All over Puerto Rico are businesses that operate under Puerto Rico’s Export Services tax incentive, formerly known as Act 20. Going forward, new Export Services businesses established under Act 60, will start to pop up rapidly. Since hiring at least one full-time Puerto Rican employee is a requirement for many of Puerto Rico’s tax incentives, one of the most common questions Export Services decree holders have is how to hire employees in Puerto Rico.

Luckily for those looking to hire employees in Puerto Rico, the hiring practices are relatively similar to those in the US, and Puerto Rico boasts a strong, vibrant workforce full of qualified workers for various positions.

Puerto Rico’s Workforce

When the predecessor of the Puerto Rico Incentives Code, Act 20, was first introduced, the Puerto Rican government released a report to show prospective decree holders the many advantages of moving or establishing a business in Puerto Rico. The report highlighted Puerto Rico’s workforce of 1.3 million, which includes a sizeable proportion of highly skilled workers. The 30,000+ advanced degrees in STEM fields that Puerto Rico grants every year are clear evidence of the skills of the Puerto Rican workforce.

How to Recruit Employees in Puerto Rico

If you’re looking to hire employees in Puerto Rico, check out the job bank maintained by the Puerto Rico Department of Labor. It’s an entirely free service that allows you to create an employer account and sift through the resumes of potential employees.

Of course, the Internet is rife with other opportunities to find employees, as well. Many job banks that are popular in the US, such as Indeed and GlassDoor, also have a strong presence in Puerto Rico, making them ideal recruitment platforms for Act 60 businesses. Social networks such as LinkedIn and Facebook can also serve as high-quality recruitment platforms. You can also try out Puerto Rico’s own classifieds website, which, however poorly visually designed it is, is a fantastic way to hire employees in Puerto Rico.

Wages in Puerto Rico

One major bonus of hiring employees in Puerto Rico is the relatively low wages compared to the United States. According to Indeed statistics, here are the average wages for select jobs as of March 2020:

• Administrative assistant – $10.11 per hour
• Call center representative – $9.68 per hour
• Supervisor – $11.37 per hour
• Tutor – $20.49 per hour
• Home health aide – $100 per day
• Programmer analyst – $55,839 per year
• Software engineer – $26.35 per hour

Employee Benefits in Puerto Rico

Offering health and dental insurance benefits to employees is optional, but the Puerto Rican government has set various leave, wage, and hour requirements that all employers must adhere to.

Overtime

Any full-time employee who works more than 40 hours a week or 10 hours a day entitled to overtime pay at one-and-a-half times their hourly wages. Any employee who works at least six hours a day has the right to a minimum 30-minute meal break.

Sick leave

Any employee who works at least 115 hours a month, which translates to 28 hours a week, or five and a half hours a day, is entitled to one day of sick leave per month. Companies with at least 15 employees must also allow workers to use sick time to care for family members, including parents, spouses, and children.

Paid time off

Any employees who work at least 130 hours a month are also entitled to paid vacation time. They accrue vacation days based on the amount of time they have worked for the company, as follows:

• 0.5 days per month the first year
• 0.75 days per month in the second through fifth years
• 1 day per month in the sixth through fifteenth years
• 1.25 days per month beyond the sixteenth year

You can find more information about Puerto Rico’s hiring practices and labor laws at the Puerto Rico Department of Labor website.

Puerto Rico Payroll Taxes

Certain payroll taxes are applicable to any business that hires employees in Puerto Rico. They’re generally similar to those in the US, so if you’ve hired employees in the US before, you may already be familiar with the general practices. 

• FICA taxes. Puerto Rico employees are covered by Medicare and Social Security, so employers pay 7.65% in FICA taxes.

• FUTA. The unemployment tax rate is 0.6% on the first $7,000, after the 5.4% credit for the Puerto Rico unemployment tax.

• Puerto Rico unemployment tax. You pay 5.6% of the first $7,000 for each employee.

• Disability tax. This tax is shared equally between employer and employee and amounts to 0.6% of the first $9,000 in salary.

• Worker’s compensation insurance. This tax is based on the type of work the employee performs.

Do I Have to Hire Employees in Puerto Rico under Act 60?

When Act 20 was originally passed, Puerto Rico’s unemployment rate was nearly 18%, so the legislation included a provision that Act 20 businesses employ at least five employees in Puerto Rico, one of which could be the business owner. Later, after Puerto Rico’s economy improved and the unemployment rate sank, the employee requirement was dropped.

Things changed again when Act 20 was replaced by Act 60. Act 60 brought a new employee requirement: Exempt businesses that generate at least $3,000,000 in annual revenue must directly employ at least one full-time employee. The employee has to be a bona fide resident of Puerto Rico who directly contributes to the business activities covered by the decree.

All in all, even if you have to hire employees in Puerto Rico, the process is relatively simple and straightforward. You can take advantage of a highly skilled labor force that works for significantly lower wages than in the US while enjoying Puerto Rico’s generous tax incentives.

Disclaimer: Neither PRelocate, LLC, nor any of its affiliates (together “PRelocate”) are law firms, and this is not legal advice. You should use common sense and rely on your own legal counsel for a formal legal opinion on Puerto Rico’s tax incentives, maintaining bona fide residence in Puerto Rico, and any other issues related to taxes or residency in Puerto Rico. PRelocate does not assume any responsibility for the contents of, or the consequences of using, any version of any real estate or other document templates or any spreadsheets found on our website (together, the “Materials”). Before using any Materials, you should consult with legal counsel licensed to practice in the relevant jurisdiction.