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Employment contracts in Puerto Rico can be either verbal or written and in any language understood by both parties. The employee is presumed to understand the provisions within an agreement if it is signed. Contracts can be for either a fixed or indefinite duration. If the contract does not stipulate the termination date, the agreement will be considered for an indefinite term. A fixed-term contract cannot exceed three years in its initial term or the total of its renewals.

The standard workweek in Puerto Rico is 40 hours, with eight-hour days. Overtime must be paid to employees who work more than 40 hours. The employee must receive 1.5 times their regular hourly wage for each hour worked beyond the standard 40-hour workweek. An employer and employee can agree on an alternative work schedule where the employee works 10 hours a day and no more than 40 hours per week. In this case, overtime is only paid for work beyond 10 hours a day. The agreement must be in writing. Employees between 14 and 18 years old may be employed only with a special permit for a 40-hour limited workweek. If the worker attends school, then the cumulative school and work hours cannot exceed eight hours daily. Workers between 14 to 16 years of age can work between 8 a.m. and 6 p.m., while workers between 16 to 18 years can work between 6 a.m. and 10 p.m.

In Puerto Rico, the public holidays are:

• New Year's Day

• Epiphany

• Good Friday

• Mothers' Day

• Fathers' Day

• Thanksgiving Day

• Christmas Day

An employer in Puerto Rico may terminate a permanent contract unilaterally only for just cause, including:

• The employee repeatedly engaged in improper or disorderly conduct,

• The employee's performance is deficient, inefficient, unsatisfactory, inadequate or negligent, and

• The employee repeatedly violates reasonable rules, regulations and policies of the company.

An employee terminated or made redundant for any reason other than just cause must be paid severance, which is three month’s salary and an additional two weeks of salary for each year worked with the same employer. The total compensation is limited to nine months or 36 weeks of salary. Severance payments are not subject to Puerto Rican income tax.

Employees who worked at least 1,350 hours between Oct. 1 of the previous year and Sept. 30 of the current year are entitled to an annual bonus in Puerto Rico, often referred to as the Christmas bonus because it must be paid between Dec. 1 and Dec. 15 each year. The amount of the bonus is dependent upon the number of employees and their hire dates.

Employers with more than 20 employees must pay a bonus of at least 3% of the salary for each employee up to USD 600. Employers with fewer than 20 employees must pay a bonus of at least 3% of the wages to each employee up to USD 300. Any other bonus paid during the year of work may be used to offset the annual bonus if notice is provided to the employee and the change in payment date is provided to the Department of Labor and Human Resources prior to Nov. 30.