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Minimum wage in Puerto Rico
Puerto Rico's payroll
Social security in Puerto Rico
Other employee benefits in Puerto Rico
Compliant, seamless payroll and benefits in Puerto Rico and beyond
Payroll in Puerto Rico
When managing payroll in Puerto Rico, companies need to consider what employees expect in terms of salary, benefits, and industry best practices to ensure a competitive compensation package. On top of that, they also need to ensure compliance with local labour laws and regulations.
That’s why many companies are choosing to outsource payroll services in Puerto Rico to ensure compliance, and efficiency. Payroll outsourcing simplifies these complexities, which allows companies to focus on growth without getting caught up in administrative burdens.
What is payroll outsourcing in Puerto Rico?
Payroll outsourcing is the process of hiring a third-party provider to manage payroll functions such as salary calculations, tax withholdings, benefits administration, and compliance with labour laws. Instead of handling payroll in-house, businesses rely on external experts to ensure accurate and timely employee payments while reducing administrative workload and legal risks.
Outsourcing payroll can be particularly beneficial for companies operating in complex regulatory environments, such as Puerto Rico, where compliance with local tax laws, employment regulations, and social security contributions is essential.
Minimum wage in Puerto Rico
As of April 2025, Puerto Rico’s minimum wage stands at 10.50 USD per hour, following an increase that took effect on July 1, 2024. This adjustment applies to most non-exempt employees covered by the Fair Labor Standards Act (FLSA), with certain exceptions such as agricultural workers and specific professional categories.
The Puerto Rico Minimum
Wage Act established a structured plan to gradually raise the minimum wage over several years:
- January 1, 2022: Increased the minimum wage to 8.50 USD per hour.
- July 1, 2023: Increased the minimum wage to 9.50 USD per hour.
- July 1, 2024: Increased the minimum wage to 10.50 USD per hour.
These increases aim to improve the standard of living for workers across the country.
Employers in Puerto Rico are required to comply with the local minimum wage, ensuring that employees receive at least 10.50 USD per hour as of 2025.
For a full-time employee working 40 hours per week, this hourly rate translates to approximately 1,820 USD per month before taxes and other deductions. This provides a general idea of the monthly earnings for minimum wage workers in Puerto Rico.
Minimum wage in San Juan, Puerto Rico
In San Juan, the capital city, the minimum wage aligns with the island-wide rate of 10.50 USD per hour. There are no separate minimum wage laws specific to San Juan; therefore, employers and employees in the city adhere to the same standards set by the Puerto Rico Minimum Wage Act.
Puerto Rico's payroll
Payroll cycle in Puerto Rico
Employers in Puerto Rico can choose from different payroll frequency options, including bi-weekly, monthly, or semi-monthly payments.
However, there is a legal requirement that salary payments must be made on the 15th of each month. This ensures that employees receive their wages on a timely and consistent basis. The chosen payroll cycle typically depends on the employer’s industry, financial structure, and workforce size.
13th-month salary in Puerto Rico
Puerto Rico enforces a mandatory 13th-month salary, a benefit that provides additional income to employees at the end of the year. This bonus payment is required by law and must be paid in December. The amount varies depending on the employer’s workforce size:
- Companies with more than 21 employees must pay an extra 2% of the employee’s annual wages, up to a maximum of 600 USD.
- Companies with 20 employees or fewer must still pay 2% of the employee’s wages, but the cap is set at 300 USD.
Businesses should plan ahead for this expense, as non-compliance could lead to legal penalties or employee dissatisfaction.
Puerto Rico’s payroll taxes
Employers in Puerto Rico are responsible for withholding and remitting various payroll taxes to the government. These contributions help fund important social programs, such as unemployment benefits, disability insurance, and federal tax obligations.
In addition, Puerto Rico has a progressive income tax system, which means that tax rates increase with income levels. Employees are subject to local income tax rates ranging from 0% to 33% depending on their earnings. Employers are responsible for withholding the correct amount based on the employee’s salary and applicable tax brackets.
1. Puerto Rico’s social security
Employers are required to contribute to Social Security and Medicare, just like in the U.S. mainland. The rates are:
- Social Security tax: 6.2% of the employee’s taxable wages.
- Medicare tax: 1.45% of the employee’s taxable wages.
- Total employer contribution: 7.65%.
This tax is matched by employees, which means that both the employer and the worker contribute equally to the FICA tax system.
2. Puerto Rico’s Unemployment Insurance (PR UI)
Unemployment insurance provides financial support to workers who lose their jobs. Employers must contribute to the Puerto Rico Unemployment Insurance Fund, with rates based on their experience rating. Standard rate is at 0.3% to 5.4% of taxable wages, while new employer rate is at 3.3%.
3. Federal Unemployment Tax Act (FUTA)
Employers must also contribute to FUTA, which supports unemployment programs at the federal level. The standard rate is 6.0% on the first 7,000 USD of an employee’s wages. Employers may qualify for a tax credit, reducing the rate to 0.6%. Unemployment Insurance (PR UI) payments are made on time.
4. Disability Insurance (SINOT)
The Puerto Rico Temporary Disability Insurance (SINOT) program provides financial assistance to employees unable to work due to non-work-related illness or injury.
Employers contribute 0.6% of an employee’s wages. This program ensures that employees continue to receive income during temporary health-related absences.
Social security in Puerto Rico
Social Security in Puerto Rico operates similarly to the Social Security system in the mainland United States. It provides financial assistance to eligible individuals, including retirees, disabled individuals, and survivors of deceased workers. The program is administered by the U.S. Social Security Administration (SSA) and follows the same federal regulations as in the rest of the U.S.
Both employees and employers in Puerto Rico must contribute to the Federal Insurance Contributions Act (FICA) tax, which funds Social Security benefits. The tax rates are:
- Employee contribution: 6.2% of wages.
- Employer contribution: 6.2% of wages.
- Self-employed individuals: 12.4% (since they cover both portions).
These contributions go toward funding Social Security retirement benefits, disability benefits, and survivor benefits.
Social security benefits in Puerto Rico
To qualify for social security benefits in Puerto Rico, individuals must meet the same eligibility criteria as those in the U.S.:
- Workers must have earned at least 40 credits (about 10 years of work) to qualify for retirement benefits.
- The full retirement age (FRA) is determined by the year of birth (e.g., 67 for those born after 1960).
- Workers can start receiving benefits as early as age 62, but with reduced payments.
• Delaying benefits beyond FRA can increase monthly payments.
Disability benefits (SSDI) in Puerto Rico
Individuals who become disabled and are unable to work may qualify for Social Security Disability Insurance (SSDI). The person must have worked and contributed to Social Security for a required number of years.
The SSA evaluates the severity of the disability before approving benefits.
Survivor benefits in Puerto Rico
Family members (spouse, children, or dependent parents) of a deceased worker may be eligible for survivor benefits. The deceased worker must have earned sufficient Social Security credits.
Receiving social security benefits in Puerto Rico
Puerto Rico residents receive benefits just like U.S. citizens in the mainland. Social Security benefits are paid monthly via direct deposit or checks.
Benefits are subject to federal income tax if the recipient’s total income exceeds a certain threshold.
While most social security benefits apply the same way as in the U.S., there’s one major difference that employers must keep in mind. In Puerto Rico, there is no supplemental security income (SSI). This means Puerto Rico residents do not qualify for SSI benefits, which provide extra financial help for low-income individuals who are elderly, blind, or disabled.
However, they can still receive SSDI if they have worked and contributed to Social Security.
Other employee benefits in Puerto Rico
While statutory benefits are required by law, many companies offer additional benefits to stand out in a competitive job market. These non-statutory benefits help attract and keep skilled workers. Some common non-statutory employee benefits include:
Health insurance in Puerto Rico
While Puerto Rico does not require employers to provide private health insurance, many companies offer it as a benefit to attract employees. Private health insurance is commonly offered by employers and includes medical, dental, and vision coverage.
Many companies contribute a percentage of the insurance premium to make it more affordable for employees.
Childcare allowance in Puerto Rico
Some companies help working parents by subsidizing childcare costs. While this is not mandatory, it is a valuable benefit that helps parents balance work and family responsibilities. This also improves employee retention, especially among working mothers.
Education assistance in Puerto Rico
To support professional growth, many employers provide education benefits, such as tuition reimbursement for graduate courses, training programs or certifications related to an employee’s job.
These benefits help employees advance in their careers while making companies more attractive to job seekers.
Employers have the authority to determine other job benefits offered to employees, such as additional paid vacation days, commercial health insurance, education assistance, wellness programs, childcare assistance and other similar perks.
Compliant, seamless payroll and benefits in Puerto Rico and beyond
Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.
Thankfully, we know what we’re doing. When you work with CXC to engage workers in Puerto Rico, we’ll handle everything from tax withholding to employee bonuses on your behalf.
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