How to Hire Employees in Puerto Rico - Relocate to Puerto Rico with Act 20 & Act 22

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The application deadline for Puerto Rico’s Act 20 business exemption is December 31, 2020 (earlier for preferential terms), and entrepreneurs and business owners are eager to learn more about doing business in Puerto Rico. While there are questions about tax incentives, establishing residency, and what type of businesses qualify, one of the most common is how to hire employees in Puerto Rico.

Fortunately, Puerto Rico has a vibrant workforce and hiring practices quite similar to those in the United States. It’s easier than you might think to find qualified employees in Puerto Rico.

Puerto Rico’s workforce

In the wake of passage of Act 20, the Government of Puerto Rico prepared a report to help business owners get a clearer picture of the advantages of relocating to Puerto Rico. Chief among them is the island’s 1.3 million strong, highly educated workforce—Puerto Rico grants more than 30,000 advanced degrees in STEM fields each year. 

How to recruit employees in Puerto Rico

The Puerto Rico Department of Labor maintains a job bank where you can create an employer account and screen resumes to find qualified candidates. It’s a free service and there are many other employer resources to help you understand Puerto Rico’s compliance regime. 

In addition, many other major headhunting and recruiting firms have a presence in Puerto Rico. You can also post jobs with internet sites such as Indeed or GlassDoor. LinkedIn is another potential source of skilled candidates. 

Wages in Puerto Rico

The most recent statistics from August 2019 show average salaries are lower than those for similar jobs in the mainland. For example:

  • Administrative assistant – $8 to $10 per hour
  • Call center representative – $9 to $11 per hour
  • Small business supervisor – $11 to $13 per hour
  • English teacher – $16 to $18 per hour
  • Home health aide – $100 per day
  • Programmer/analyst – $39,500 per year
  • Software engineer – $60,000 per year

Understanding employee benefits in Puerto Rico

While benefits such as health and dental insurance are discretionary, Puerto Rico does have leave, wage, and hour laws that apply to all employers. 

Overtime

Full-time employees who work more than 40 hours per week or more than 10 hours per day are entitled to overtime pay at one-and-a-half times their hourly wages. If any employee works six hours or more in a day, he’s allowed at least a 30 minute meal break. 

Sick leave

All workers who work at least 115 hours per month (roughly 5-½ hours a day, or 28 hours a week) earn one day of sick leave each month. If you have at least 15 employees, you also must allow workers to use sick time to care for family members, including parents, spouses, and children. 

Paid time off

Puerto Rico law also provides paid vacation for employees who work at least 130 hours a month. The accrual schedule looks like this:

  • 0.5 days per month in year one
  • 0.75 days per month years 2 through 5
  • 1 day per month years 6 through 15
  • 1.25 days per month years 16 and beyond

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

If you hire employees in Puerto Rico, you have to pay certain payroll taxes, many of which are similar to those paid on the mainland. 

  • 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 is shared equally between employer and employee and amounts to 0.6% of the first $9,000 in salary.
  • Worker’s compensation insurance. This is based on the type of work the employee performs.

Do I have to hire employees in Puerto Rico under Act 20?

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. 

The Act succeeded in bringing entrepreneurs and small businesses to the Commonwealth; between new business growth and the general economic recovery, Puerto Rico’s unemployment rate dropped considerably. In 2017, the law was amended to drop the five-employee requirement. 

There’s a lot to consider before moving your business to Puerto Rico, but finding qualified employees isn’t a major concern. Puerto Rico’s service sector is thriving, and workers are anxious to find good jobs now that the recovery from Hurricane Maria is well underway.

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