Employer of Record in Puerto Rico

An Employer of Record (EOR) in Puerto Rico is a company that legally hires and pays employees on your behalf. This means you can build a team in Puerto Rico without setting up your own local entity. The EOR handles all the administrative and legal tasks of employment. Think of them as your local HR partner, managing payroll, taxes, benefits, and compliance with Puerto Rican labor laws. You manage your team's day-to-day work, while the EOR takes care of the rest. For companies looking to hire in Puerto Rico, providers like Rivermate can simplify the process.

How an Employer of Record (EOR) Works in Puerto Rico

Using an EOR to hire in Puerto Rico is a straightforward process. It allows you to onboard new talent quickly and correctly.

Here is how it typically works:

1. You Find the Talent: You identify the person you want to hire in Puerto Rico.
2. The EOR Hires Them: The EOR legally hires the employee through their local Puerto Rican entity. They handle the employment contract, making sure it complies with all local labor laws.
3. Onboarding: The EOR manages the onboarding process. This includes setting up payroll, enrolling the employee in mandatory benefits, and ensuring all paperwork is correct.
4. Payroll and Benefits Management: The EOR takes care of paying your employee accurately and on time. They also manage all withholdings for taxes and social contributions as required by Puerto Rican law.
5. Ongoing Compliance: The EOR stays up-to-date with Puerto Rico's labor laws. They manage any HR issues that may arise, ensuring you remain compliant.
6. You Manage Your Employee: You direct your employee's daily tasks and responsibilities, just like any other member of your team. The EOR handles the administrative side of employment.

Why use an Employer of Record in Puerto Rico

Using an EOR in Puerto Rico simplifies your expansion. It removes the legal and administrative hurdles of hiring in a new territory, letting you focus on growing your business. You can access a new talent pool without the time and expense of establishing a legal entity yourself.

Here are some key benefits:

• Enter the Market Faster: You can hire employees and start operations in Puerto Rico quickly. You do not have to go through the lengthy process of setting up a local company.
• Ensure Legal Compliance: Puerto Rico has its own specific labor laws and regulations. An EOR has the local expertise to navigate these complexities, reducing your risk of non-compliance.
• Save Time and Money: Setting up and maintaining a legal entity involves significant costs and administrative work. An EOR handles all HR-related tasks, saving you money on legal fees and internal administrative staff.
• Offer Competitive Benefits: An EOR can provide your employees with legally required and competitive benefits packages, including health insurance and retirement plans. This helps you attract and retain top talent in the local market.
• Gain Flexibility: An EOR gives you the flexibility to scale your workforce up or down as your business needs change, without the complexities of direct employment contracts.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Puerto Rico includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Puerto Rico.

Hiring in Puerto Rico means navigating a unique legal landscape that blends U.S. federal laws with its own specific labor regulations. As a U.S. territory, many employment standards will feel familiar, but key differences exist that you need to know. For example, a Christmas bonus is a mandatory benefit for employees. To hire directly, you must register as an employer with multiple government agencies, including the Department of Labor and the Department of Treasury. You'll also be responsible for managing payroll taxes and complying with local laws on wages, hours, and leave.

Employment contracts & must-have clauses

While verbal agreements are recognized, we strongly recommend written contracts in Puerto Rico to ensure clarity and protection for everyone involved. You can write the contract in any language, as long as both you and the employee understand it.

Your employment contracts should clearly state the following:

• Job responsibilities: What the employee will do.
• Salary and compensation: How much and how often the employee will be paid.
• Working hours: The expected schedule.
• Benefits: This includes mandatory benefits like paid leave and social security contributions.
• Probationary period: The length of the trial period.
• Termination policies: The conditions under which either party can end the contract.

Probation periods

In Puerto Rico, new hires typically have a probationary period. This allows you to assess their performance before they gain full employment status.

Unless your employment contract says otherwise, this probationary period is automatic.

Working hours & overtime

The standard workweek in Puerto Rico is 40 hours, based on an 8-hour workday. If an employee works more than 8 hours in a day or 40 hours in a week, they are entitled to overtime pay. The overtime rate is typically at least 1.5 times their regular hourly wage.

Public & regional holidays

Employees in Puerto Rico are entitled to a number of public holidays. Keep these dates in mind when scheduling work and calculating leave.

• January 1: New Year's Day
• January 6: Three Kings Day
• January 15: Martin Luther King Jr. Day
• February 19: Presidents' Day
• March 22: Emancipation Day
• March 29: Good Friday
• April 16: José de Diego Day
• May 27: Memorial Day
• June 19: Juneteenth
• July 4: U.S. Independence Day
• July 25: Puerto Rico Constitution Day
• September 2: Labor Day
• October 14: Columbus Day
• November 11: Veterans Day
• November 19: Discovery of Puerto Rico Day
• November 28: Thanksgiving Day
• December 25: Christmas Day

Hiring contractors in Puerto Rico

You can also hire independent contractors in Puerto Rico. This can be a flexible option, but it's important to classify workers correctly. Misclassifying an employee as an independent contractor can lead to significant legal and financial penalties.

An Employer of Record (EOR) can help you avoid these risks. An EOR takes on the legal responsibility for your workers in Puerto Rico. This includes:

• Ensuring compliant contracts
• Managing payroll and taxes
• Providing statutory benefits

By using an EOR, you can hire talent in Puerto Rico without needing to establish a local entity or worry about navigating complex labor laws. This allows you to focus on growing your business while we handle the HR and compliance.

When you hire in Puerto Rico, you need to understand the local compensation and payroll practices. This involves a dual system where you follow both U.S. federal and Puerto Rican laws. This guide breaks down what you need to know to pay your team correctly and stay compliant.

Payroll cycles & wage structure

You can pay your employees in Puerto Rico on a bi-weekly, monthly, or semi-monthly basis. No matter which cycle you choose, you must issue payment on the 15th of the month.

A standard workweek is 40 hours, typically eight hours per day over five days.

Puerto Rico also has a mandatory 13th-month salary, which is a Christmas bonus paid in December. The amount depends on your number of employees:

• More than 21 employees: 2% of the employee's annual wages, up to a maximum of $600.
• 21 or fewer employees: 2% of the employee's annual wages, up to a maximum of $300.

Overtime & minimums

The minimum wage in Puerto Rico is $10.50 per hour as of July 1, 2024. This applies to most non-exempt employees.

You must pay overtime for any hours worked beyond the standard 40-hour workweek. The overtime rate is 150% of the regular wage. If an employee works on a public holiday, the overtime rate is also 150%. For any overtime hours exceeding 10 in a week, the rate increases to 200% of the regular salary.

Employer taxes and contributions

As an employer in Puerto Rico, you are responsible for several taxes and contributions. These include both federal and local obligations.

Employee taxes and deductions

You must withhold several taxes and deductions from your employees' paychecks.

In Puerto Rico, employee benefits and leave are a mix of U.S. federal laws and local regulations. This means you'll find some familiar protections, but also unique requirements you need to follow. Providing the right benefits is key to attracting and keeping great employees. It shows you value your team and are invested in their well being.

Statutory Leave

Puerto Rico law requires employers to provide several types of paid leave. These are the minimums, and you can always offer more.

• Annual Leave: The amount of paid vacation an employee gets depends on their years of service with your company. To be eligible, employees must work at least 115 to 130 hours in a month, depending on the specific leave.
  • First year: 6 days.
  • 1 to 5 years: 9 days.
  • 5 to 15 years: 12 days.
  • Over 15 years: 15 days.
• Sick Leave: Employees earn one day of paid sick leave for every month they work at least 130 hours. This adds up to a maximum of 12 days per year.
• Maternity Leave: Female employees are entitled to eight weeks of paid maternity leave. Typically, four weeks are taken before the birth and four weeks after.
• Family and Medical Leave: The U.S. Family and Medical Leave Act (FMLA) applies in Puerto Rico. This provides eligible employees with up to 12 weeks of unpaid, job-protected leave for certain family and medical reasons.

Public Holidays & Regional Holidays

Employees in Puerto Rico are entitled to paid time off for public holidays. Here are the public holidays for 2025.

Typical Supplemental Benefits

To stay competitive, many employers in Puerto Rico offer benefits beyond what the law requires.

How an EOR Can Help with Setting Up Benefits

Setting up a benefits package in a new place can be complicated. An Employer of Record (EOR) can make it simple.

An EOR acts as the legal employer for your team in Puerto Rico. This means they handle all the HR tasks, including benefits administration. Here’s how an EOR can help:

• Compliance: An EOR ensures your benefits package meets all local labor laws. They stay up to date on changing regulations so you don’t have to.
• Payroll and Taxes: They manage payroll, tax withholdings, and contributions for benefits like social security.
• Attract Talent: An EOR can help you create a competitive benefits package that attracts and retains top talent in the local market.
• Save Time and Money: You avoid the cost and time of setting up a legal entity in Puerto Rico and hiring an in-house HR team.

By partnering with an EOR, you can focus on growing your business while they handle the complexities of employee benefits.

When an employment relationship ends in Puerto Rico, you need to follow specific rules. The process is different from the mainland United States because of local laws that protect employees. You must handle terminations carefully to avoid legal and financial problems.

Notice Periods

Puerto Rico law does not require you to give an employee advance notice of termination. An employee is also not legally required to give you notice before they resign. Even so, providing notice is a good professional practice that helps make the transition smoother for everyone.

Severance Pay

If you terminate an employee without "just cause," you must pay them severance. Puerto Rico’s Unjust Dismissal Act, or Act 80, sets the rules for this. An employee dismissed without a valid reason is entitled to severance pay based on how long they worked for you.

The calculation for severance can vary depending on the employee's hire date. For employees hired on or after January 26, 2017, the severance is:

• A base payment equal to three months of salary.
• An additional two weeks of salary for each full year of service.
• The total severance payment is capped at a maximum of nine months' salary.

You are not required to pay severance if you can prove there was a just cause for the termination.

How Rivermate Handles Compliant Exits

When you partner with an Employer of Record like Rivermate, we manage the entire offboarding process for you. We make sure that every termination complies with Puerto Rican labor laws.

Here’s how we help:

• Legal Compliance: We navigate the complexities of local laws, including Act 80, to ensure every termination is handled correctly.
• Documentation: We prepare all necessary offboarding documents, including the final pay and any required separation agreements.
• Severance Calculations: We accurately calculate any required severance pay based on the employee's service length and the reason for termination.
• Clear Communication: We help you communicate the decision professionally and respectfully, reducing the risk of disputes.

By managing these steps, we help you offboard employees in Puerto Rico smoothly and without risking legal issues.

Navigating the visa and work permit landscape in Puerto Rico is straightforward once you understand a key fact: Puerto Rico is a territory of the United States. This means it follows U.S. federal immigration laws. If you are a U.S. citizen, you can live and work in Puerto Rico without any special permits. For foreign nationals, the process is the same as entering and working in any U.S. state. You will need the appropriate U.S. visa to work legally on the island.

Employment visas & sponsorship realities

When you hire foreign talent to work in Puerto Rico, you need to secure the correct U.S. work visa. An Employer of Record (EOR) can help you with this. An EOR can legally employ workers on your behalf, handling payroll, taxes, and compliance with local labor laws.

Here are some common visa types for working in Puerto Rico:

• H-1B Visa: For professionals in specialty occupations that require a bachelor's degree or equivalent.
• L-1 Visa: For employees transferring from a foreign company to a U.S. branch, subsidiary, or affiliate.
• E-2 Visa: For investors from treaty countries who have made a significant investment in a U.S. business.

An EOR can sponsor these visas, but they must be registered with the Puerto Rico Department of Labor and Human Resources. The EOR takes on the responsibility of ensuring all immigration and labor regulations are met. This simplifies the process for you, especially if you don't have a legal entity in Puerto Rico.

Keep in mind that independent contractors are considered self-employed and must apply for their own appropriate visa.

Business travel compliance

For short-term business visits to Puerto Rico, you have a couple of options depending on your nationality. These visits are for activities like attending meetings, conferences, or negotiating contracts. You cannot perform work or earn a salary on a business visitor visa.

Here’s a breakdown of the common options for short-term business travel:

If you are from a country in the Visa Waiver Program, you can apply for an Electronic System for Travel Authorization (ESTA) online. This is a faster and more streamlined process than applying for a B-1 visa. An approved ESTA is valid for two years and allows for multiple entries.