The LTFA amends the Puerto Rico Internal Revenue Code of 2011 (the “PR Code”) to exclude from gross income and wages, any compensation or indemnification received by an employee for reason of his/her dismissal, without having to determine there was or was not just cause for dismissal. The exclusion applies to statutory indemnity amounts under Act 80. The product must continue to apply FICA and Medicare withholding on payments made under Act 80.
The new law includes many changes that affect employers doing business in Puerto Rico including:
During the first year of employment employees are only entitled to 50 percent of the required bonus. Hours for eligibility and bonus rates are based on employee hire dates and company size. The LTFA amends the eligibility and payment requirements as shown below. The total amount of the bonus cannot exceed 15 percent of the employers' annual net profit
Employers who employ 20 or fewer employees
Employees hired after January 26, 2017 | Employees hired on or before January 26, 2017 |
Must work 1,350 hours to be bonus eligible | Must work 700 hours to be bonus eligible |
Bonus amount is 2% of the total wages paid during the relevant period | Bonus amount is 3% of the total wages paid during the relevant period |
Maximum/cap paid is $300 | Maximum/cap paid is $300 |
Employers who employ more then 20 employees
Employees hired after January 26, 2017 | Employees hired on or before January 26, 2017 |
Must work 1,350 hours to be bonus eligible | Must work 700 hours to be bonus eligible |
Bonus amount is 2% of the total wages paid during the relevant period | Bonus amount is 6% of the total wages paid during the relevant period |
Maximum/cap paid is $600 | Maximum/cap paid is $600 |
In some sections of the LTFA the preexisting law permitted grandfathering of certain rights to employees in certain industries, which is no longer in effect. However, the new law does provide superior benefits for certain employees, but whether these benefits apply and to which employees, is something the customer will need to determine with their counsel. Employers will need to review all affected policies and procedures and make necessary changes to comply. In addition, they will need to be aware of court interpretations of changes and modify policies as appropriate.
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View CollectionSeptember 23, 2021