Puerto Rico Employment Guide

Understanding Puerto Rico's Minimum Wage Requirements

Puerto Rico maintains a minimum wage of $1,160 per month for covered employees. This baseline compensation is essential for employers to understand when structuring compensation packages for their workforce on the island.

Personal Income Tax Structure in Puerto Rico

The territory employs a progressive income tax system with rates ranging from 0% to 33%. What makes Puerto Rico's tax calculation particularly nuanced is how family circumstances, including the number of dependents, can significantly influence the final tax liability. For instance, a single employee earning $50,000 annually will have a different effective tax rate than a married colleague with two children earning the same salary.

Breaking Down Employer Payroll Costs

When calculating total employment expenses, businesses should anticipate additional costs averaging approximately 13.75% of an employee's gross salary. These mandatory contributions cover various social security and insurance programs.

Monthly Payroll Contributions

• Puerto Rico Unemployment Insurance - 2.70%*
• Puerto Rico Special Assessment - 1.00%*
• Workmen's Accident Compensation - 1.50%
• Federal Unemployment Tax (FUTA) - 0.60%*
• Federal Social Security and Medicare (FICA) - 7.65%**
• Disability Insurance - 0.30%***

*Contribution base: $7,000 annually
**Contribution base: $160,200 annually
***Contribution base: $9,000 annually

Annual Employer Obligations

Employers must also account for the 13th-month payment, equivalent to 2% of annual wages with a maximum cap of $600 per employee. This statutory bonus is a distinctive feature of Puerto Rico's labor landscape that companies like SailGlobal help international businesses navigate effectively.

Understanding contribution caps is crucial for budget planning. For example, once an employee's earnings exceed $160,200 annually, no further FICA contributions are required for the remainder of the year, creating potential savings for high-earning positions.

Overtime Regulations and Standard Work Hours

The standard workweek in Puerto Rico mirrors mainland U.S. standards at 40 hours, typically structured as eight-hour days from Monday through Friday. Non-exempt employees must receive overtime compensation at 150% of their regular hourly rate for hours worked beyond this threshold.

Classification is critical—non-exempt employees generally don't oversee teams or perform specialized professional duties and earn below $2,964 monthly. Misclassification can lead to significant penalties, as demonstrated in recent cases where companies faced back-pay settlements exceeding six figures.

Professional employer organizations like SailGlobal provide essential guidance to ensure compliance with both federal and Puerto Rico-specific overtime regulations, helping businesses avoid costly legal complications while maintaining competitive compensation structures.