Employing in Puerto Rico
Puerto Rico offers a fascinating blend of cultures and traditions that make it an enjoyable place to do business. And although Puerto Rico has struggled through financial turbulence in recent years, this small yet well-developed Caribbean island still has much to offer those interested in global expansion.
Thanks to its status as a US Commonwealth, the island has modern infrastructure and an institutional framework guided by the US, including laws governing intellectual property. Because of the island’s proximity to the US mainland, it also enjoys well-established transportation networks — serving as an access point to the vast US consumer market.
Yet, despite sharing a regulatory framework with the US, Puerto Rico retains its own favourable foreign tax structure — a major competitive advantage for businesses looking to expand overseas. Combined with its well-educated, largely bilingual workforce and lost cost of doing business, this competitive tax system and Puerto’s Rico’s robust infrastructure make it one of the more attractive markets for investment in the Caribbean region.
An employer of record, sometimes known as an international PEO can help you quickly hire and onboard workers in Puerto Rico – often with just two weeks’ notice. Establishing your own local entity without risk and saving costs, this type of service makes an EOR in Puerto Rico worth checking out!
Country Guidelines

Contractual Provisions
Contract of employment
The contract can be executed electronically and should be provided in a language that the employee understands and has sufficient knowledge of in order to understand the documentation.
Medical examinations and drug testing are not a statutory requirement in Puerto Rico; however, it’s customary practice for private companies to establish these procedures as part of their onboarding process.
For onboarding, Puerto Rico requires employers to establish certain mandatory policies:
- Domestic violence protocol
- Unpaid leave and reasonable accommodation for victims of abuse
- Substance abuse policy (required if the employer will be conducting drug tests)
- Video surveillance (required if the facilities will have video surveillance in the workplace)
Rules of registration
Pursuant to Puerto Rico’s Special Child Support Act, every employer who hires or rehires a person must provide the following information to the Child Support Administration: employee’s name, address and social security number and employer’s federal employer identification number. The forms may be sent by mail or by magnetic or electronic media. The form may also be submitted through the Puerto Rico Department of Labor.
Employers are required to report this information no later than 20 days after the date on which the employer hires or rehires the person — or twice per month with a lapse of no less than 12 days or more than 16 days between transmissions if the information is submitted electronically or magnetically.
New hires are also required to complete the Department of Homeland Security U.S. Citizenship and Immigration Services Form I-9, Employment Eligibility Verification, as well as a Puerto Rico Department of Treasury Form 499 R-4.1, Withholding Exemption Certificate.
Probationary period
An automatic probationary period applies to all employees in Puerto Rico unless a shorter period is agreed by the employer and employee.
- Exempt employees: 360 days
- Non-exempt employees: 270 days
This, however, is not applicable to employees on a temporary contract, hired through an employment agency.
No extensions are permissible should the performance be unsatisfactory. The probationary period is automatically extended by the employee taking statutory leave of absence and continues for the remaining period once the employee returns to work.
There are no statutory periods of termination during the probationary period.
Working hours
There’s no minimum or maximum statutory requirement for the number of working hours.
Rest breaks
It’s customary to give a one-hour unpaid meal break to all employees.
Non-exempt employees are required by federal law to take a one-hour meal break when scheduled to work for more than five consecutive hours and longer than six hours.
Overtime
Exempt employees are not entitled to overtime pay.
Non-exempt employees are entitled to overtime pay under the following circumstances:
- Employers are required to pay for all overtime hours worked in excess of 40 during any week at 1.5 times the regular rate of pay.
- Employers must also pay daily overtime (excess of eight hours in a calendar day) at 1.5 times the regular rate of pay.
- Employers are also required to pay for work performed on an employee’s day of rest at 1.5 times their regular rate of pay.
The day of rest, also known as the seventh day, is a calendar period of 24 consecutive hours during which no work should be performed if any work has been carried out during all of the previous six calendar days. The day of rest need not fall on any particular calendar day.
Vacation allowance
Exempt employees are not entitled to statutory vacation.
Non-exempt employees accrue vacation in months in which they work at least 130 hours, at four different rates depending on years of service:
Years of service | Days per month | Maximum days per year |
---|---|---|
One | 0.5 | Six |
Two to five | 0.75 | Nine |
Six to 15 | One | 12 |
15+ | 1.25 | 15 |
Vacation benefits are not accrued during the first six months of employment; however, once an employee completes six months of employment, they’ll accrue vacation leave retroactively to the first day of employment. It’s important to note that vacation accrual is payable over salary.
Termination
Pursuant to Act No. 80 of 30 May, 1976, terminations from employment must be with just cause and, usually, by following a progressive discipline process.
Holiday & Leave
Statutory insurances
Unemployment insurance
Unemployment insurance is mandatory at state and federal level. Employers are entitled to contribute a maximum of 5.4% of annual wages to the state (SUTA) and 0.6% to the federal unemployment tax (FUTA)
Workers’ compensation
The Puerto Rico Compensation System for Work-Related Accidents Act provides certain economic benefits and job reinstatement rights to employees who become temporarily disabled due to work-related illness or injury.
Employers are required to pay mandatory premiums of 1% of the employee’s salary to a public corporation known as the State Insurance Fund Corporation (SIFC), based on the total amount of salaries paid and the types of risks involved.
In addition to economic benefits, the SIFC also provides the medical and rehabilitation services that ill and or injured employees may need. This government system may not be substituted with private coverage. In exchange for payment of the mandatory premiums, employers are generally granted immunity from any civil action and damages resulting from employee work-related accidents.
Non-occupational disability insurance
SINOT (Act No. 139 of 26 June, 1968) provides up to 12 months (equivalent to 360 days) of protected leave and certain economic benefits to employees who become temporarily disabled due to non-occupational illness or injury.
SINOT coverage is compulsory for all employees, exempt and non-exempt.
For purposes of computing the disability period, paid vacation and/or sick leave cannot be deducted from the maximum period of benefits.

Keen to engage an EOR in Puerto Rico? At TopSource Worldwide, we work with local experts to help you navigate the various admin and cost obstacles you may come across along your expansion journey
To find out how we can help your business with our employment solutions, contact us today.
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