Payroll and Benefits Guide Puerto Rico
Last updated: Mar 03, 2026
Contribution
| Employer Payroll Contributions | |
|
6.20%
|
Federal Insurance Contributions Act (FICA) – Social Security, a maximum annual taxable wages is 176,100 USD. |
|
1.45%
|
Federal Insurance Contributions Act (FICA) – Medicare
|
|
0.90%
|
Federal Insurance Contributions Act (FICA) – Medicare.
An additional % applied for excess of 250,000 USD for a married couple filing a joint return and 125,000 USD for a married individual filing a separate return.
|
| 0.60% – 6.00% | Federal Unemployment Tax Act (FUTA).
This rate applies to the first 7,000 USD of wages paid to an employee each calendar year. However, the FUTA tax rate is reduced from 6.0% to 0.6% because Puerto Rico operates its unemployment insurance program in compliance with Federal law, allowing for a credit of 5.4%. |
|
1.40% – 5.40%
|
State Unemployment Tax (SUTA)
|
|
2.90%
|
State Unemployment Tax (SUTA) – New Employer Tax
|
| 17.95% – 22.85% |
Total Employer Cost |
| Employee Payroll Contributions | |
|
6.20%
|
Federal Insurance Contributions Act (FICA) – Social Security, a maximum annual taxable wages is 176,100 USD. |
|
1.45%
|
Federal Insurance Contributions Act (FICA) – Medicare |
|
0.90%
|
Federal Insurance Contributions Act (FICA) – Medicare.
An additional % applied for excess of 250,000 USD for a married couple filing a joint return and 125,000 USD for a married individual filing a separate return.
|
|
6.00%
|
Federal Unemployment Tax Act (FUTA). |
| 13.65% – 14.55% |
Total Employee Cost |
| Employee Income Tax | Annual |
|
0.00%
|
Up to 9,000 USD
|
|
7.00%
|
9,000-25,000 USD
|
|
1,120 USD + 14% of the excess over 25,000 USD
|
25,000-41,500 USD
|
|
3,430 USD + 25% of the excess over 41,500 USD
|
41,500-61,500 USD
|
| 8,430 USD + 33% of the excess over 61,500 USD | Over 61,500 USD |
Employer taxes
Employee taxes
Minimum Wage
General
Puerto Rico’s minimum wage is 10.50 USD per hour as of July 2024, for all employees covered by the Fair Labor Standards Act.
Other categories of workers, such as agricultural and tipped employees, are subject to different minimum wages.
MINIMUM WAGE (PER MONTH)
Payroll
Payroll Cycle
In Puerto Rico, the payroll frequency is bi-weekly, monthly or semi-monthly. An employer must make the salary payments in Puerto Rico on the 15th of the month.
13th Salary
In Puerto Rico, 13th-month payments are mandatory. Employers with a workforce in excess of 21 employees must by law pay a 13th-month salary in December equating to 2% of the employees’ wages or not more than 600 USD. Employers with less than 21 employees must pay an additional 2% or no more than 300 USD in December.
Working Hours
General
The standard working week in Puerto Rico consists of 40 hours a week, 8 hours per day.
Overtime
| Aspect | Regulation Details | Notes |
| Standard Work Day | 8 hours per day | This is the local statutory maximum. Overtime is triggered after this limit. |
| Standard Work Week | 40 hours per week | Overtime is triggered after this limit (federal standard). |
| Overtime Triggers | Overtime compensation is mandatory for hours worked in excess of 8 hours in a single day OR 40 hours in a single workweek. | The local law provides for both daily and weekly overtime triggers. |
| Absolute Daily Cap | No absolute maximum, but hours worked over 10 in a single day or 8 hours on the seventh consecutive day are compensated at the highest rate. | |
| Mandatory Overtime | The employer generally can require overtime work from employees, provided the correct premium pay is given. |
Mandatory Overtime Pay Rates (Tiered System)
The minimum overtime rate is determined by the specific hour and day worked.
| Overtime Condition | Minimum Premium Rate (Multiplier) | Total Pay Rate | Notes |
| Standard Overtime (Hours $\gt$ 8/day or $\gt$ 40/week) | 1.5 times the regular rate of pay. | 150% | This applies to all standard overtime hours. |
| Hours Worked $\gt$ 10 in a Single Day | 2 times the regular rate of pay. | 200% | Any hour worked over the 10th hour in a day must be paid at double time. |
| Designated Day of Rest Work | 2 times the regular rate of pay. | 200% | This applies to all hours worked on the employee’s designated weekly day of rest (or the seventh consecutive day of work). |
| Public Holiday Work | No statutory premium is mandated for holidays, unless the holiday work pushes the employee into the daily or weekly overtime thresholds. | Varies | Compensation is determined by contract, unless the holiday is also the employee’s designated day of rest. |
Compensation Method and Exemptions
| Aspect | Statutory Requirement | Notes |
| Overtime Stacking | If hours worked exceed both the daily (8 hours) and weekly (40 hours) limits, the employer is only required to pay the higher applicable overtime rate, not stack the premiums. | |
| Meal Period Violation | If an employee is required to work during a mandatory meal period, the employer must pay a fine equal to the $150\%$ premium for that time, in addition to the regular pay for the time worked. | |
| Exempt Employees | Executive, administrative, or professional employees are exempt from overtime rules if they meet the duties test and are paid a salary of at least $455 per week (the special salary level for U.S. territories). | This salary level is lower than the federal standard. |
Leave
Annual Leave (vacation)
The annual leave entitlement in Puerto Rico is dependent on the seniority of the employee as follows:
- If an employee has been employed for one year they will be entitled to six days of annual leave
- If an employee has been employed between one and five years, they will be entitled to nine days of annual leave
- If an employee has been employed between five and 15 years, they will be entitled to 12 days of annual leave
- If an employee has been employed for more than 15 years, the employee receives the maximum entitlement of 15 days of annual leave
PTO carryover
In Puerto Rico, statutory vacation generally accrues and carries over, but it is subject to legal caps.
Note:
- SGF Global does not allow for carryover
Public Holidays
Certain public holidays falling on a Sunday are usually moved to the following Monday as a day off in lieu.
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 1 January 2026 | Thursday | New Year’s Day | Standard holiday |
| 6 January 2026 | Tuesday | Three Kings Day / Epiphany | Standard holiday |
| 19 January 2026 | Monday | Martin Luther King, Jr. Day | Standard holiday |
| 16 February 2026 | Monday | Presidents’ Day / Puerto Rican Heroes Day | Standard holiday |
| 2 March 2026 | Monday | American Citizenship Day | Standard holiday |
| 22 March 2026 | Sunday | Emancipation Day | Standard holiday |
| 23 March 2026 | Monday | Emancipation Day Observed | |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 25 May 2026 | Monday | Memorial Day | Standard holiday |
| 19 June 2026 | Friday | Juneteenth National Independence Day | Standard holiday |
| 4 July 2026 | Saturday | U.S. Independence Day | Standard holiday |
| 25 July 2026 | Saturday | Puerto Rico Constitution Day | Standard holiday |
| 27 July 2026 | Monday | Birthday of José Celso Barbosa | Standard holiday |
| 7 September 2026 | Monday | Labor Day | Standard holiday |
| 12 October 2026 | Monday | Columbus Day (Día de la Raza) | Standard holiday |
| 11 November 2026 | Wednesday | Veterans Day | Standard holiday |
| 19 November 2026 | Thursday | Discovery of Puerto Rico Day / Puerto Rican Heritage Day | Standard holiday |
| 26 November 2026 | Thursday | Thanksgiving Day | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Sick Days
Following 12 months of consecutive service at a company, an employee is entitled to six days of paid leave for severe diseases.
Employees receive 12 days of paid sick leave which is accrued at the rate of one day per month following the commencement of at least 130 hours in that month.
Maternity Leave
An employee in Puerto Rico is entitled to a maternity leave of eight weeks, four weeks of which is generally taken before the birth and four weeks after. An employee can start maternity leave as late as one week before their predicted due date and can return just two weeks after the child’s birth provided the employee can present a medical certificate.
Maternity leave can be extended to 20 weeks following a pregnancy-related complication, however, the additional 12 weeks will be unpaid.
Adoptive mothers are entitled to the same maternity benefits as those of a mother who gives birth, providing the adoptive child is below the age of 6.
Paternity Leave
Private sector employees can choose to take six months of job-protected unpaid leave.
Parental Leave
Employers with a workforce of 50 employees or more can provide their employees with 12 weeks of unpaid leave for the birth of a new-born child, the placement of an adoptive/foster child, to care for an immediate family member, or to take medical leave when an employee is unable to work under the U.S. Federal Family and Medical Leave Act (FMLA).
Other Leave
Special paid leave of up to 6 months for an employee with one of the serious diseases of catastrophic character listed by the Special Coverage of the Health Insurance Administration of Puerto Rico.
PAID MATERNITY LEAVE (DAYS)
Termination
Termination Process
The termination process varies according to the employment agreement or collective agreement in place and is based on the type of contract and reason for termination. Employers must have just cause to dismiss an employee based on the employee’s conduct or behavior.
Notice Period
In Puerto Rico, notice periods are not mandatory.
Severance Pay
Severance pay is only required if there is termination without just cause at an amount of 12 weeks’ salary + 2 weeks of salary for each full year of service, capped at 36 weeks of pay.
Probation Period
The probation period is only allowed for indefinite contracts and the period is dependent on the employee’s job role. For employees classified as executives, administrators, and professionals, the probation period is 12 months. The probation period for general employees is nine months.
Immigration
Foreigners who wish to work in Puerto Rico must comply with Puerto Rico immigration requirements. According to U.S. visa law, citizens of approximately 40 countries worldwide must have an approved ESTA to visit the country for short stays.
The ESTA was introduced in 2009 for all nationalities included in the U.S. visa waiver program. It’s a travel authorization system that allows those who register multiple entries to Puerto Rico, mainland USA, and all incorporated territories of the United States, including the District of Columbia and the U.S. Virgin Islands during its validity.
Once approved, an ESTA for Puerto Rico allows a stay of 90 days within a 180-day period with each entry to U.S. territory and it is valid for a total of 2 years from the date of issue. A Puerto Rico ESTA is usually processed within a few business days and is electronically linked to the traveler’s passport once approved, removing the need to present additional documents upon arrival at U.S. border control.
For a foreigner to visit Puerto Rico for other purposes or more extended periods of stay, visa waiver citizens must apply for a Puerto Rican embassy visa from a U.S. diplomatic government office and obtain a visa that authorizes the chosen employment.
Over 190 nationalities need to apply for a visa from an embassy no matter the intended duration of stay or travel purpose.
VAT
General
The standard rate of VAT in Puerto Rico is 11.50%.
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Payroll and Benefits Guide
in Puerto Rico
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
And more...
Public Holidays Calendar
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 1 January 2026 | Thursday | New Year’s Day | Standard holiday |
| 6 January 2026 | Tuesday | Three Kings Day / Epiphany | Standard holiday |
| 19 January 2026 | Monday | Martin Luther King, Jr. Day | Standard holiday |
| 16 February 2026 | Monday | Presidents’ Day / Puerto Rican Heroes Day | Standard holiday |
| 2 March 2026 | Monday | American Citizenship Day | Standard holiday |
| 22 March 2026 | Sunday | Emancipation Day | Standard holiday |
| 23 March 2026 | Monday | Emancipation Day Observed | |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 25 May 2026 | Monday | Memorial Day | Standard holiday |
| 19 June 2026 | Friday | Juneteenth National Independence Day | Standard holiday |
| 4 July 2026 | Saturday | U.S. Independence Day | Standard holiday |
| 25 July 2026 | Saturday | Puerto Rico Constitution Day | Standard holiday |
| 27 July 2026 | Monday | Birthday of José Celso Barbosa | Standard holiday |
| 7 September 2026 | Monday | Labor Day | Standard holiday |
| 12 October 2026 | Monday | Columbus Day (Día de la Raza) | Standard holiday |
| 11 November 2026 | Wednesday | Veterans Day | Standard holiday |
| 19 November 2026 | Thursday | Discovery of Puerto Rico Day / Puerto Rican Heritage Day | Standard holiday |
| 26 November 2026 | Thursday | Thanksgiving Day | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Can Maternity Leave paid be tax exempt from Puerto Rico withholding Tax?
Hi! Here’s what we can share based on common practices in Puerto Rico (note: this does not constitute advice and is not legally binding):
Whether maternity leave pay is tax-exempt in Puerto Rico depends on how it’s paid out. If it comes from a private disability insurance plan or the government’s State Insurance Fund, it might not be taxed. But if your employer is paying it directly as part of your regular wages, it’s usually considered taxable and subject to Puerto Rico withholding tax.
To figure out where you stand, ask:
– Who’s paying you—your employer or an insurance provider?
– Is it part of a formal disability plan?
– Does your employer treat it as regular wages on your pay stub?
For a clear answer in your situation, it’s best to check with a tax advisor or the Puerto Rico Treasury (Hacienda).