Understanding Payroll in the Dominican Republic: What Global Companies Need to Know About Dominican Republic Payroll
Jul 11, 2017
The Dominican Republic is the second largest country in the Caribbean, and features beautiful beaches, rainforests, even a savannah. Luxuries here include golf courses and exclusive resorts for both the professional visitors and tourists alike. If you're considering this country for your business, it helps to understand how the tax structure, payroll regulations, and employee norms all work together.
This country has about 10.5 million people, and a GDP of around $67 billion. Corporate taxes are on the higher side, but the overall tax climate is fairly straight-forward. Much of their GDP is due to their booming service industry, but it also comprises of mining and agriculture sectors as well. At least 80% of a company's workforce is required to be Dominican, meaning you'll need to understand customs and restrictions in the country as soon as possible. Hiring a global payroll specialist can help you decipher these rules if you plan on hiring local people, so you make an easier transition.
All companies will need to find and purchase their company name from the Oficina Nacional de la Propiedad Industrial, with the next stop being the National Agency of Internal Revenues. You can register for taxes online, but you will need to file the physical paperwork at the agency. Companies receive their identification number from the Chamber of Commerce. Final departments are the Social Security Office and the Department of Labor.
While not required, having an in-country bank account will make it easier to handle the finances, and they are not difficult to set up. Once you have all the necessary paperwork in order, it should not take longer than a few days to open. Personal bank accounts can be set up in as little as an hour.
Employment Laws/Employment Rights
A regular workweek is 44 hours, with most employees working 8 hours a day. Shifts on Saturday should end by noon. Anything over 44 hours and under 68 hours is paid at a 35% premium of the employee's original salary. Anything over 68 hours is billed as double time.
The Dominican Republic prides itself on taking care of its workers. Unions are encouraged here, and strikes may be held if workers feel their employers are not treating them fairly. Strikes must be coordinated with the Ministry of Labor at least 10 days in advance. Foreign workers are required to have a short-stay permit or temporary residency, which will typically cover about a year. Contracts are required with employees, though these contracts are allowed to be verbal. Probationary periods are allowed, but cannot last longer than three months.
Compensation, Bonuses, Severance
Minimum wage is dependent on the type of work the employee is performing and the size of the company. In large businesses, the minimum average monthly salary is set at about RD$12,811 ($270, €237, £210). You will need to check the union and the Ministry of Labor laws before setting your final numbers. When it comes to bonuses, the Dominican has two mandatory ways of compensating loyal employees. One is a Christmas bonus equal to an extra month's wages, and the other is a 10% share of all pre-tax profits.
Employees can be terminated for any reason (except pregnancy) if the employment contract is at-will. Termination pay in this case will generally have been negotiated by unions or through the employee contract. Employees will need advanced notice and severance pay in the case of redundancy. The exact amount of notice and pay is dependent on how long an employee has worked for the company.
Income tax, social security tax, and retirement fund percentages need to be withheld from the employee's salary, and then distributed to the government within the first three days of the month. Anyone making under RD$34,171 ($720, €632, £559) a month is exempt from income tax, and the total income tax is capped at 25% for even the highest of salaries. Social security is also taxed based on the employee salary, and those contributions can be deducted when calculating the final income tax due. The corporate tax rate is 27% and VAT is 18%. A payroll solution ensures all money is properly withheld and handled and that every government deadline is met.
Leave – Sick, Maternity, Vacation, Absence, Holiday
New mothers receive six weeks off prior to giving birth, and six weeks following the birth. New fathers receive two days off. Mothers are also entitled to rest periods throughout the day to care for their child, and a half-day a month so their child can be seen by the doctor. Employees are entitled to 14 days of vacation after working for a company for more than a year, and the 13 public holidays in the country. Employees generally use their vacation time as sick time as employees are not entitled to separate sick pay. Extended sick time is covered by the government, and does not include payment from the first day of illness.
|Date||Dominican Republic's Public Holiday Schedule|
|January 1st||New Year's Day|
|January 21st||Lady of Altagracia|
|January 26th||Juan Pablo Duarte Day|
|February 27th||Independence Day|
|Friday before Easter Sunday||Good Friday|
|A Sunday in March - April (varies each year)||Easter Day|
|May 1st||Labor Day|
|Second Thursday after Whitsun||Corpus Christi|
|August 16th||Restoration Day|
|September 24th||Our Lady of Mercedes Day|
|November 6th||Constitution Day|
|December 25th||Christmas Day|
The Dominican Republic is still establishing its presence in the world in many ways, making it a good time for larger corporations to help build the country up. A good payroll solution can simplify a large staff's paychecks, so companies can focus on making their revenue goals. The country has a number of officials and agencies that companies need to comply with, and just one slip-up can create legal hassles that can last for months. An international payroll specialist makes it effortless to pay the government, management staff, and company employees.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.