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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 2026, Puerto Rico’s minimum wage remains at USD 10.50 per hour. This rate continues to apply to most non-exempt employees covered by the Fair Labor Standards Act (FLSA) and local wage laws. Certain categories—such as some agricultural workers and specific exempt professional roles—may be subject to different rules under applicable legislation.

The current rate reflects the phased increases established under the Puerto Rico Minimum Wage Act:

January 1, 2022: USD 8.50 per hour.
July 1, 2023: USD 9.50 per hour.
July 1, 2024: USD 10.50 per hour.

No further statutory increase has taken effect as of 2026, so employers must continue to ensure compliance with the USD 10.50 hourly minimum.

Monthly equivalent

For a full-time employee working 40 hours per week, the minimum wage corresponds to approximately:

USD 1,820 per month (gross)

This figure is an estimate and does not account for taxes, withholdings, or benefits.

Minimum wage in San Juan

There is no separate minimum wage for San Juan. Employers and employees in the capital city follow the same island-wide minimum wage of USD 10.50 per hour established under Puerto Rico law.

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 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.

Want to find out more?

FAQ's

How does payroll work in Puerto Rico?

Payroll in Puerto Rico requires employers to calculate wages in US dollars, withhold Puerto Rico income tax, deduct the employee share of Social Security and Medicare, and account for local payroll obligations such as unemployment and temporary disability insurance.

Puerto Rico income tax withholding is reported to the Puerto Rico Department of the Treasury, known as Hacienda, through SURI. Social Security and Medicare remain federal: in 2026, employers and employees each pay 6.2% Social Security up to the USD 184,500 wage base and 1.45% Medicare with no wage ceiling. Employers must also withhold an additional 0.9% Medicare Tax from an employee’s wages above USD 200,000 in a calendar year. This additional tax is employee-only and has no employer matching contribution.

Employers also need to account for Puerto Rico-specific employment costs and benefits when running payroll, including statutory leave and the Christmas bonus where the employee qualifies.

This mix of Puerto Rico and federal requirements is what makes Puerto Rico payroll different from payroll in a typical US state.

Why is payroll in Puerto Rico different from payroll in a US state due to its dual federal and Hacienda filing requirements?

Payroll in Puerto Rico runs through two tax systems: employers report Puerto Rico income tax withholding to Hacienda while also handling federal Social Security, Medicare and applicable FUTA obligations.

Hacienda uses its own forms and filing system. Employers file Puerto Rico withholding through SURI, including the quarterly Form 499 R-1B and annual Form 499R-2/W-2PR and Form 499 R-3.

At federal level, employers remain responsible for FICA taxes. For 2026, Puerto Rico employers should refer to IRS Publication 15 (Employer’s Tax Guide), which now incorporates the relevant federal employment-tax guidance following the discontinuation of Publication 179 for tax years after 2023. The IRS confirms that its federal employer tax guidance applies to Puerto Rico, although there are specific rules and forms for Puerto Rico employers.

Employers may also have Puerto Rico unemployment, temporary disability and workers’ compensation obligations. A payroll system built only for US-state payroll can therefore miss local filings or apply the wrong tax treatment.

What registrations must an employer complete before running payroll in Puerto Rico?

Before running payroll in Puerto Rico, an employer generally needs a federal EIN, a Hacienda/SURI employer account, and registrations for Puerto Rico unemployment and temporary disability insurance. Workers’ compensation registration may also be required.

SURI is used for Puerto Rico income tax withholding, returns and payments. The Department of Labor and Human Resources separately administers unemployment insurance and SINOT, Puerto Rico’s temporary non-occupational disability programme. New employers can register for an employer number covering unemployment and disability obligations through the Department of Labor’s employer services.

Employers also need the appropriate federal payroll setup for Social Security, Medicare and any applicable FUTA reporting.

For an overseas company, these registrations are an important part of establishing payroll in Puerto Rico before the first employee is paid.

What are the employer payroll tax rates in Puerto Rico in 2026?

In 2026, Puerto Rico employers pay 6.2% Social Security on wages up to USD 184,500 and 1.45% Medicare on all covered wages, plus Puerto Rico unemployment, temporary disability and workers’ compensation costs where applicable.

Social Security and Medicare give employers a 7.65% federal FICA cost on wages below the Social Security ceiling. There is no employer match for the additional 0.9% Medicare tax withheld from an employee once wages exceed USD 200,000.

Puerto Rico’s SINOT temporary disability contribution is 0.60% of wages up to USD 9,000. The employee can be charged no more than 0.30%, meaning the employer pays at least the remaining share where the programme applies.

Unemployment insurance is not one universal percentage for every employer. The Puerto Rico Department of Labor calculates liability using the employer’s applicable unemployment, disability and special contribution rates. Workers’ compensation premiums also vary according to the employer and risk classification. The 2026 federal rates are unchanged at 6.2% Social Security for both employer and employee and 1.45% Medicare for each party, but the Social Security wage base increased from USD 176,100 in 2025 to USD 184,500 in 2026.

What statutory benefits must employers provide in Puerto Rico?

Statutory employee benefits in Puerto Rico can include paid vacation and sick leave, maternity leave, the Christmas bonus, temporary disability insurance and workers’ compensation, subject to the employee’s eligibility and the rules that apply to the employer.

Puerto Rico’s Vacation and Sick Leave Act has a particularly local rule. Eligible employees must generally work at least 130 hours in a month to accrue statutory vacation and sick leave. Sick leave accrues at one day per month, while vacation accrual can increase with length of service. Smaller resident employers have a separate vacation accrual rule.

Puerto Rico also has a statutory Christmas bonus for qualifying private-sector employees, which employers need to account for separately from normal basic salary in Puerto Rico.

These local benefits sit alongside Social Security, Medicare and other applicable federal protections. As of September 2026, employers should continue applying these local statutory benefits under the legal framework in force following the nullification ab initio of Act 41-2022.

When should companies outsource payroll in Puerto Rico?

Companies should consider outsourcing payroll in Puerto Rico when they do not have local payroll expertise, are hiring their first Puerto Rico employees, or need help managing Hacienda filings alongside federal payroll obligations.

It can be particularly useful for a US company that assumes Puerto Rico can simply be added to its existing state payroll. Puerto Rico has its own income tax withholding system, SURI filings, unemployment insurance and SINOT requirements, while Social Security and Medicare remain federal.

Outsourcing can also make sense for international companies running payroll across several countries and territories that do not want a separate local payroll operation for each market.

The employer should still retain oversight of salaries, headcount and compensation decisions, while the payroll provider manages the local calculations, filings and payroll administration.

What is the total employer cost of running payroll in Puerto Rico?

Employers in Puerto Rico should budget for gross salary plus at least 7.65% in employer Social Security and Medicare contributions, with additional costs for unemployment insurance, SINOT, workers’ compensation and statutory employee benefits. The 7.65% figure applies only to wages within the 2026 Social Security wage base. Once an employee’s wages exceed USD 184,500, the employer’s 6.2% Social Security contribution no longer applies to additional wages, although the 1.45% employer Medicare contribution continues without a wage ceiling.

The exact percentage above basic salary in Puerto Rico cannot be reduced to one universal rate. Unemployment and workers’ compensation costs vary, while leave and Christmas bonus costs are affected by employee eligibility and the employer’s circumstances.

SINOT adds up to 0.60% on the first USD 9,000 of wages, although up to half can be contributed by the employee.

For workforce budgeting, employers should therefore calculate total employment cost using the employee’s actual salary and applicable employer rates rather than adding a single Puerto Rico payroll percentage.

How often must employees be paid in Puerto Rico, and what payroll records should employers maintain?

Employees covered by Puerto Rico’s Payment of Wages Act must generally be paid at intervals not exceeding 15 days. However, exempt executive, administrative and professional employees are excluded from the Act’s coverage, so the 15-day requirement should not be presented as applying universally to every employee. Puerto Rico law permits payment in US legal tender through methods including cash, cheque, direct deposit, electronic transfer or payroll card.

This 15-day rule comes from Puerto Rico’s Payment of Wages Act, not Act 379-1948. Act 379 deals primarily with working hours and overtime.

Payroll records should document wages, hours where applicable, overtime, statutory deductions and other authorised deductions accurately. Employers should also retain the information needed to support Hacienda and federal payroll filings.

The payroll-frequency requirement derives from Act No. 17 of 17 April 1931, as amended (Payment of Wages Act), rather than Act 379-1948.

What forms must employers file annually for Puerto Rico payroll?

Puerto Rico employers generally file Form 499R-2/W-2PR for each employee and Form 499 R-3 to reconcile Puerto Rico income tax withheld, alongside the applicable federal payroll reporting.

Form 499R-2/W-2PR reports wages and Puerto Rico income tax withheld. Hacienda requires it to be filed electronically through SURI. The Department’s current repository already includes the 2026 version.

Form 499 R-3 is the annual reconciliation of income tax withheld. Hacienda’s instructions require the withholding statements and reconciliation to be filed together by the applicable annual deadline.

Employers also have quarterly obligations during the year, including Hacienda’s Form 499 R-1B, so annual forms are only one part of Puerto Rico payroll compliance. Employers should also ensure that Puerto Rico wage and tax information is reconciled with the applicable federal employment-tax returns. IRS Publication 15 for 2026 specifically addresses reconciliation of federal payroll returns with Form 499R-2/W-2PR reporting.

What are the benefits of partnering with CXC for payroll outsourcing in Puerto Rico?

Partnering with CXC for payroll in Puerto Rico gives international companies local payroll support for both Puerto Rico and applicable US federal requirements, backed by more than 30 years of workforce management experience.

CXC can manage salary calculations, payroll deductions, statutory contributions and local payroll administration, helping companies deal with Hacienda requirements alongside federal Social Security and Medicare obligations.

For companies with employees in several markets, CXC can support payroll across 100+ countries. Workers can be paid in local currency, while payments can be consolidated into a single invoice in the client’s preferred currency. CXC also supports different payroll cycles and workers paid on hourly, daily or monthly arrangements.

This allows companies to manage Puerto Rico as part of their wider international payroll without appointing a separate payroll provider for every market.

Speak to our team to learn more about payroll outsourcing in Puerto Rico with CXC.

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