Economic Overview, Act 60 Tech Incentives & Biopharma Capital
Puerto Rico combines US federal legal protections and US Dollar currency with Act 60 export tax incentives (4% tax) and world-class biopharma manufacturing.
Key Economic Clusters
- Act 60 Export Services & Tech: Software development, blockchain engineering, digital marketing, and family offices in San Juan and Palmas del Mar.
- Biopharmaceutical & Medical Devices: Amgen, Pfizer, Medtronic, and AbbVie manufacturing life-saving drugs and surgical devices.
- Aerospace & Space Systems: Aviation engineering, cybersecurity, and aircraft maintenance (Lufthansa Technik in Aguadilla).
Employment Contracts, Act 4-2017 Labor Transformation & At-Will Status
Regulated by the Puerto Rico Labor Transformation and Flexibility Act (Act 4-2017) and US Federal Law.
- At-Will Employment & Just Cause Law (Act 80): Employees hired on an indefinite basis are protected by Puerto Rico's Unjust Dismissal Act (*Act 80 of 1976*), requiring statutory severance (*Mesada*) if dismissed without just cause.
- Probation Period: Statutory automatic probationary period of 9 months for non-exempt employees and 12 months for exempt executive/professional roles.
Working Hours, Overtime Multipliers (1.5× FLSA) & Rest Periods
- Standard Hours: 40 hours per week (8 hours/day over 5 days).
- Overtime Surcharges: 150% (1.5× regular hourly wage) for hours worked in excess of 8 hours per day or 40 hours per week under Act 4-2017 and US Fair Labor Standards Act (FLSA).
Annual Vacation (12–15 Days), 12 Days Sick Leave & Christmas Bonus
Annual Vacation & Sick Leave Accrual
- Annual Paid Vacation: Employees working >= 130 hours/month accrue 1 to 1.25 days per month (12 to 15 working days per year).
- Paid Sick Leave: Accrues at 1 day per month (12 working days per year).
- Public Holidays: ~18 to 20 official US Federal and Puerto Rico Commonwealth public holidays.
Mandatory Christmas Bonus (*Bono de Navidad*)
Under Act 148 of 1969 (as amended by Act 4-2017), employers must pay a mandatory Christmas bonus between **November 15 and December 15** (up to $600 for employers with > 20 staff who worked >= 1,350 hours).
US FICA Taxes (7.65%), SINOT Disability & Hacienda Income Tax
| Statutory Scheme | Employer Share | Employee Share | Description |
|---|---|---|---|
| US Federal FICA (Social Security) | 6.20% | 6.20% | US Social Security retirement and disability fund (capped base) |
| US Federal FICA (Medicare) | 1.45% | 1.45% | US Medicare healthcare fund (uncapped) |
| PR Non-Occupational Disability (SINOT) | 0.30% | 0.30% | Puerto Rico temporary disability insurance (capped base) |
| PR State Unemployment (SUTA) | ~2.7%–5.4% | 0.00% | State unemployment tax (DTRH) |
| Total Statutory Contributions | ~10.65%–13.35% | 7.95% | Plus PR State Insurance Fund (CFSE) |
Personal Income Tax: Progressive Puerto Rico local tax rates from 0% up to 33% on taxable income, withheld monthly and remitted to the *Departamento de Hacienda*.
Termination, Just Cause & Statutory Indemnity (*Mesada under Act 80*)
Puerto Rico Act 80 Severance (*Mesada*)
Under Act 80 of 1976 (as modernized by Act 4-2017), an employee terminated without statutory just cause is entitled to a mandatory severance indemnity (*Mesada*):
- Employees hired after Jan 26, 2017: 3 months' salary + 2 weeks' salary per completed year of service (capped at 9 months of salary).
Why Use an Employer of Record (EOR) in Puerto Rico
- Instant Access to Bilingual US Talent: Onboard software developers, biopharma scientists, and finance directors in San Juan in days.
- FICA, SINOT & Hacienda Automated Compliance: Seamless management of US Federal payroll taxes, local SINOT disability, and Hacienda tax filings.
- Act 60 Remote Operations: Enable mainland US companies to employ talent in Puerto Rico with zero permanent establishment risk.
Hiring in Puerto Rico? Key Resources
Whether you are evaluating entity setup vs. using an Employer of Record, or looking for the best international payroll solution, our guides give you transparent benchmarks: