Skip to content
What global businesses need to know about payroll in Dominican Republic
The Dominican Republic may only have a population of around 11 million, but it’s the seventh-largest economy in Latin America. So it’s fair to say that it punches well above its weight economically, just as it has with its proud heritage in boxing over the years.
Most people consider the Dominican Republic to be a tourism-heavy industry, being a popular choice among European and American holiday-makers. But it has so much more to offer, from sugar and cement to tobacco and gold mining. Over one-third of its GDP is generated by heavy industry, meaning many businesses have opportunities in the country that shares the island of Hispaniola with Haiti.
There are a few idiosyncrasies to get used to if doing business in the Dominican Republic. In particular, corporate taxes are relatively high, while the minimum wage rate varies substantially depending on the size and success of your business. For these key facts and all the other basics around payroll in the Dominican Republic, read on.
Getting Started
As in many other Spanish-speaking countries, the two most common types of foreign business entities are the limited liability company (S.R.L) and the joint-stock company (S.A.). The latter is only really appropriate for larger companies as the minimum capital requirement is 30 million Dominican pesos (approximately £410,000; $510,000; €475,000), whereas the capital requirement for an S.R.L. is nominal.
The set-up process starts by finding and registering an available company name with the National Office of Industrial Property. Within ten days, the company’s name should be published in the register, after which the company’s constitution and by-laws can be drafted, signed, and approved.
Then, any relevant taxes and fees can be paid, a tax identification number can be obtained from the Internal Revenue Service, and the company can be registered with the National Taxpayers Registry. Finally, registration with the Department of Labor and with Social Security (CNSS) completes the process.
Much of this can be completed online and is relatively straightforward, and an in-country bank account (while not mandatory) makes things much easier. However, accessing expertise is essential, partly because any documents not in Spanish will need to be translated, and partly because local lawyers and other professionals can help clear any obstacles along the way.
Employment Considerations
The Dominican Republic is strong on employee rights. Union activity is common, 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 ten days in advance. Foreign workers are required to have a short-stay permit or temporary residency, which will typically cover about a year.
Verbal and written contracts are both permissible in the Dominican Republic. However, it’s important to note that at least 80% of a company’s workforce must be Dominican, and Dominicans collectively must earn at least 80% of the total wages paid by the company (excluding management and technical staff wages).
The normal working hours are eight per day and 44 per week, although there is no legal cap on the amount of overtime that can be worked beyond these levels. Overtime should be paid at 135% for the first 24 extra hours worked each week, and 170% beyond this. Overtime at night (between 9pm and 7am) should be paid at a 15% premium, while a 200% rate applies at weekends, on public holidays, or where an employee has been prevented from getting 36 hours of uninterrupted rest between working weeks. Senior managers are exempt from the working time restrictions, but are not eligible for overtime pay.
Probation periods can run for a maximum of three months and should be agreed in employment contracts. Notice periods start at seven days within the first six months of service, rising to 14 days after six months and 28 days after a year.
Compensation, Bonuses and Severance
Unusually, the minimum wage in the Dominican Republic varies, depending on the value of the employer, and the latest rate rise took effect on February 1 2024. There are four different bandings, and employers are separated by how many employees they have or the size of their turnover:
- Large enterprise (headcount of 151 employees or more, or turnover greater than DOP 202 million): minimum wage of DOP 25,116 per month (approx. £340; $430; €400)
- Medium enterprise (headcount of 51-150 employees, or turnover greater than DOP 54 million): minimum wage of DOP 22,908 per month (approx. £310; $390; €365)
- Small enterprise (headcount of 11-50 employees, or turnover greater than DOP 8 million): minimum wage of DOP 15,428 per month (approx. £210; $260; €245)
- Micro-enterprise (headcount of ten employees or less, and turnover below DOP 8 million): minimum wage of DOP 14,232 per month (approx. £195; $240; €225)
The payment of a 13th-month bonus in the Dominican Republic is not a legal requirement, but it is customary to pay one just before Christmas. Employees are also entitled to a share of 10% of the company’s pre-tax profits, capped at 45 days’ salary for workers with less than three years’ service, and 60 days’ salary for those with three years’ service or more.
Severance pay rates start at six days’ salary after three months of service, rising to 13 days after six months, 21 days per year of service after one year, and 23 days per year of service after five years. Payment must be made within ten days of the employee being notified that their employment is being terminated.
Tax and Social Security
Income tax in the Dominican Republic is levied on a progressive scale, and is withheld at the source by the employer. Rates have remained unchanged for a few years now, but it’s worth remaining vigilant to any potential alteration in the future.
The first DOP 416,220 earned per year (approx. £5650; $7100; €6600) is exempt, after which three bandings apply:
- Beyond DOP 416,220 up to DOP 624,329 (approx. £8500; $10,700; €9900): 15%
- Beyond this up to DOP 867,123 (approx. £11,800; $14,800; €13,800): 20%
- Beyond DOP 867,123: 25%
The corporation tax rate is 27%. VAT is levied at 18%, with exemptions applicable to certain goods and services, including sales to Free Trade Zones and exports.
There are four types of social security contributions; employers should withhold employee contributions and remit them to the relevant authorities along with their own:
- Pension: 7.1% employer (up to a maximum of DOP 269,640), 2.87% employee
- Health insurance: 7.09% employer (up to a maximum of DOP 134,820), 3.04% employee
- Labor risk insurance: 1.2% employer (up to a maximum of DOP 53,928)
- Technical education contribution: 1% employer, 0.5% employee
Holidays and Leave
Paid leave entitlement in the Dominican Republic is relatively low: employees get 14 working days off after one year of service, rising to 18 days after five years. Employees are also required to take their time off in blocks of at least a week in duration. However, employees do get paid for the 12 days of public holiday each year.
Maternity leave entitlement is 14 days, seven weeks before the birth and seven weeks after it. Mothers receive full pay throughout this period, with employers and social security each picking up half of the bill. Paternity leave is two days.
There is no statutory right to sick leave or sick pay in the Dominican Republic, which means that employees generally use up their paid leave in the case of an extended illness. But there are paid leave entitlements for a family bereavement (three days) or for getting married (five days).
In Summary
Many of the payroll and employment requirements in the Dominican Republic are fairly similar to those in other Latin American and Caribbean countries. However, areas such as minimum wage variation by company size are unusual, and require careful treatment to ensure compliance. For this, and a host of other reasons highlighted in this guide, we would always recommend partnering with a global payroll expert, so that your expansion into the Dominican Republic runs as smoothly as it possibly can.
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.