Nanny Taxes & Payroll in Puerto Rico

Minimum Wage

Household employees must be paid at least the highest applicable federal, state, or local minimum wage rate. Puerto Rico’s minimum wage rate of $10.50/hour applies.

Overtime Pay Rules

Household employees in Puerto Rico are required to be paid at least time and a half for hours worked over eight in a day and 40 in a seven-day workweek. The same overtime compensation rules apply to live-in employees.

State Unemployment Tax & Rate

In Puerto Rico, the new employer unemployment insurance tax rate is 2.80 percent on the first $7,000 of each employee’s wages. Employers with previous employees may be subject to a different rate. This is an employer-only tax.

Workers’ Compensation Insurance

Household employers in Puerto Rico are required to carry a workers’ compensation policy for any household employee. Coverage cannot be purchased through private insurers; employers must use the monopolistic state fund administered by the Corporación del Fondo del Seguro del Estado (State Insurance Fund Corporation or CFSE).

Disability Benefits Insurance

In Puerto Rico, household employers are legally required to provide non-occupational short-term disability coverage (often called SINOT) that includes Accidental Death & Dismemberment (AD&D) coverage for their domestic workers. Both the employer and employee pay 0.3% of the employee’s first $9,000 in annual earnings (a max of $27 per year for each). Employers may cover both portions if they choose.

While SINOT is the state-run option, employers may opt for a private Short-Term Disability (STD) plan.

Domestic Workers’ Bill of Rights

Puerto Rico does not have a domestic workers’ bill of rights.

Paid Leave Law

Puerto Rico Vacation and Sick Leave Act

Household employees hired in Puerto Rico prior to January 26, 2017, accrue sick leave at one sick day per month and vacation time at 1.25 days per month.

For employees hired after January 26, 2017, sick leave accrues at one day per month and .5 vacation days per month during the first year of service. After the first year of service and up to the fifth year of service, the accrual rate will be .75 vacation days a month. From the fifth to the fifteenth year of work, the rate will be one vacation day per month. After the fifteenth year of service, the accrual rate is 1.25 vacation days per month.

Employees must work at least 130 hours per month for sick leave and vacation time to accrue.

Other State Regulations

Severance Pay

Employees hired prior to January 26, 2017, who are terminated without cause, are entitled to two months of severance if they are terminated within the first 5 years of service; three months of severance if terminated after the fifth and up to the fifteenth year of service; and six months of severance if terminated after 15 years of service. This also includes an additional indemnification equal to one week for each year of service within the first 5 years of service; two weeks for each year of service if termination occurs between the fifth and the fifteenth years of service; and three weeks for each year of service after completing 15 years of service.

For employees hired after January 26, 2017 and terminated without cause, they are entitled to 3 months of severance and an additional 2 weeks of wages for each year of service completed.

Helpful Links for Nanny Taxes in Puerto Rico

• Department of Labor & Human Resources of Puerto Rico
• Financial Oversight and Management Board for Puerto Rico

Federal Regulations

All household employers need to follow certain federal regulations, including:

Fair Labor Standards Act (FLSA) Classification Guidelines

• Household workers are considered employees and not independent contractors. Learn more about misclassifying employees as independent contractors.
• Household workers are also non-exempt employees, meaning they receive at least time-and-a-half for hours worked over 40 per workweek. Learn more about overtime pay.

FICA Taxes

Social Security and Medicare taxes are commonly referred to as FICA taxes.

If you pay cash wages of $3,000 or more to any household employee in 2026 (or paid a domestic worker $2,800 or more in 2025), you must withhold and pay FICA taxes. FICA taxes are 15.3 percent of cash wages.

As an employer, you pay 7.65 percent (6.2 percent for Social Security and 1.45 percent for Medicare).

Your employee's share is also 7.65 percent, which you may withhold from their wages or pay yourself.

You don't withhold or owe FICA taxes on wages you pay to your spouse, child under the age of 21, parent, or any employee under 18 at any time during the calendar year.

Federal Unemployment Tax (FUTA)

If you pay a household employee total cash wages of $1,000 or more in any calendar quarter, you'll owe federal unemployment tax. This is an employer-only tax. FUTA is 6% of cash wages on the first $7,000 of wages paid to an employee.

Mileage Reimbursement

If your employee uses their own car in the course of their work, you can reimburse them for mileage. For 2026, the IRS has set the optional standard mileage rate at 72.5 cents per mile driven. Paying mileage is not mandatory in most states, and you can reimburse your employee at a different rate. However, if mileage costs cause your employee to fall below the minimum wage, you must reimburse them for mileage.

Remitting Taxes Quarterly

Household employers can remit taxes, including FICA, employee income, and federal unemployment, quarterly using Form 1040-ES. If a household employer does not remit their taxes quarterly, the entire amount will be due when they file their personal tax return. This could cause an underpayment penalty.

Year-End Requirements

By January 31, household employers must provide Form W-2 to their employees and submit Form W-3 and Copy A of Form W-2 to the Social Security Administration. Then, a household employer must file Schedule H with their personal tax return. Learn more: How to File Schedule H