What types of Work Visas and Permits for Puerto Rico are there?
As Puerto Rico is an unincorporated territory of the US, it operates the same US visa policy with equivalent rules and regulations imposed on expatriates. US citizens do not require a visa to enter or permits to work and live in Puerto Rico. However other nationalities require either an Electronic System for Travel Authorisation (ESTA) for tourism, transit, or business trips for stays of three months, or a specific national visa to enter Puerto Rico.
Relevant authorities for work documentation are the Federal and State Departments of Labour, Citizenship and Immigration Services, and Department of State. The Immigration and Nationality Act (INA) controls which foreign workers enter the US and its territories, including Puerto Rico. The Secretary of State and Attorney General are responsible for applying the INA.
Visas fall into two groups: ‘Non-immigrant’ which is for a temporary period of time i.e., Temporary Resident Visa, or the Immigrant Visa which is for Permanent Residence.
Main Non-immigrant Visas
These are for: Tourism, business, temporary work, medical treatment, study, or similar reasons, for persons entering for a time fixed period. Non-immigrant visas, apart from ESTA, can be applied for at a local embassy or consulate in the country of residence. These are only for stays longer than 90 days, provide a temporary resident visa and length of validity depends on which visa is applied for.
Note: A valid ESTA or national visa does not guarantee entry into Puerto Rico, this is in the hands of the Customs and Border Patrol officers who may question arrivals.
A visa’s validity shows how long individuals have to enter Porto Rico, not how long holders may remain, which is decided at port of entry by border control who stamp passports accordingly. Holders can apply for an extension through USCIS if required:
ESTA for qualifying applicants given stays up to a maximum of 90-day trips during its validity (two years) and is for tourism, business trips and transit https://esta.cbp.dhs.gov/esta
B1:Business Visa Foreigners apply for this visa for business activities or conferences for stays exceeding 90 days or those not eligible for ESTA
B2:Tourist Visa For visitors who want to stay in Puerto Rico for more than 90 days, for tourism, medical treatment, to visit friends or family. Can be applied for if not eligible for the visa processing programme e.g., ESTA
C: Transit Visa. Required to pass through Puerto Rico unless travellers can apply for an ESTA
D: Crew Visa. For air or sea crews requiring a stopover
E: Trade/Treaty Visa. For those wishing to participate in investment or commercial activities
F-1: Student Visa. Applied for by overseas students for academic reasons
M: Student Visa. For overseas students wanting to enrol for courses or programmes outside of academia
J: Exchange Visa. For exchange student programmes
I: Journalist and Media Visa
K-1: Fiancé To allow foreigners entry for 90 days to marry a Puerto Rican/US Citizen
P: Sports Visa. For those travelling for sporting events or training, and competitions
Q: Cultural exchange. For people coming from overseas for cultural reasons
Companies expanding into Puerto Rico will find that work visas i.e., non-immigrant and immigrant visas and other paperwork regarding employment documentation, are organised through the US Federal and State Departments of Labour; US Citizenship and Immigration Services, and the Department of State as Puerto Rico is an unincorporated territory of the US and comes under its jurisdiction.
General requirements to be fulfilled before applying for a work visa e.g., H, L, O, include:
A job from a qualified employer has been accepted. The employer submits the relevant paperwork to the appropriate government department before submitting the visa application
The employer or a third-party agent, such as Bradford Jacobs, a Professional Employer Organisation (PEO), applies to the US Citizenship and Immigration Services (USCIS) for an Immigrant Petition for Alien Worker (Form I-140)https://www.uscis.gov/i-140 for the appropriate employment-based category work visa. Approval does not automatically ensure the application will be accepted. The USCIS determines whether the occupation is specialised and if the applicant is qualified
A Non-immigrant Worker Petition needs Form I-129. Some categories have a limited number of petitions available annually
Some visas also require certification from the Department of Labour, applied for before the petition to the USCIS by the employer or third-party agent. Check on Forms 1-129 or 1-140 to see if one is required. This is a way of ensuring that foreign workers do not impact on jobs for Puerto Rican citizens
NOTE: For both immigrant and non-immigrant visas for workers, an approved petition is required to apply for a work visa.
Figures are given in US dollars with euro equivalents.
Personal Income Tax (PIT): Tax-free allowance up to US$9,000 (€8,368), with four further bands up to 33% on excess above US$61,500 (€57,182) plus a payment of US$8,430 (€7,838).
Gradual Adjustment Tax (GAT): Applies where net taxable income exceeds US$500,000 (€464,900). Taxed at 5% on the excess over US$500,000, limited to 33% of their personal and dependents’ exemption, plus US$8,895 (€8,270).
Alternate Basic Tax (ABT): Computed on certain income categories exempt from PIT. Initial rate of 1% on income between US$25,000 (€23,245) and four further rates up 24% on excess over US$250,000 (€232,450).
Optional tax for self-employed: Applies on gross income to those whose earnings come substantially from providing services, instead of tax otherwise applied on net income under the tax code. 6% on income up to US$100,000 (€92,980) and five further bands up to 20% on excess over US$500,000 (€464,900).
Sales and Use Tax (SUT): Applied at 10.5% by the state with an extra 1% at municipal level for an aggregate 11.5%.
Corporate Income Tax (CIT): A base rate of 18.5% plus a graduated surtax. Starting at 5% surtax on income up to US$75,000 (€69,735) through five further bands up to 19% surtax plus US$36,750 on net income exceeding US$275,000 (€25,570) for a composite top rate of 37.5% CIT. A business-to-business service company which sells its services to the US can be eligible for 4% CIT.
Alternative Minimum Tax (AMT): Flat rate of 18.5%, up to 23% for taxpayers with gross proceeds exceeding US$10,000,000 (€9,300,000).
Deemed Dividends Tax: 10% on dividends to a non-resident foreign owner.
Customs Duties and Import Tariffs: As per those of the US.
Excise Taxes: Applying to such as tobacco products, fuel and crude oils, alcoholic beverages and vehicles.
Other Taxes:Property Tax – Administered by the Municipal Revenue Collection Centre (MRCC) and generally falls between 40% and 50% of the hypothetical value of the property in 1957. Personal Property Tax – self-assessed and ranging between 5.80% and 9.83% depending on the municipality.
Note: There are no net worth or wealth taxes, or stamp duties.
Personal Income Tax in Puerto Rico
Figures are given in US dollars with euro equivalents.
Personal income tax for residents
Income | Tax on Excess
Up to US$9,000 (€8,368) | 0%
Over US$9,000 up to US$25,000 (€23,245) | 7%
Over US$25,000 up to US$41,500 (€38,586) | 14% plus US$1,250 (€1,162)
Over US$41,500 up to US$61,500 (€57,182) | 25% plus US$3,340 (€3,105)
Over US$61,500 | 33% plus US$8,430 (€7,838)
Alternate Basic Tax (ABT)
Income | Tax on Excess
Over US$25,000 (€23,245) not more than US$50,000 (€46,490) | 1%
Over US$50,000 not more than US$75,000 (€69,735) | 3%
Over US$75,000 not more than US$150,000 (€139,470) | 5%
Over US$150,000 not more than US$250,000 (€232,450) | 10%
Over US$250,000 | 24%
Individual Tax Rules in Puerto Rico
The tax year is the calendar year
Filing returns, tax rates and possible deductions can depend on residency and US citizenship
Generally, returns are filed by April 15 following the tax year; a six months’ extension can be applied for by April 15
Filing returns is mandatory unless entire income is deducted at source
Married couples can file joint or separate returns
Individuals are considered to be liable for taxes if resident in Puerto Rico for a period of 183 days in a tax year. Non-resident individuals could still be taxable in some circumstances even if not resident for 183 days
Taxable income includes salaries, wages, compensation such as bonuses, financial incentives and benefits in kind
Employers’ and Employees’ Social Security and Statutory Contributions in Puerto Rico
The US social insurance system covers Puerto Rico and its citizens. The Federal Social Security and Medicare Law apply in Puerto Rico.
Setting up a subsidiary is an option for international companies when expanding their operations into the Commonwealth of Puerto Rico and intending to hire staff and run the payroll for the new entity.
Puerto Rico is located in the eastern Caribbean Sea and is an unincorporated territory of the United States of America even though Florida is the nearest point on the US mainland, 1,000 miles to the north west. It is a strategic location economically, with Puerto Rico’s 11 ports making it a key player in the region for connecting the Caribbean with North and South America and Latin American economies.
A strong manufacturing sector is dominated by pharmaceuticals and high-value medical devices and laboratory equipment, while the government’s Incentives Code aims to attract Foreign Direct Investment into other areas, such as tourism, much-needed infrastructure development and support for exporting companies.
Companies attracted by this potential to invest in Puerto Rico through a subsidiary typically look at establishing a limited liability company (LLC) or a corporation. LLCs are the most popular choice and comply with the General Corporations Law and 2011’s Internal Revenue Code.
There is a more practical, faster and simpler route into the Puerto Rican economy which sidesteps the complications of opening a subsidiary. Bradford Jacobs has the expertise to remove these potential obstacles. Our Professional Employer Organisation (PEO) specialists and Employer of Record (EOR) consultants will be with you every step of the way – from recruiting the staff to managing every legal aspect of compliance. Instead of waiting weeks or months, you and your staff can be up-and-running in days … and your employees are always under your day-to-day control.
How to set up an Puerto Rico Subsidiary
Incorporation and registration procedures to set up a limited liability company in Puerto Rico include the following:
Registering the company online with the Puerto Rico State Department, including the company’s certificate of formation
The unique company name must include the terms ‘Limited Liability Company’ or ‘Compañia de Responsabilidad Limitada’ or the initials LTD or CRL
Apply to the US Internal Revenue Service (IRS) for the Employer Identification Number (EIN)
Apply for Merchant’s Registration from the Puerto Rico Treasury Department (PRTD) 30 days before starting business; US$10,000 fines apply for non-compliance
Notify the relevant Municipal Treasury Office of the intention to start operations
Submit copy of the certificate of incorporation and Form SS-4 to the PRTD
Register with the PR State Insurance Fund within 30 days of starting business. This is mandatory to provide accident compensation for employees
Register with the Department of Labour and Human Resources at the Bureau of Social Security
What are the Benefits of setting up a Subsidiary in Puerto Rico?
The subsidiary operates in Puerto Rico as a separate and independent legal entity from the parent company, which is generally protected from responsibility for debts or liabilities, including legal issues. Shareholders, members and officers are normally liable only to the extent of their contribution to the subsidiary’s capital.
The subsidiary provides the parent company with the opportunity to test new markets outside its regular area of operations. The subsidiary opens the potential to enter into agreements with other registered companies in Puerto Rico and throughout the Caribbean and Latin American nations. Also, the permanency of a subsidiary has greater credibility with clients and suppliers, compared with branches.
However, taking the step of setting up a subsidiary is still a long journey compared with taking the most efficient and financially sensible route to starting operations in Puerto Rico.
There is a more sensible solution … Bradford Jacobs will locate the brightest talent for your company in Puerto Rico through our in-country Professional Employer Organisation (PEO) specialists. Employees can be working at their desks and screens in days … not weeks, or even longer. We remove all concerns regarding employment laws and compliance. Our Employer of Record (EOR) teams handle the hassle … while you have day-to-day operational control over your workforce.
Subsidiary Regulations in Puerto Rico
Procedures applying to a limited liability company include:
Registration and Documentation:
The Puerto Rico State Department requires all companies to register online, attaching the certificate of formation
Register the company name, which must include the words ‘Limited Liability Company’ or Compañia de Responsabilidad Limitada or the relevant initials LTD or CRL
Obtain the Merchant’s Registration from the Puerto Rico Treasury Department (PRTD) 30 days before starting operations. US$10,000 fines apply for non-compliance
Inform the relevant Municipal Treasurer of the intention to start business
Submit a copy of the certificate of incorporation and Form SS-4 to the PRTD
Register with the State Insurance Fund, mandatory to cover employees for workplace accidents. This must be done within 30 days of starting business
Register with the Department of Labour and Human Resources at the Bureau of Social Security
Accounts and Taxation:
Apply to the US Internal Revenue Service (IRS) for the Employer Identification Number (EIN)
Corporate Income Tax is paid at the base rate of 18.5% on profits, plus a surtax depending on revenue
LLCs are taxed by default as corporations at both entity and members level. The IRS automatically treats LLCs as corporations for taxation. LLCs in Puerto Rico can also elect to be taxed as partnerships
Additionally, LLCs generally have to file municipal gross tax receipts and personal property tax returns
Physical presence required for tax registration, which can be undertaken by such as accountants, lawyers etc
International companies planning expansion into the Puerto Rico economy will be entering a country rich in heritage and with an unusual political status. Located in the north-eastern Caribbean Sea, Puerto Rico is at the eastern end of the Greater Antilles archipelago, 40 miles east of the Dominican Republic and 1,000 miles south-east of the US state of Florida.
Politically, the Commonwealth of Puerto Rico is closer to the United States, however. Puerto Rico is an unincorporated territory of the US but not one its states. Puerto Ricans are US citizens but cannot vote in elections. Economically, Puerto Rico and the US mutually benefit from being part of the same customs system; financially, Puerto Rico uses the US dollar as its currency.
Puerto Rico’s culture reflects its history, with Spanish, American and Afro-Caribbean influences. Today’s capital San Juan was named San Juan Bautista (‘St John the Baptist’) by Christopher Columbus in 1493, when he claimed the island for the Spanish monarchy. Spain’s colonisation of Puerto Rico (‘Rich Port’) accelerated in the 16th century, bringing Indian slaves from nearby islands and more from Africa to work in sugar cane and ginger plantations.
Centuries later, the brief Spanish-American War of 1898 saw Puerto Rico, with Cuba and the Philippines, come under US influence, with Puerto Rico identified as an ideal fuelling stop for US warships and a stepping stone towards the soon-to-be-built Panama Canal.
Puerto Rico’s mainly mountainous terrain reflects geological faults that cause earthquakes, while 100 miles to the north the Porto Rico Trench is the Atlantic’s deepest point and reaches five mile below sea level.
Starting your business in Puerto Rico
Foreign companies intending to start business operations by opening a subsidiary in Puerto Rico face making a number of decisions – and they must make the right choices from day one. Which of the business structures best suits their needs? Where should they base operations to find staff with the necessary skills and experience? Which incentives apply to foreign businesses? This is an important factor considering Puerto Rico’s special status as an unincorporated territory of the United States of America and the application of some US tax laws. And how long will the incorporation process take?
Limited liability companies and corporations are the most popular options in Puerto Rico for foreign companies entering the market by opening a subsidiary. They operate under the General Corporations Law and the Internal Revenue Code of 2011.
As an example, incorporation requirements for a limited liability company include the following:
All companies must register with the Puerto Rico State Department online, attaching the certificate of formation. Fee US$250
The company name must contain the terms ‘Limited Liability Company’ or Compañia de Responsabilidad Limitada or the relevant initials LTD or CRL
Obtain Employer Identification Number (EIN) from the US Internal Revenue Service (IRS). Subsequently, file copy of certificate of incorporation and Form SS-4 with the Puerto Rico Treasury Department (PRTD)
Apply for Merchant’s Registration from the (PRTD) 30 days before starting operations, at risk of US$10,000 fine for non-compliance. Inform the relevant Municipal Treasurer of intention to start business
Register with the PR State Insurance Fund, which is compulsory to provide accident compensation for employees, within 30 days of starting business
Register with the Department of Labour and Human Resources at the Bureau of Social Security
There is no minimum share capital requirement
This incorporation process underlines the importance of taking the best possible advice. By making the right choice now, you can steer a course around these obstacles by working alongside Bradford Jacobs. Our Professional Employer Organisation (PEO) specialists and Employer of Record (EOR) experts will recruit the staff and undertake every step of compliance to have them up-and-running in the shortest possible time. Instead of waiting weeks to complete the process for opening a subsidiary, you can be operational in days.
Expanding your business into Puerto Rico
The Commonwealth of Puerto Rico is an unusual economy in which to be expanding your business’s global reach. As an unincorporated US territory, Puerto Rico operates under the same customs code as the US, with the benefits that brings, and uses the US dollar as its official currency.
The north-eastern Caribbean island’s relatively small economy, with Gross Domestic Product of around 118 billion US dollars in 2022, has built a niche for high-value products in the field of pharmaceuticals, medical devices and supplies, laboratory equipment, chemicals and ancillary products.
The relationship with the US also brings benefits from their free trade agreements for companies operating in Puerto Rico. Additionally, the Puerto Rico government’s Incentives Code attracts Foreign Direct Investment into other designated areas, including manufacturing outside the pharmaceutics sector, tourism, infrastructure, exports support and international banking, finance and insurance.
Advantages and Challenges when entering the Puerto Rican Market
Relatively low cost of living and comparatively competitive labour costs
Stable currency (the US dollar), legal system and property rights
Strategic location on trade routes between North, South and Central America as well as other Caribbean nations
The US Federal Reserve Bank cites advantages including skilled and educated workforce, beneficial business climate
Vulnerability to extreme weather – tropical storms and hurricanes – affecting logistics and supply chains
Informal economy creates low labour force participation in the formal economy
Strong pharmaceutical sector, comprising half of manufacturing Gross Domestic Product, but considered to have reached maximum potential
High public debt; not eligible for International Monetary Fund support as it is not a sovereign state
Uncertainty over Puerto Rico attaining statehood with the US or becoming independent
Despite being an unincorporated territory of the United States of America, Puerto Rico’s employment market is not ‘at will’ as is the case in most US states. Contracts, whether written or oral, are an essential element of the relationship between employers and employees. They are regulated by statutes, The Unjust Dismissal Law (Act 80) and the Civil Code. Contracts, agreements, offers and acceptances have the same legal validity whether signatures are electronic or in writing. Contracts can be written in any language the parties fully understand.
Different types of Employment Contracts in Puerto Rico
Open-ended, permanent employment contracts: The usual form of contract in Puerto Rico. Under Act 80, employees hired for an indefinite term and dismissed without just cause are due severance pay.
Fixed-term employment contracts: Can be agreed in writing or verbally to undertake a specific task, or temporarily replace an employee during leave, and these conditions should be clearly specified. If the agreement is repeatedly renewed it will become a valid contract for up to three years.
Probation periods: Act 80 established an automatic probation period of nine months, or 12 months for designated positions such as executives, administrators and professionals. Employer and employee can agree to a shorter period, with start and end date agreed in writing, or adopt the trial period designated by a union or Collective Bargaining Agreement. If the employee is retained after the end of the agreed trial period, employment becomes permanent and indefinite.
Temporary employment contracts: There is no limit on their duration in theory and they can be written, advisable, or verbal. If they are repeatedly renewed, the employee is deemed to be permanently employed.
Collective Bargaining Agreements (CBAs): Collective Bargaining Agreements in Puerto Rico are regulated by the National Labour Relations Act (NLRA), which also applies in the US and establishes CBAs as a public policy to reduce the number of employment disputes and improve productivity. Additionally, in Puerto Rico, the Constitution, the Puerto Rico Labour Relations Act and the PR Public Service Labour Relations Act also provide regulations for union recognition, the right to self-organise or join labour unions and bargain collectively.
Laws that regulate the labour relationship in Puerto Rico
As an unincorporated territory of the United States, Puerto Rico is subject to US labour and employment laws. Legislation, including laws specific to Puerto Rico, feature:
The Labour Reform Act (2017), also known as the Labour Transformation and Flexibility Act
The Unjust Dismissal Act (Act 80)
The Puerto Rico Labour Relations Act
The Puerto Rico Public Service Labour Relations Act
The US Worker Adjustment and Retraining Notification Act (WARN)
The Minimum Wage Act
The General Anti-Discrimination Act
The Disability Discrimination Act
The Sex Discrimination Act
The Sexual Harassment in Employment Act
The Working Mother’s Maternity Leave Law
General requirements for Contracts
Despite being a territory of the United States of America, different regulations apply to drawing up contracts in certain respects. In the US, unless a contract specifies otherwise, employment is ‘at will’ in most States. This is not the case in Puerto Rico and contracts are the norm, either in writing or verbally agreed. Under the terms of the Unjust Dismissal Act, if an agreement does not give a termination date it is considered permanent and indefinite. Written contracts can be in any language that is understood by the parties. An employee’s signature is confirmation they understand and fully agree with the terms.
Puerto Rico’s status as a territory of the United States means federal laws can apply alongside local legislation. The most recent amendments to Puerto Rico’s employment legislation are based on the Labour Reform Act of 2017 (Law No. 4). Statutory minimums apply unless employees are designated as ‘exempt’, in the case of professionals, executives and administrators. All others are ‘non-exempt’ and subject to the statutory minimums, which are dealt with here.
Bradford Jacobs, as your Employer of Record, will be up-to-the-minute with both federal and Puerto Rican employment legislation and compliance regulations.
What are the Compensation Laws?
National Minimum Wage (NMW): The hourly minimum rate was due to be increased to US$9.50 (€8.80) from July 1 2023, an increase from US$8.50 (€7.90) per hour, which had applied since January 1 2022. The next increase to US$10.50 (€9.70) per hour is due in July 2024. The Minimum Wage Evaluation Commission annually assesses working conditions, benefits and cost of living in setting the minimums.
Working Hours and Breaks: The regular working day is eight hours and 40 hours a week. Employers and employees can have a written agreement for working four 10-hour days, that need not be consecutive and without involving overtime. Employees are entitled to a one-hour meal break if working six hours, taken between the second and sixth hour so they do not work for more than five consecutive hours.
Overtime: This is one-and-a-half times the regular hourly rate for those employed since January 26 2017, with twice the hourly rate for those employed before that date. They are entitled to retain the 100% increase on their hourly rate if they are with the same employer since 2017.
Sick Leave and Benefits: Paid sick leave is based on one day for each month in which the employee worked at least 130 hours. Increased minimums apply to designated ‘grave illnesses’.
Paid Vacations: Where a company has employed more than 15 staff over 26 weeks in consecutive two-year periods, employees who work at least 115 hours a month accrue one-and-a-quarter days’ holiday per months worked in the year. Employees working for companies with fewer staff accrue holidays at half-a-day a month if they work at least 115 days a month.
Public Holidays: As a US territory, Puerto Rico observes their official traditional holidays, in addition to nine local holidays during which most banks and state agencies close.
Probation Periods: Employer and employee can agree to a shorter period than the statutory nine months, or 12 months in the case of administrators, professionals and executives. The end date of a trial period must be in writing and if the employee is required to work beyond this date the employment becomes indefinite and permanent.
Notice Periods: The US Worker Adjustment and Retraining Notification Act (WARN) applies in Puerto Rico. Employers who violate WARN notice requirements are liable to each employee for up to 60 days’ pay and benefits in lieu of notice.
Termination, Severance and Redundancies: Under the Unjust Dismissals Act, termination of an individual employed on an indefinite basis must be for just cause, for reasons as defined by the Act. Severance payments for employees hired before January 26 2017 are: Up to five years’ service – two months’ salary plus one week’s salary for each completed year; five to 15 years’ service – three months’ salary plus two weeks for each completed year; more than 15 years’ service, six months’ salary plus three weeks for each completed year. Those employed after January 26 2017 receive three months’ salary plus two weeks for each completed year, regardless of years employed. In the case of redundancies, WARN also applies and requires advance notice. Under the Unjust Dismissals Act, employees with greater experience should be retained in preference.
Maternity / Paternity Leave: Pregnant employees are entitled to eight weeks maternity leave, paid by the employer, generally taken four weeks each pre- and post-natal, after presenting employer with a medical certificate confirming pregnancy and estimated due date. Leave before or after the birth can be varied if cleared by a medical certificate. Post-natal complications can allow up to 12 weeks of extra leave. Fathers are entitled to request up to five business days of paternity leave on full pay.
13th Month Bonus: Employers with more than 12 staff must pay an employee a 13th month bonus of 6% of salary if they have worked at least 700 hours between October 1 and September 30, capped at US$10,000 (€9,275). Employers with less than 12 staff pay 3% of salary. Usually paid before Christmas.
Pensions: Employers and employees contribute to Puerto Rico’s pension system, the Employees Retirement System, which faces challenges due to the overall financial situation of the country. At the beginning of 2022 there was a US$55 billion gap between available funding and projected benefits owed to pensioners. The pension funding gap contributed towards Puerto Rico declaring bankruptcy in 2017. Official retirement for men and women is 67 years, but the system comes under pressure as the average retirement age is 65 for men and 63 for women.
Health Insurance: Puerto Rico is part of the US Medicaid system, and capped federal funding towards the island’s system will increase strain on its provisions. Reduced funding creates long waiting lists and a shortage of doctors, who are attracted to the US mainland by higher salaries. Expats typically access higher standard facilities and avoid waiting lists with private insurance, from a variety of international companies or through their employers.
Foreign companies expanding their international operations into a new country, typically need to recruit staff there … and recruitment in Puerto Rico needs expert guidance.
The Commonwealth of Puerto Rico is not an independent nation, but an unincorporated territory of the United States of America, shares the same customs regime and has the US dollar as its official currency. However, whereas ‘at-will’ employment is the default position in most US states unless stipulated otherwise in a contract, Puerto Rico is not an ‘at-will’ jurisdiction. The Unjust Dismissal Act (Act 80) regulates employment termination for employees on an indefinite contract. Companies taking the recruitment route into Puerto Rico must beware of this distinction.
Additionally, employers must comply with all aspects of rigidly regulated employment legislation, which is a combination of US labour laws and the Puerto Rico Civil Code. Legislation includes drawing up contracts or reaching employment agreements as part of the recruitment process.
The recruitment ‘to do’ list is long and often complex. Locating new talent will be the No. 1 requirement and it is certain to raise major issues. Once staff are recruited and onboarded, employers face strictly-applied legislation that spells out their responsibilities and obligations to employees, in addition to the legal rights of their staff.
These demands add up to a considerable workload. There is a better option … a straightforward, fast and cost-effective alternative that will have your new staff operational in a matter of days, without the need to unravel the red tape surrounding recruitment.
Bradford Jacobs has the vital expertise you need to provide the simplest route for your journey into the Puerto Rican economy. Our Professional Employer Organisation (PEO) networks have global reach to find the right staff. Then, through our Employer of Record (EOR) platforms we will have your new employees at their desks and screens in the shortest time. This guide highlights the essentials of recruitment and onboarding in Puerto Rico. You can trust Bradford Jacobs to put the brightest talent in position for your company – right now!
Recruiting in Puerto Rico
An important consideration for companies recruiting in Puerto Rico is to distinguish one element of its employment market from the United States of America. Puerto Rico is a US territory, but unlike in the States the employment relationship between employers and employees is not ‘at will’. This distinction particularly applies to termination of employment, which in Puerto Rico is strictly regulated by the Unjust Dismissal Act.
Recruiters will find there is already pressure to find the best talent for certain sectors. Fifty per cent of Puerto Rico’s Gross Domestic Product comes from manufacturing, with around 50% of that from the pharmaceuticals, medical and laboratory appliances sector. These always have a high demand for highly skilled and qualified professionals, along with other manufacturing areas such as machinery, electronics and chemicals.
Puerto Rico’s population of around 3.25 million has an estimated workforce of 1.2 million, according to the US Bureau of Labour Statistics. So … a relatively small employment market, plus a skills gap affecting key areas of the economy. Also, demand is heightened by young and highly skilled workers leaving for mainland US.
In another complication, companies wishing to employ foreign workers in Puerto Rico in certain sectors may need certification from the Department of Labour confirming that there are no suitable Puerto Rican candidates.
These considerations highlight where the global experience and local know-how of Bradford Jacobs is essential. Our Professional Employer Organisation (PEO) platforms will bridge the gap between the skills you need and finding the right fit for your company.
Employees’ pre-hire checks in Puerto Rico
General: Employers are permitted in general to run criminal and credit checks on potential and existing employees, but are expected to consider several factors when assessing applicants for employment beyond pre-hire screening. If employers take into account information revealed on bankruptcy, medical or disability information, military service or discharge and decide against employing the candidate they could be liable for a discrimination claim.
Regarding checks, both US federal laws and Puerto Rico regulations can apply.
Discrimination: Employers cannot discriminate against applicants or employees on the grounds of sex, gender identity or sexual orientation; race, national origin or colour; age or veteran status; marital or social status; political or religious beliefs or affiliations; pregnancy or disability.
Criminal Checks: These are allowed, but the Puerto Rico Supreme Court ruled that not hiring due to the applicant’s criminal record could result in a discrimination claim.
Credit Checks: Employers must comply with the Fair Credit Reporting Act (1970) and the Fair Credit Reporting Agencies Act and obtain the applicant’s permission before carrying out the check. If the applicant is not hired, the employer must hand over the report to them.
Basic requirements when recruiting in Puerto Rico
Puerto Rican employment legislation is based on US federal laws and the Puerto Rico Civil Code, but an important distinction applies even though Puerto Rico is an unincorporated territory of the US. By default, employment in most US States and the District of Columbia is deemed to be ‘at will’ unless a contract confirms otherwise. ‘At will’ employment does not apply in Puerto Rico.
In Puerto Rico, therefore, employment legislation applies to one of the basic requirements of recruiting – drawing up contracts. In general, contracts can be oral or in writing. If an agreement does not give a termination date it is deemed to be permanent and the employee is protected by the Unjust Dismissal Act (Act 80). Written contracts can be in any language understood by the employee and their signature is presumed to confirm they understood the language and agreed to the contract’s terms. Where a contract applies, written or oral, it cannot diminish minimums set by federal laws or the Civil Code.
The word ‘Boricua’ is at the heart of the culture and heritage of Puerto Rico. The indigenous Taíno hunter-gatherers who settled the Caribbean island 1,000 years before Spain’s 16th century colonisation, named their home Borinquén and called themselves Boricua. It is a term the locals still use today, but for them the word ‘boricua’ also sums up a state of mind, outlook and rhythm of life that is distinctly Puerto Rican.
The often-invaded island’s heritage reflects Spanish, wider European, American and Afro-Caribbean influences. It is a fusion that reaches into every aspect of island life and can be seen in classical, urban and contemporary art that can be seen around the streets as well as in museums; music and dance with African and Caribbean flavours and varied cuisine to delight the foodies.
A highlight among the countless spectacular festivals is the Fiestas de la Calle San Sebastián … a street party in the historic quarter of Old San Juan.
Puerto Rico Work Culture
Hierarchy: The pecking order is important but not always obvious. Identify the key personnel – probably the decision makers – and defer accordingly. Business hierarchy reflects the respect for seniority in a family.
Introductions/Greetings: A warm smile and firm, friendly handshake is the norm for both men and women, using title and family name before invited to share first names. Where appropriate, bearing in mind personnel on the other team, use Señor, Señora or Señorita.
Language: Any documents or presentations should be in both official languages, English and Spanish. Do not assume meetings and discussions will be in English, so be prepared with an interpreter on hand.
Gift Giving: Not expected, but when given should be modest and will be gracefully received and probably opened at the time.
Business Cards: Exchanged without too much ceremony. Print one side in English and the other in Spanish and be sure to present the Spanish side up, where appropriate.
Dress Code: Dark business suits for men and formal, smart dresses, trouser suits, skirts and shirts for women.
Punctuality: Show respect by being on time, but do not expect the hosts to always reciprocate. Deadlines and schedules can be equally fluid.
Negotiations and Meetings: Although the first meeting can tend towards formality, small talk is a pre-requisite of business meetings and negotiations. Building relationships is essential and comes well in advance of drawing up agreements. Decisions are rarely made at the initial meeting and discussions can be animated and often interrupted, with Puerto Ricans keen to come straight to the point. Avoid excessive facial or bodily gestures, which can be misinterpreted between nationalities.
Avoid: Offering views about Puerto Rico’s status as a territory of the United States as this is controversial and divides opinions locally.
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