Puerto Rico, a small Caribbean island and unincorporated territory of the United States of America, hosts a diverse economy driven by important sectors such as tourism, pharmaceuticals and manufacturing. In recent years, there has been a growing interest in renewable energy and the development of new Web3 technologies like blockchain and cryptocurrency, making these sectors potential areas of high growth. Multinational companies (MNCs) considering expanding into or hiring in Puerto Rico can benefit from its favorable business environment, tax incentives and highly skilled workforce.
- Strategic Geography: The Caribbean location, along with Spanish being the dominant language, means the island is ideal for companies looking to expand into Latin American and neighboring Caribbean markets. It may also serve as a gateway to the U.S.
- Strong Talent Pool: Puerto Rico offers a highly educated, bilingual workforce, with a strong footprint in engineering, science and technology. This provides companies with access to a pool of talented workers and can help drive innovation and competitiveness.
- Unique Tax Incentives: Several tax breaks and benefits are available to companies operating on the island, including a select 4% corporate tax rate (for business-to-business services and designated services), a generous tax exemption for qualifying dividends received from foreign subsidiaries as well as tax credits for research and development.
- Premier Hub for Innovation: The island is becoming an important hub for innovation and the emerging technology space, including blockchain, cryptocurrency, healthtech, manufacturing tech, renewable energy, internet of things (IoT) and more.
How does the HR framework in Puerto Rico differ from that of the mainland U.S.?
Puerto Rico is U.S. and many of its labor laws are similar to those of the mainland but, as is the case with each U.S. state, there are some key differences that companies need to be aware of.
For example, Puerto Rico maintains its own regulations on minimum wage, overtime pay, worker’s compensation, labor unions, discrimination and harassment.
Because Puerto Rico has unique labor laws, it is recommended that all companies – including those based in other U.S. regions – seek consultation from experts to ensure they are compliant and ready to engage workers.
How are labor laws determined in Puerto Rico?
Employment laws in Puerto Rico are regulated by the following:
Puerto Rico tends to be more protective of employee rights compared to many other parts of the U.S. Therefore, even though both local and federal laws apply in Puerto Rico, companies are advised to follow the policy that will be more favorable for employees.
What official bodies oversee Puerto Rico’s labor landscape?
The Puerto Rico Department of Labor and Human Resources (PRDLHR) is charged with overseeing labor and employment-related legislation on the island. This same body administers other labor-related areas such as human resources training, occupational health/safety, unemployment insurance benefits and re-employment programs.
When filing administrative claims, employees will reach out to the Bureau of Employment Norms and the Office of Mediation and Adjudication. They may also have to engage with the Anti-Discrimination Unit, which is Puerto Rico’s counterpart of the US Equal Employment Opportunity Commission.
What do companies need to know about employment contracts?
The employment contract has been defined by Act 4 as the basis of established employment relations between the employer and the employee. As per the law, the contract does not have to be written and can be verbal instead.
If the contract does not specify a termination date, it is assumed that it is for an indefinite period. The employment contract can be communicated in any language the employee is comfortable with. Act 4 specifies that an employee’s signature in the contract establishes he or she understands the contract’s language and terms.
Are probation periods common in Puerto Rico?
Probation periods are allowed in Puerto Rico. The aim of the probation period is for both the employer and the employee to determine if the job is a good fit.
The exact length of a probation period can vary depending on the company, industry and the type of job. The standard probation period for managerial staff and executives is set at 12 months. Other staff members and workers typically go through a standard nine-month probation period.
Are bonuses mandatory in Puerto Rico?
The Christmas Bonus Act (Act No. 148-1969) specifies that non-exempt workers must be paid an annual bonus. Provisions for this Act are updated with amendments every few years. Furthermore, there are separate requirements for micro, small and medium-sized business as established in the Puerto Rico Micro, Small, and Medium-Sized Business Promotion Act. Because of the ambiguity, employers are highly advised to seek expert consultation to ensure they are properly compensating employees with bonuses.
Why is the Employer of Record (EOR) hiring model growing in Puerto Rico?
Puerto Rico is becoming a hub for many key industries and continues to attract the interest of MNCs for expansion and hiring, especially those seeking to enter the markets of Latin America or the U.S.
While Puerto Rico looks to have a bright future ahead, MNCs may find it difficult to hire and manage a workforce on the island. Puerto Rico’s labor landscape tends to be favorable toward employees and there are unique laws in the labor code that are subject to amendments and interpretation. One wrong move can result in fines, penalties and reputation damage.
Some companies find the EOR hiring model to be a more agile, cost-effective solution for hiring in Puerto Rico. By engaging an EOR like GoGlobal, the MNC can sidestep the lengthy process of setting up a company. An effective EOR solution also relieves the HR team from learning the regulations for operating a company, paying taxes and administering payroll in Puerto Rico. With the right EOR provider on the job, the MNC can avoid HR risks and operational pitfalls.
The EOR arrangement is sometimes just temporary, serving as a bridge solution until the company officially establishes a legal entity. Other times, it can be a permanent solution for building a team in Puerto Rico.
What can a company expect when they partner with GoGlobal for hiring needs?
More and more companies are discovering how vibrant Puerto Rico is for business expansion and hiring.
Before we onboard a new worker, GoGlobal’s team on the ground in Puerto Rico will meet one-on-one with him or her to go over the details of the EOR arrangement. Once the worker is onboarded, that same dedicated team will serve as the point of contact. Our expert team members are always ready to resolve any issues that come up in payroll, benefits or taxation.
What makes the GoGlobal experience different?
GoGlobal is a people-first international HR and Employer of Record (EOR) service provider, which means we emphasize human-to-human touch points throughout the entire hiring process. We then complement the experience with our cutting-edge technology solutions.
Our team members in Puerto Rico are experts in the regulatory environment and are well acquainted with local cultural customs. They can offer workers services in their time zone and in English, Spanish or whatever language they prefer. This customized user experience is a win-win for both our clients as well as the workers we directly employ on their behalf.
With Puerto Rico having a highly competitive labor market, many clients choose to augment our legacy EOR services with our Recruit & Hire solution for hard-to-fill roles, like technology, sales and client services.
GoGlobal offers you peace of mind because we have the end-to-end hiring process covered – from talent sourcing to onboarding, payroll, benefits and offboarding. We take care of all the arduous work in compliance and administration – while you focus on core business and growing your team in Puerto Rico.
Find additional details on benefits and hiring in Puerto Rico, or contact us to talk with an international HR expert.