Labor laws and compliance in the Dominican Republic
This guide has important information for businesses looking to hire employees or contractors in the Dominican Republic. It’s the largest economy in the Caribbean and Central America according to the World Bank. It’s the seventh-largest economy in Latin America. Almost 30% of the country’s population lives in the capital city of Santo Domingo.
Minimum Wage
Starts at 11,900 Pesos per year
Overtime Wage
1.35x Regular Wages
Meal Breaks
60 Minutes
Rest Breaks
No federal mandate
Working hours
8 hours/day, 40 hours/week
Salary Payment Cycle
Monthly
Payroll Taxes
Pension fund, Family healthcare, Labor risk insurance, Technical education tax
Paid Vacation
14 days, 18 days after 5 years of service
Overtime Hours
Beyond 44 hours in a week
Night Shift Hours
115% of regular pay 9PM to 7AM
Holidays
12 holidays/year
No Work Days
Saturday, Sunday, Voting days
A business needs a local entity in The Dominican Republic to hire locally.
Setting up an entity in the Dominican Republic involves registering with multiple agencies and can take 45-60 days. All documents have to be filled up in Spanish. You also need to register with the Department of Labour before you can hire any employee.
As per the new regulations, the person authorized to operate the account must be present to set up the bank account. Opening a bank account for a business can take 20-30 days due to the time needed to verify various documents.
You will also need to comply with benefits, payroll, tax, and HR laws.
Dominican Republic differentiates between employees and contractors. There are different rules for both, and incorrect classification can lead to fines.
There are different minimum wage laws for public and private sector in the Dominican Republic. Private sector minimum wage in depends on the number of employees and annual sales of the business.
In addition to the minimum wages, many employers also pay one month’s salary as a Christmas bonus, making the total annual salary to 13-times the monthly salary.
| Size of Business | Minimum Wage |
|---|---|
| Microenterprises – up to 10 employees and annual sales of up to 8 million Pesos | 11,900 Pesos |
| Small businesses – 11 – 50 employees and annual sales of up to 54 million Pesos | 12,900 Pesos |
| Medium-sized businesses – 51 – 150 employees and annual sales of up to 202 million Pesos | 19,250 Pesos |
| Large businesses – over 150 employees and annual sales of over 202 million Pesos | 21,000 P |
Work hours are tightly regulated in the Dominican Republic.
Standard working hours in The Dominican Republic are 8 hours per day or 40 hours per week, Monday to Friday. But it can be extended to 44 hours by adding 4 hours of work on Saturday. Managers can work up to 10 hours per day after an assessment by the Labour Office.
Employers typically follow a monthly payment schedule, with salaries paid on the first of every month. Salary is prorated for employees joining in the middle of a month.
In The Dominican Republic, monthly wages are calculated as 4.33 times the weekly wage or 4.33 times the standard hours per week if an hourly wage is given.
Salary must be paid in cash, by check, or by direct deposit to the employee’s account at a bank or other financial institution.
Individual Income Tax
In The Dominican Republic, domestic income is subject to income tax but income from outside is generally not taxed.
The Dominican Republic income tax system follows a slab structure. It means individuals pay income tax based on their income level. This is also called the progressive tax system in which individuals with higher income also pay higher taxes. Employers need to stay on top of these changes to be compliant with tax laws.
The following table shows income tax rates for Dominican Republic:
| Annual Salary | Applicable Tax Rate |
|---|---|
| 0 – 416,220 Pesos | NIL |
| 416,220 – 624,329 Pesos | 15% |
| 624,329– 867,123 Pesos | 20% |
| 867,123 and above | 25% |
Employers bear the following costs in Dominican Republic:
Pension Fund: Employers contribute 7.10% of salary and must withhold 2.87% from employee’s salary for pensions. This contribution is mandatory. Annual limit for pension fund contribution per employee is 325,250 Pesos.
Family Healthcare: Employers must contribute 7.09% of salary and also withhold 3.04% from employee’s salary for family healthcare. Annual limit for family healthcare contribution per employee is 162,625 Pesos.
Labour Risks Insurance – Employers also need to pay 1.2% of salary towards labour risks insurance. Annual limit for this tax per employee is 65,050 Pesos.
Technical Education Tax – Dominican Republic has a unique payroll-based tax to finance a program for technical education and training of workers. All employers must pay 1% of total monthly payroll towards this ax. The employees pay 0.5% of bonuses received towards this tax.
There are 13 National Holidays in The Dominican Republic.
Employees are entitled to a minimum of 14 paid holiday days each year. This increases to 18 days per year after five years of continuous employment. Employees can take the vacation after completing one year on the job.
Vacation time cannot be compensated by any form of payment.
Vacations cannot be taken for less than a week. Employers must pay the salary for the vacation time one day before the vacation time starts.
Expectant and new mothers get 14 weeks of maternity leave. They must have worked for 12 months and contributed to social security for 8 months to be eligible for this.
The employee gets 100% of regular pay during this period. Social security pays 50% of the salary while the employer pays the other 50%. Social security also credits the employers for the salary paid during this time. This helps mitigate the burden on the employer.
New mothers also get three 20-minute breaks during the workday for breastfeeding the child.
Paternity leave
Men get 2 days of paid paternity leave for every childbirth. It must be taken on the day the child is born. Employer must pay 100% salary fir these two days.
Sick Leave
There is no regulation for paid sick leave in the Dominican Republic. However, the social security will pay the employee through the employer if the worker is sick for more than four days:
- For outpatient treatment, employees get 60% of the base salary
- In case of hospitalization, employee will get 40% of the base salary
Dominican Republic has a comprehensive social security system that offers several mandatory benefits to employees:
- Retirement benefit
- Death benefit
- Disability benefits
- Short-term sickness benefits
- Maternity benefits
- Workmen’s compensation benefits
In addition, many employers also provide supplemental health insurance to their employees. In fact, a good health insurance plan can be a very attractive recruiting tool in Dominican Republic.
Terminating an employee in The Dominican Republic is complex, unless it’s by mutual agreement.
Contracts can be terminated with mutual agreement or if the contract period is over.
An employee can terminate the employment at will.
- Termination due to performance or disciplinary reasons – employer will need to provide proof of misconduct and give 48 hours’ notice to the employee.
- Termination without cause (“at will”) requires a longer notice period and may also involve severance pay. Employees on probation are not eligible for notice period. For others, the minimum notice period is 7 days and varies according to the following table:
| Length of Employment | Notice Period |
|---|---|
| 3 to 6 months | 7 days |
| 6 to 12 months | 14 days |
| More than a year | 28 days |
| Length of Employment | Severance Pay |
|---|---|
| 3 to 6 months | 6 days of pay |
| 6 to 12 months | 13 days |
| 1 to 5 years | 21 days |
| Over 5 years | 23 days |
| Length of Employment | Time Off Payment |
|---|---|
| 5 months | 6 days |
| 6 months | 7 days |
| 7 months | 8 days |
| 8 months | 9 days |
| 9 months | 10 days |
| 10 months | 11 days |
| 11 months | 12 days |