Puerto Rico Labor Law Guide for Hiring Employees and Contractors
Puerto Rico, an unincorporated territory of the United States, has a population of approximately 3.2 million people.
As of 2023, Puerto Rico’s economy was valued at around $100 billion in GDP, driven primarily by key sectors such as manufacturing (pharmaceuticals, electronics, and textiles), services (particularly finance, insurance, and real estate), and tourism. The island also has a growing technology sector, supported by government incentives.
The official currency of Puerto Rico is the US Dollar (USD).
Minimum Wage
USD 10.50 per hour
Overtime Wage
150% of the regular hourly rate
Meal Breaks
1 hour
Rest Breaks
10 minutes
Working hours
8 hours/day, 40 hours/week
Salary Payment Cycle
Bi-weekly
Payroll Taxes
FICA, FUTA, SUTA
Paid Vacation
15 days
Overtime Hours
After 8 hours per day
Night Shift Hours
150% of the regular hourly rate
Holidays
12 holidays
No Work Days
Sunday
To hire employees in Puerto Rico, businesses must register with the relevant local and federal authorities, including obtaining a tax identification number (TIN) and complying with the Puerto Rico Department of Labor and Human Resources regulations. The cost of setting up a business entity typically ranges from $500 to $2,000, and the process can take 30 to 60 days.
Employment contracts in Puerto Rico must be in writing and include essential details such as job description, salary, working hours, benefits, and termination conditions. The contracts should also specify probationary periods, if applicable. Puerto Rican labor laws distinguish between employees and independent contractors, with employees receiving more extensive protections, including benefits such as health insurance and retirement plans.
Puerto Rico follows a minimum wage law, which is set at USD 10.50 per hour as of July 1, 2024. This rate is consistent across the island and applies to most sectors. Certain exemptions may apply, such as for tipped employees, who may have a different minimum wage rate. Employers are required to pay holiday pay for work done on public holidays.
The standard working hours in Puerto Rico are 8 hours per day, totaling 40 hours per week. Overtime is compensated at 150% of the regular hourly rate and applies to any work beyond 8 hours per day or 40 hours per week. Night shift work, typically between 10 PM and 6 AM, is also compensated at 150% of the regular hourly rate.
The legal minimum age for employment in Puerto Rico is 16 years, with strict regulations to prevent child labor, especially in hazardous industries.
Employers in Puerto Rico must make several payroll deductions, including contributions to the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), and the State Unemployment Tax Act (SUTA). These deductions cover Social Security, Medicare, and unemployment benefits.
Puerto Rico has a unique income tax system that operates independently of the US federal tax system. The Puerto Rican income tax rates for 2024 are as follows:
Income Level (USD) | Tax Rate |
0 – 9,000 | 0% |
9,001 – 25,000 | 7% |
25,001 – 41,500 | 14% |
41,501 – 61,500 | 25% |
61,501 and above | 33% |
Puerto Rican law mandates several types of leave for employees:
Paid Vacation: Employees are entitled to 15 days of paid vacation after one year of service.
Maternity Leave: 8 weeks, with 4 weeks before and 4 weeks after childbirth.
Paternity Leave: 5 days following the birth of a child.
Sick Leave: Paid sick leave is available at a rate of one day per month of work, up to a maximum of 12 days per year.
Adoption Leave: Similar to maternity leave, applicable when adopting a child.
Mandated Holidays: Puerto Rico observes 12 public holidays each year.
Holiday | Date |
New Year’s Day | January 1 |
Three Kings Day | January 6 |
Good Friday | April |
Labor Day | May 1 |
Independence Day | July 4 |
Christmas Day | December 25 |
Employers in Puerto Rico are required to provide various benefits, including health insurance, retirement plans, and contributions to Social Security. Employees are also entitled to a Christmas bonus, which is equivalent to one-twelfth of their annual salary, provided they have worked at least 700 hours in the year.
Puerto Rico does not follow At-Will Employment laws. Employers must have a valid reason for terminating an employee, such as misconduct, redundancy, or breach of contract.
The termination process typically requires a notice period, often 30 days, and employees are entitled to severance pay based on their length of service and the reason for termination. In cases of unjust dismissal, employees can challenge the termination in court, and employers may be required to pay additional compensation or reinstate the employee.
Employers can legally terminate an employee under specific conditions, including the expiration of a fixed-term contract, mutual agreement, or severe misconduct. However, all terminations must be well-documented to ensure compliance with Puerto Rican labor laws.