What Severance Pay Rules Must Employers Follow in Puerto Rico?

Which Employees Qualify for Severance Pay?

• Employees hired for an indefinite term who are dismissed without just cause under Puerto Rico Law 80.
• Full-time and part-time employees who meet the minimum service thresholds applicable to their hire date.
• Employees working in Puerto Rico for private-sector employers, including local entities of foreign companies.
• Employees who are not covered by a valid probationary contract that complies with Puerto Rico’s formal requirements.
• Employees who are not terminated for a Law 80 “just cause” reason, such as serious misconduct or bona fide reorganization.
• Employees who are not already receiving a superior severance benefit under a collective bargaining agreement or written company policy.

What Are the Legal Timelines for Paying Severance?

In Puerto Rico, severance pay is treated similarly to final wages and should be paid as soon as reasonably possible after termination, ideally on the termination date or within a few business days. While Law 80 does not set a precise calendar-day deadline for mesada, delays increase the risk of claims, interest, and attorneys’ fees. Many employers align severance payment with the final payroll cycle to simplify administration, but you should not wait beyond the next regular payday without a clear, documented reason. When severance is disputed, you may negotiate or escrow the amount while you resolve the claim, but uncontested sums should still be paid promptly.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay mandatory severance in Puerto Rico, you risk significant financial and legal exposure. Employees can file claims in Puerto Rico courts or with the Puerto Rico Department of Labor, and judges generally interpret Law 80 in favor of the employee. Non-compliance can also damage your reputation and complicate future workforce reductions.

• Courts can order payment of the full statutory mesada plus any unpaid wages.
• You may be liable for court costs and reasonable attorneys’ fees if the employee prevails.
• Interest can accrue on late or wrongfully withheld severance amounts.
• Improper terminations can trigger reinstatement claims in certain scenarios.
• Regulatory scrutiny and repeat-violation risk increase with each non-compliant termination.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not eliminate the underlying severance obligations created by Puerto Rico law. Typically, the EOR is the legal employer responsible for calculating and paying mesada, but your company funds the cost through the service agreement. If you direct a termination without just cause, you should expect to bear the financial impact of any statutory severance, even if the EOR handles the paperwork. It is critical to define in your EOR contract who decides on terminations, how “just cause” will be evaluated, and who pays if a court later finds the dismissal unlawful.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing Puerto Rico severance correctly means tracking hire dates, salary history, and the evolving Law 80 formulas for different cohorts of employees. Playroll helps your team centralize this data, apply the right statutory rules, and document the business reasons for each termination so you can defend your decisions if challenged. With clear workflows and localized guidance, you reduce the risk of surprise liabilities when restructuring or closing roles.

Playroll’s global employment platform also coordinates final pay, benefits offboarding, and severance funding across countries, including Puerto Rico. Your HR and finance teams get a single source of truth for who is owed what, when, and under which law, while Playroll’s experts keep you aligned with local updates. That means fewer compliance gaps, smoother exits for employees, and more predictable costs for your business.