer of Record (EOR) in Puerto Rico helps foreign companies hire employees without setting up a local entity. The EOR manages payroll, taxes, benefits, and compliance with local labor laws while the client company focuses on daily operations.
2) What is a PEO in Puerto Rico?
A Professional Employer Organization (PEO) in Puerto Rico provides HR services, including payroll, benefits, and compliance, under a co-employment model, where legal responsibilities are shared between the PEO and the client company.
3) Can a US company hire an employee in Puerto Rico?
Yes, a US company can hire employees in Puerto Rico. Using an EOR simplifies the process by managing local compliance, payroll, and benefits without a local entity.
4) What is the difference between payroll and employer of record?
Payroll services handle salary payments, tax deductions, and financial compliance, while an EOR takes on full legal responsibility for employment, managing contracts, benefits, and compliance with Puerto Rico's labor laws.
5) What is the difference between EOR and PEO?
An EOR assumes full legal responsibility for hiring and compliance, while a PEO operates under a co-employment model, sharing legal responsibilities with the client company.
6) What is the best employer of record?
Leading EOR providers for Puerto Rico include Skuad, Multiplier, Globalization Partners, Deel, and Papaya Global. The best provider depends on your company's specific needs, such as pricing, services, and local expertise.
7) How does an EOR work?
An EOR becomes the legal employer for workers, handling payroll, taxes, benefits, and compliance with local labor laws, while the client company manages day-to-day operations.
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