For anyone looking to enter the Dominican Republic on a short-term or limited-scale basis, or who simply wants to get to know the market better before making a deeper commitment, hiring staff via an employer of record (EOR) is a good option. Because an EOR in the Dominican Republic will act as the official employer of those staff, while you will have full control over their workloads and schedules, meaning you can have team members in only the time it takes to find them, allowing you to enter and exit the market rapidly.
As such you can avoid the need to register a subsidiary in the Dominican Republic, or any other type of legal entity. Note that an EOR can also be known as a professional employer organization (PEO), and a PEO firm may advertise its services as “payroll outsourcing.”
The Dominican Republic is the eighth-largest economy in Latin America by gross domestic product (GDP), as well as the largest in the Caribbean. It has experienced significant growth over recent decades, only registering a decline in GDP during one year since 1985, with GDP hitting $88.9 billion in 2019 (all figures in USD).
The rise in GDP has been met with a corresponding increase in overall prosperity, as measured by gross national income (GNI), which hit $8,080 per capita in 2019 — a figure that places it as an upper-middle income nation by international standards.
The Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) provides businesses based in the Caribbean nation with preferential access to markets in the United States and most countries in Central America. The Dominican Republic is also a member of the Caribbean Community (Caricom), providing access to 14 other economies in the Caribbean, as well as to the European Union via a free trade agreement (FTA).
Key economic sectors to the Dominican republic include hospitality, tourism, and import/export, while the textile and pharmaceutical industries draw approximately 40% of foreign direct investment (FDI) into the country’s free trade zones (FTZs), which recent legislation allows foreigners to invest in. In 2019, the country’s total net inflows of FDI stood at more than $2.85 billion.
Among the country’s key exports are gold, medical equipment, tobacco, and bananas, with Canada, China, India, and the United States major recipients of Dominican goods.
If you are interested in doing business in this prosperous and growing market, read on to understand what an EOR in the Dominican Republic will be able to do for you. Or go ahead and contact us now to discuss your business alternatives.
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Understanding the role of a PEO in the Dominican Republic
A Professional Employer Organization (PEO) offers a set of employee management services, such as payroll processing, benefits management and social contributions to government authorities. The employment services of a PEO in the Dominican Republic can be valuable for foreign executives, as these organizations take responsibility for complying with local employment laws.
Through a co-employment model, these companies offer far-reaching human resource services abroad for organizations without a physical presence in the nation. A PEO can support smaller businesses and it is especially helpful for businesses that are not sure yet about deciding whether they want to open an office in a new foreign market. This could increase their chances of being successful. This empowers organizations to concentrate on their core tasks and growth of the business in the Dominican Republic.
Legal requirements your EOR will oversee
As part of the compliance guarantee that an EOR in the Dominican Republic will offer you, the firm will fulfill a range of legal requirements. Those include:
- Enforcing statutory limits on working hours — which stand at 44 hours per week and 8 hours per day for full-time workers, and 29 hours per week for part-time employees
- Adhering to provisions regarding additional pay for, and special statutory leave, such as maternity or compassionate leave
- Honoring all national holidays, of which there are 12 annually
- Guarantee that any employee will receive at least the national minimum wage — which stood at $188 in 2021
- Complying with nationality quotas — with Dominican firms obliged to have at least 80% local staff
- Paying any contractually agreed bonuses in a timely manner
Benefits of using a PEO provider
Comply with legal requirements
Employment laws and requirements in the Dominican Republic can change annually, making it hard to keep up with the recent updates. To keep up with updated PEO law, and ensure your company’s hiring activities are fully compliant, means spending time and resources investigating the legislation. This isn’t easy for foreign executives with no previous experience hiring staff in the Dominican Republic, or who don’t speak Spanish.
A PEO in the Dominican Republic can support your business’ compliance with employment regulations by managing your compliance. Though you can choose the extent of a PEO’s activities undertaken on your company’s behalf, they can effectively manage all non-revenue generating paperwork regarding your employees working in the country.
As your partnered PEO in the Dominican Republic is handling your employment compliance requirements, they mitigate the risk of non-compliance with local legislation. Professional Employer Organizations shoulder this burden, so your business is protected and all employment activities undertaken by your company are ‘above board’.
PEO providers are important for small- and medium-sized organizations hiring staff abroad. Local care, information, and engagement are important for overseas staff. The process of employee management services could take the majority of your time, this weight will be taken off your shoulders when you work with a PEO.
Entering and exiting the market made easy
Save money on full company incorporation when expanding by starting small. If it’s best for your business to begin expanding into the Dominican Republic with a light footprint, hiring staff through a local PEO provider is an ideal solution.
You can employ a small number of sales representatives or executives who can begin work building connections, meeting distributors, and marketing your company. With further market validation and industry and distribution connections, you can then consider formally incorporating your company in the Dominican Republic.
Likewise, if operations don’t work out as planned or you need to pivot your business strategy, winding up operations in the Dominican Republic is made easier with a PEO. With a lighter presence in the country, you can more smoothly exit the market, and save on liquidation costs.
Focus on core operations
PEO providers allow small and medium-sized companies to develop their business and brand awareness in the Dominican Republic without the requirement of full company incorporation, which could be a time consuming and costly process.
One of the most substantial advantages you will receive from using a PEO specialist organization is the amount of time you will have to focus on your job. Removing the administrative weight for your company and outsourcing it to a PEO specialist allows you to work directly with your employees and increase your rate of success in your company.
Cons of Hiring through an Employer of Record
- Cost Considerations:
- Limited Control over HR Functions
- Potential Communication Challenges
- Perception and Employer Branding
Cost Considerations: While hiring through an EOR offers administrative convenience, it does come at a cost. Employers should carefully assess the financial implications of using an EOR, as their fees can be higher compared to an in-house HR department or partnering with a traditional staffing agency. Businesses should weigh the benefits against the expenses to determine the most cost-effective approach for their circumstances.
Limited Control over HR Functions: Outsourcing employment functions to an EOR means relinquishing direct control over certain HR processes. The lack of control can affect the quality of candidate selection, employee management, and cultural fit within the organization. Businesses should conduct thorough due diligence while selecting an EOR to ensure their values, goals, and employee management practices align.
Potential Communication Challenges: Working with an EOR in a foreign country like the Dominican Republic may present language and cultural barriers. Although many EORs have multilingual capabilities, miscommunication or misunderstandings can occur, potentially impacting day-to-day operations or employee satisfaction. Establishing clear communication channels and regularly reviewing progress can help mitigate these challenges.
Perception and Employer Branding: In some instances, hiring through an EOR may lead to a perception that the company lacks a local presence or commitment. This could affect the employer branding and the ability to attract top talent. Businesses should consider how hiring through an EOR may impact their reputation and explore ways to address these concerns through transparent communication and active involvement in the local business community.
Hiring through an Employer of Record in the Dominican Republic offers numerous benefits, including compliance support, administrative simplicity, talent acquisition assistance, and flexibility.
However, businesses should carefully evaluate the potential drawbacks such as costs, limited control over HR functions, communication challenges, and employer branding implications.
Legal Framework Governing Employers of Records (EORs) in the Dominican Republic
The legal framework governing Employers of Records (EORs) in the Dominican Republic consists of various labor laws and regulations that define the rights and obligations of employers, employees, and EORs. Understanding this framework is crucial for businesses considering hiring through an EOR in the country. Here are the fundamental aspects of the legal framework:
- Labor Code: The Labor Code of the Dominican Republic (Law No. 16-92) is the primary legislation governing labor relations in the country. It sets out the rights and obligations of both employers and employees, covering aspects such as working hours, minimum wage, social security, and termination of employment contracts. EORs must comply with the provisions outlined in the Labor Code to guarantee the protection of workers’ rights.
- Employment Contracts: Employment contracts in the Dominican Republic can be written or verbal. However, it is recommended to have written contracts that specify vital details such as job description, working hours, compensation, benefits, and duration of employment. EORs play a crucial role in ensuring that employment contracts comply with the requirements of the Labor Code and other relevant regulations.
- Social Security Contributions: Under Dominican law, employers must contribute to the social security system on behalf of their employees. These contributions cover health insurance, retirement benefits, and other social programs. EORs are responsible for managing and ensuring the accurate calculation and payment of these social security contributions on behalf of the employer and the employees.
- Taxation and Payroll Compliance: EORs in the Dominican Republic must adhere to the tax regulations set forth by the General Directorate of Internal Revenue (DGII). They are responsible for calculating and deducting the appropriate income tax and social security contributions from employee salaries. EORs also ensure the accurate filing and payment of these taxes to the tax authorities, relieving the hiring organization of the administrative burden associated with payroll compliance.
- Employment Termination: The Labor Code establishes the grounds and procedures for terminating employment contracts in the Dominican Republic. To avoid legal disputes, EORS should follow legal requirements when terminating an employee’s contract. Termination may be based on reasons such as mutual agreement, expiration of the employment contract, disciplinary issues, or economic reasons, subject to the provisions of the Labor Code.
- Work Permits and Immigration: If hiring foreign employees through an EOR, it is necessary to comply with the immigration laws and regulations of the Dominican Republic. EORs assist in obtaining the required work permits and visas for foreign employees, ensuring compliance with immigration requirements.
- Health and Safety: Employers, including EORs, are responsible for providing a safe and healthy work environment. They must comply with the Occupational Health and Safety regulations, including implementing safety measures, necessary training, and ensuring compliance with workplace health and safety standards.
Businesses need to work with EORs with a deep understanding of the Dominican Republic’s employment law framework. These EORs ensure compliance with labor laws, taxation, and other regulatory requirements, minimizing the risk of legal issues and ensuring a smooth employment process for employers and employees.
How to use a payroll calculator
If you are keen to get an idea of the possible costs involved in payroll outsourcing in Dominican Republic, using a payroll calculator is one way to get a very good estimate.
Because while a payroll calculator won’t be completely accurate, it will give you the opportunity to search according to the salary, the number of employees, the country you want to enter, and the currency you wish to work in. As such, you will be able to understand your likely costs across a range of salaries, while also being able to compare other countries as potential alternative destinations.
You can find the BLH payroll calculator at the bottom of our Hiring & PEO Services page. The calculator will allow you to make good estimations of the costs involved in hiring in Latin America and the Caribbean based on country, currency, and salary, with the calculator factoring in local statutory deductions.
To use the BLH payroll calculator, you will need to undertake the following steps:
Step 1: Select the country
Choose the country where you are doing business, or planning to launch. This feature will be useful when it comes to comparing potential alternative markets.
Step 2: Select the currency you wish to deal in
You can choose between US dollars (USD), British Sterling (GBP) and Euros, as well as the local currency for the country you are looking at, based on that which is most convenient to you. Note that for Ecuador, El Salvador, and Panama, the local currency is also USD, as they have dollarized economies.
Step 3: Indicate an employees monthly income
Here you can indicate the expected salary you will be paying an employee, in the currency of your choice.
Step 4: Calculate your estimated costs
Based on all of the information you have provided, you will receive results indicating your estimated costs, including a breakdown for estimated statutory benefits you will be liable for.
Step 5: Compare your costs to other options
With a good estimate at hand of how much your staff in Dominican Republic would be, if you are flexible about your expansion into Latin America and the Caribbean, you can use the BLH payroll calculator to compare those costs to other jurisdictions.
Common Questions when hiring through an Employer of Record (EOR) in the Dominican Republic
Based on our experience these are the common questions and doubts of our clients.
You can hire an employee by incorporating your own legal entity in the Dominican Republic and then using your own entity to hire employees or you can hire through an Employer of Record (EOR), which is a third party organization that allows you to hire employees in the Dominican Republic by acting as the legal employer. Meaning you do not need a Dominican Republic legal entity to hire local employees.
A standard Dominican Republic employment contract should be written in Spanish (and can also be in English) and must contain the following information:
– ID and address of the employer and employee
– City and date
– The location where the service will be provided.
– Type of tasks to be carried out
– Remuneration and bonifications/commissions (if applicable)
– Method payment frequency
– Duration of the contract.
– Probation period
– Work hours
– Additional benefits (if applicable)
The mandatory employment benefits in the Dominican Republic are the following:
– Working tools necessary to carry out the work (if applicable)
– Payment of social security contributions (health, pension, and labor risks).
– Social benefits (severance pay, Christmas bonus, maternity, or paternity leave, profit sharing).
– Paid time-off (vacation and a day off).
– Transportation allowance (if applicable)
– Overtime and surcharges (if applicable)
For more information on mandatory employment benefits read our recent article on Employment laws in the Dominican Republic.
The total cost for an employer is 16.39% percent of the employee’s salary, which must be paid and reported to the Dominican Republic Social Security monthly.
Please use our Payroll Calculator to calculate employment costs.
How does a PEO in the Dominican Republic save costs on hiring staff?
Time is money. Hiring a PEO will save you a substantial amount of time and will decrease costs for your business. The grounds that PEOs allow you to offer more advantages to your employees at a reduced rate. A PEO can show signs of improvement rate for benefits like retirement plans, worker´s compensation, insurances, medical benefits and so forth. Through this, a PEO could save you a significant amount of money.
Furthermore, being fully compliant with employment law in the Dominican Republic will lower your risks of receiving penalties because your company fulfills all the legal requirements of the employee management services.
Use Biz Latin Hub as your PEO provider in the Dominican Republic
At Biz Latin Hub we offer a full range of market entry and back-office services in Latin America, including as a PEO provider in the Dominican Republic. Our team of multilingual legal and accounting experts specializes in assisting foreign companies with all their corporate needs to enter a new market.
As your PEO provider, we help you find and hire local talent professionally, efficiently, and most importantly, in full compliance with Dominican law.
Contact us today to find out more about how we can support you.
For more information about hiring through a PEO solution in Latin America, see our short presentation below about your options, created by our employment and payroll specialists. Learn more about our team and expert authors.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.