- Overview: Puerto Rico
- Global HR Compliance
- Global PEO and payroll
- Contractor vs. employee: which is better?
Global HR Compliance in Puerto Rico
If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Puerto Rico Guide below will help you understand the nuances of labor legislation in the country.
Companies hire international workforce for various reasons but in most cases they are:
- entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
- hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.
Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.
If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of Puerto Rico, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in Puerto Rico and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.
We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.
Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.
With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Puerto Rico.
See Hiring and Firing Workforce in Puerto Rico Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Puerto Rico or would like to get more details.
Hiring and Firing Workforce in Puerto Rico Guide
# Employment contracts
Except in the case of probationary and temporary employment contracts, generally a written employment contract is not required under Puerto Rico law. Probationary and temporary contracts, however, are subject to specific requirements. (See discussion of temporary contracts and probationary contracts further below).
There are certain conditions of employment, however, that do need to be in writing, such as the following:
- flextime agreements,
- meal period reduction agreements,
- agreements to eliminate the second meal period and
- covenants not to compete.
Each of these is subject to specific conditions of validity. In the case of covenants not to compete, these requirements are to be found in judicial decisions and include a maximum non-competition period of twelve (12) months.
# Minimum (Statutory) Employment Rules and Regulations in Puerto Rico
# Hours of work:
Puerto Rico Law provides that the regular work shift for non-exempt employees is one of eight hours per day and a regular workweek is 40 hours. Any work performed in excess of these limits will be considered overtime work and must be compensated accordingly.
# Probation period:
Puerto Rico law allows probationary periods reasonably related to required employment skills. All probationary labor contracts (1) must be in writing; (2) must state the beginning and end of the probationary period; (3) must be executed before the employee actually begins to work; and (4) must not exceed ninety (90) days, unless a written permit is issued by the Puerto Rico Secretary of Labor, who may authorize the extension of the probationary period up to ninety (90) additional days. Any extension must be sought prior to the lapse of the initial probation period.
# Annual leave:
Before Law 4 of 26 January 2017, under Puerto Rico Law 180 of 27 July 1998, all workers in Puerto Rico employed on or after 1 August 1995, with the exception of administrators, executives and professionals accrued vacation at the rate of 1.25 days for each month in which the employee worked at least 115 hours. Under Law 4, the minimum hours worked in order to accrue vacation has been increased to 130 hours per month, instead of 115 hours.
For covered employees hired after 26 January 2017, the minimum monthly accrual of vacation leave is 0.5 days during the first year of service; 0.75 days after the first year and until the fifth year; one day after five years until 15 years; and 1.25 days after 15 years. However, if an employer has no more than 12 employees, the minimum monthly accrual of vacation leave is a fixed 0.5 days a month. Employees who worked for an employer before 26 January 2017 and had rates of accrual of vacation superior to that provided for in Law 4 continue to have the same accrual rates while they work for the same employer.
# Parental leave:
The “Working Mother’s Act” provides an eight (8) week maternity leave for female employees, at full pay. The leave commences four (4) weeks before birth and extends until four (4) weeks after birth. As an alternative, the employee can work up to one (1) week before the expected date of birth if she brings a medical certificate to the effect that she is able to do so. The leave may be extended for medical complications that disable an employee for work, up to twelve (12) weeks after the original leave expires. This extended leave is without pay, except that the employee may qualify for non-occupational disability benefits under Puerto Rico’s Short Term Non-Occupational Disability Statute.
If the employee gives birth prior to the expected date of birth, she may extend her postnatal leave by the amount of time that she did not enjoy of pre-natal leave. If she gives birth after the expected date of birth, pre-natal leave is similarly extended until actual birth, and paid accordingly. The employee may return to work after the first two (2) weeks of post-natal rest, as long as she brings a medical certificate that she is able to do so.
# Sick leave:
Before Law 4 of 26 January 2017, under Puerto Rico Law 180 of 27 July 1998, all workers in Puerto Rico employed on or after 1 August 1995, with the exception of administrators, executives and professionals, accrued sick leave at the rate of one day per month for each month in which the employee worked at least 115 hours. Under Law 4, the minimum hours worked in order to accrue sick leave has been increased to 130 hours per month, instead of 115 hours. Sick leave accrual remains one day for each month the covered employee works at least 130 hours.
Non-exempt employees are entitled to overtime pay for work in excess of 40 hours per week and/or eight hours in any calendar day (or, instead of calendar day, alternative 24-hour cycle determined by the employer, subject to certain requirements). Employees generally may not opt out of these statutory limitations.
Under Law 4 of 26 January 2017 (Labor Transformation and Flexibility Act), an employer and employee may agree in writing to establish an alternate workweek in which an employee works 10 regular hours for four days (which do not have to be consecutive) each week, without incurring the employer’s obligation to pay daily overtime. However, if, under the alternate workweek, an employee works more than 10 hours in a day, the employee is owed overtime. Alternate week schedule agreements must be in writing and voluntary.
# State minimum salary:
The minimum wage in Puerto Rico is currently $7.25 per hour. Puerto Rico’s minimum wage rate is linked to a Consumer Price Index, which is intended to raise the rate along with inflation. The current minimum wage rate is re-evaluated yearly based on these values.
# Employee dismissal:
The employment contract, except as otherwise provided in a special law, shall be terminated:
- by a mutual agreement of the parties;
- on the grounds set forth in the contract;
- the expiration of the agreed on period or the completion of the work or services object of the contract;
- the employee’s resignation or abandonment of the job;
- employee’s death or disability beyond the job holding period established in a special law;
- employee’s retirement;
- a change of employer, unless there is an agreement between the parties or a law that provides to the contrary;
- the employee’s discharge, or;
- noncompliance with the rules of conduct.
Under the new amendment, employees who are unjustly terminated, that is, without “just cause,” are entitled to the following mandatory severance pay:
- 2 months of salary if the employee has less than 5 years of service;
- or 3 months of salary if the employee has at least 5 years but less than 15 years of service;
- or 6 months of salary if the employee has more than 15 years of service; and
- an additional compensation consisting of 1 week of salary for each year of service if the discharge occurs within the first 5 years of employment;
- or 2 weeks of salary for each year of service if the discharge occurs after 5 years of service but before 15 years of service;
- or 3 weeks of salary for each year of service if the discharge occurs after completing 15 years or more of service.
Acumen International can help you fast-track your possibilities of entering and expanding your business in Puerto Rico by providing you with our Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any need to set up a legal entity first or afterwards.