Fringe Benefits | Puerto Rico
Holiday pay
Puerto Rico observes the traditional holidays of the United States and nine local public holidays. Most banks and state agencies are closed on these holidays. Holidays are customarily paid. Employers are not required to close during statutory holidays nor grant holiday pay on those days if the employer was not subject to the Closing Law (Act 1 of 1989, as amended).
Vacation and Sick leave
Act 41-2022 amends the statutory requirements regarding the accrual and enjoyment of vacation and sick leave. Vacation and sick leave benefits for certain industries are determined by the Puerto Rico Department of Labor’s mandatory decrees instead of those granted under Act 41.
While the statutory requirement for accrual and enjoyment of vacation and sick leave for non-exempt employees and outside salespersons in Puerto Rico are covered by Act 180, as amended by Act 41, employee Executives, Administrators, and Professionals, as defined by Regulation No. 13 of the Minimum Wage Board of Puerto Rico, are excluded.
Vacation and sick leave under Act 41 are accrued at the rate of one and one quarter (1.25) day per month for vacation, and one (1) day per month for sick leave, provided that the full-time employee works at least one hundred and fifteen (115) hours during the month of accrual. This provision applies to an employer with more than twelve (12) employees.
Vacation and sick leave are accrued at a rate of a half (0.5) day per month for vacation, and one (1) day per month for sick leave, for any full-time employee that works in a small or medium sized business (PyMEs by its Spanish acronym), as defined by as defined by the Law to Support Microenterprise, Small and Medium Merchants, provided the employee works at least one hundred and fifteen (115) hours during the month.
Part-time employees accrue a half (0.5) day per month for both vacation and sick leave, provided they work at least one hundred and fifteen (115) hours, and not less than twenty (20) hours each week.
Part-time employees accrue a quarter (0.25) day per month for vacation, and half (0.5) day per month for sick leave when the Puerto Rico employer has less than twelve (12) employees.
The use of vacation and sick time is considered time worked and must be taken at least 5 consecutive days in a year.
If an employee accrues vacation days for two years, the employer must pay the employee double for time worked while the accrued vacation exceeds 30 days. Time worked by a student on their designated day of rest is also paid double.
Sick leave is accrued from the start of the employee’s probationary period, or three months. Vacation benefits are not accrued during the first six months of employment. Once an employee completes six months of employment, vacation leave accrues retroactively to the first day of employment.
Severance Pay
The applicable statutory severance (known as “mesada”) is based on years of service and will apply to all employees, regardless of their hire date:
- 0 to 15 = 3 months, plus 2 weeks of pay for each full year of service
- 15+ = 6 months, plus 3 weeks of pay for each full year of service
Family and Medical leave
The Family and Medical Leave Act of 1993 (FMLA) requires private employers with fifty employees or more to provide certain employees with up to twelve weeks of unpaid leave in a twelve-month period for:
- The birth and care of a newborn child
- The placement of a son or daughter for adoption or foster care
- To care for a spouse, son, daughter, or parent with a “serious health condition”
- Medical leave when the employee is unable to work due to a “serious health condition”
- Any “qualifying exigency” arising out of the fact that the employee’s spouse, son, daughter, or parent is on active duty or call to active-duty status as a member of the National Guard or Reserve in support of a contingency operation.
An eligible employee who is the spouse, son, daughter, parent, or next of kin of a current member of the Armed Forces (including members of the National Guard or the Reserve) with a serious injury or illness, is also entitled to a total of 26 workweeks of unpaid leave during a “single 12-month period” for the care of the service member.
Only employees who have been employed by the employer for at least twelve months, and who have worked one thousand two hundred and fifty hours or more over the last twelve months of work are eligible to receive benefits under the FMLA.
Retirement Plan
In Puerto Rico, only qualified retirement plans are covered by the Puerto Rico tax code. Contributions to qualified retirement plans in Puerto Rico are deductible for income tax purposes and reported in Form SC 6042.
ALERT
Act 41-2022 is in effect as of July 20, 2022. In the case of PyMEs, the Act is in effect as of September 18, 2022. However, the Fiscal Control Board of Puerto Rico has opposed this legislation, which may affect its implementation.