The Dominican Republic is a small island that is the second-largest nation in the Caribbean. It shares its western borders with Haiti. Out of the countries in South America, the economy of the Dominican Republic ranks seventh in terms of size, and it is actually the largest among all the Caribbean countries.
The crucial industries of the country are mining, tourism, energy, agriculture, infrastructure, real estate, telecommunication, and manufacturing. The country hosts the single largest gold mine in entire South America. All of these are probably the reason behind many global organizations looking to hire a workforce from the Dominican Republic.
However, hiring from the country can become hazardous if you are not entirely acquainted with the payroll procedures and policies in the Dominican Republic. Here, we will learn all about the Dominican Republic payroll process.
How Is Payroll Calculated in the Dominican Republic?
The payroll in the Dominican Republic can be calculated by deducting taxes and other components like insurance, loan recoveries, leave adjustments, social security contributions, and others from the gross salary. We can term these deductions as gross deductions. The gross salary includes basic pay, all the allowances, and any one-time incentive. So, the formula to calculate the payroll looks like
Net Salary = Gross Salary – Gross Deduction
The employee must pay income tax by 31st March every year. The taxable income does not include Christmas Bonus. The table below shows the rate of income tax for various annual thresholds.
Annual Threshold ( in Dominican Pesos )
Income Tax (%)
Up to 416,220
416,220 – 624,329
624,329 – 867,123
Important Elements of Salary Structure in the Dominican Republic
The Dominican Republic payroll process indicates a minimum wage for the employees. The government of the country has a mandate on the minimum wage. The minimum wage for workers in the free-trade zone is 8310 Dominican pesos. It is between 7843 and 12873 Dominican pesos for the workers outside.
The gross salary is calculated by adding various allowances to the basic salary. The gross pay does not include taxes and other deductions. The allowances include overtime pay, annual leave pay, and others.
The net salary or net pay is a crucial element of the payroll in the Dominican Republic. It is the amount the employee receives after adjusting the tax and other deductions with the gross salary.
Any working hour over forty-four hours per week is considered overtime. For overtime up to 68 hours, the employer pays 135% of the regular hourly wage. For overtime above 68 hours, the overtime payment is 200% of the salary.
13th Month Pay
A critical fact to know while discussing payroll rules and regulations in the Dominican Republic is that there are no provisions for 13th-month pay in the labor law. However, many employers choose to offer Christmas bonuses as 13th-month pay.
How to Setup a Payroll in the Dominican Republic?
Setting up a payroll in the Dominican Republic can be achieved in a few steps. They are described below.
Register your company
You can register your company as individual entrepreneurship, private enterprise, representative office, permanent establishment, or a limited liability company in the Dominican Republic. The accreditation authority in the Dominican Republic is the Business Registry or Registro Mercantil.
Compliance with labor law
You need to know the labor law to understand every aspect of the payroll regulation in the Dominican Republic. The labor law generally has all the crucial elements of an employment contract, like minimum wage, overtime pay, and various employee benefits.
Employee information collection
The employment contract must have all the employee information that you may require. The crucial information includes
- Agreed Working hours
- Work location
- Location where the employment contract was signed
You need to collect those employee information and keep them in a secure location.
Acquaint with employee data
There are several changes in employee data every month. Some of these changes can be
- Change in personal information
- Change in family status
- Receiving an increase in salary
- Receiving bonus
- Taking unpaid leaves
- And many more
All this information is critical in calculating the salary.
Set up international treasury
Ensuring timely payment of salaries to your employees is crucial. To achieve this, it’s recommended to establish an international treasury process. One method is to open a bank account in the Dominican Republic specifically for paying salaries, taxes, and social security contributions.
A Step-by-step Process of Payroll Processing in the Dominican Republic
While discussing the step-by-step payroll process in the Dominican Republic, there are several steps that you need to go through.
Collecting tax information
Before you start processing payroll in the Dominican Republic, you need to collect all the tax information related to an employee. You can distribute various tax forms for the employees to fill out. You can also gather all the documents referring to various deductions and employee benefits.
Creating a payment schedule
The next step requires you to set up a payment schedule that suits you the best. According to the Labor Code of the Dominican Republic, the employees must be paid once per month or once per two weeks.
Now it’s time to calculate the payroll, considering all the information you have gathered. First, you need to calculate the gross pay for each employee. Then you need to collect all the details on gross payroll deductions in the Dominican Republic. Now you can calculate the net salary payable to every employee.
After completing the calculation, you can either send advice on disbursement to the bank or use any payroll processing software.
Performing payroll accounting
Payroll accounting is an essential part of the payroll process in the Dominican Republic. It keeps track of the payments you have made. You can do payment accounting on your own, or you can outsource it.
The final step is to ensure compliance with the rules. Make the necessary contribution to the Social Security Fund and Pension scheme on the due dates.
The payroll process in the Dominican Republic works similarly to other countries. Both the employer and the employee make various contributions to the payroll. These are also termed payroll taxes in the Dominican Republic.
According to the rules, the employer and the employee follow the different percentages of contributions. The table below shows the schemes in which both contribute and their contribution percentage.
Social Security Fund
Apart from these, the payroll deductions in the Dominican Republic also include 1.2% against labor risk insurance that the employer has to contribute.
The payroll cycle in the Dominican Republic is either monthly or bi-weekly. For monthly cycles, the employer makes the payment on the last day of the month usually.
Dominican Republic Payroll Options for Companies
For companies considering expanding their business, there are four options to manage payroll in the Dominican Republic. The options are
Comparatively larger companies usually set up their internal payroll service. In this form of payroll, the company requires setting up subsidiaries in the country. In addition, it is necessary for the company to hire an HR payroll in the Dominican Republic.
Remote payroll is a system that manages the payroll for out-of-state employees. In many cases, foreign companies having no subsidiary in a country use this type of payroll. Usually, the company utilizes its existing payroll in this. However, the company must abide by the laws and regulations of the country while setting up this type of payroll process in the Dominican Republic.
Outsourcing to a local service provider
When seeking to have complete oversight and management of your payroll process in the Dominican Republic, outsourcing to a local payroll processing company is often the best option. This allows for all pertinent payroll information to be readily available while ensuring compliance with local regulations and avoiding potential challenges that may arise when attempting to manage payroll in-house. However, the company will be responsible for compliance with all the payroll rules and regulations in the Dominican Republic.
Hiring a global payroll service
The fourth option is to hire a global payroll service. These organizations have vast experience in managing payroll for several multinational companies. Working with them means you do not have to worry about following the rules and regulations while managing payroll in the Dominican Republic.
Entitlement And Termination Terms
Although an employment contract is not mandatory according to the labor law of the Dominican Republic, businesses should create an agreement. The contract should contain the entitlement and termination terms of an employee. These terms are crucial in creating payroll policies in the Dominican Republic.
According to labor law, the employer must report the recruitment of an employee to the Ministry of Labor. This report must contain the name, age, gender, and nationality of the employee along with their identity card number, the position occupied, working hours, rest periods, salary, and leave allowance.
The labor law of the Dominican Republic does not have any mandate on probationary periods. But, the employer can include a probationary period of 3 months in the contract. During this period, the employer can legally release an employee without paying compensation.
While discussing a payroll guide in the Dominican Republic, we must remember that an employee is entitled to certain benefits. The list here contains the most crucial ones.
The employees working in a company for more than one year will receive a leave of fourteen days at least. For an employee who has worked for more than five years, it extends up to 18 days.
Public holidays are an integral part of the payroll rules and regulations in the Dominican Republic. The labor law, Law 16-92, governs the national holidays in the Dominican Republic. According to this law, there are 12 public holidays in the country. The law also gives the government of the Dominican Republic an option to create one-time national holidays. The list below contains national holidays in the Dominican Republic.
1. New Year’s Day
2. Epiphany Holiday
3. Lady of Altagracia Day
4. Duarte Day
5. Independence Day
6. Good Friday
7. Labor Day
8. Corpus Christi
9. Restoration Day
10. Our Lady of Mercedes Day
11. Constitution Day
12. Christmas Day
Maternity leave/ Parental leave
According to the labor law of the Dominican Republic, there is a provision for maternity leave for a pregnant employee. Usually, the duration of the maternity leave is 14 weeks. Seven weeks are before childbirth, and seven weeks are after.
Fathers can take a leave of up to 2 days after the birth of a child.
There are other leaves to consider when discussing the payroll rules and regulations in the Dominican Republic. Sick leave is allowed for up to 26 weeks with a partial payment. Other leaves to add to the entitlement terms are Bereavement leaves for a death in the family and a marriage leave of five days.
Termination terms are crucial while discussing the payroll policies and procedures in the Dominican Republic. Under the labor law of the country, there are several types of termination or a permanent break in the employment contract. They are –
Termination at will
It is the right of an employer or an employee to terminate an employment contract at their will. The party terminating the contract must give advance notice before terminating the contract. The table below contains the notice period for various lengths of service.
3 to 6 months
6 to 12 months
More than 12 months
Also, if the employer is terminating the contract, they must make severance payments to the terminated employees. The table below contains the severance pay for a certain length of service.
3 to 6 months
Salary of 6 days
6 to 12 months
Salary of 13 days
1 to 5 years
Salary of 21 days per year
More than 5 years
Salary of 23 days per year
“For cause” termination by the employer
An employer can terminate an employment contract, citing any cause mentioned in the labor code. For such termination, the employer must submit evidence of misconduct to the Department of Labor within 48 hours of dismissal.
“For cause” termination by the employee
An employee can terminate a contract with an employer by citing a cause. In this case, the employee must submit evidence of the misconduct to the Department of Labor within 48 hours of resignation.
Termination due to incapacity or death
In case of incapacity or death of an employee, the employer must pay economic assistance to them or their family members.
Dominican Republic Payroll Processing Company
There are two options available to optimize the payroll procedure in the Dominican Republic and maximize its benefits. You can choose to manage payroll yourself by internal or remote payroll processing. Or you can partner up with a global payroll service like Multiplier to outsource your payroll service. If you are interested to learn more, contact Multiplier.
How Multiplier Can Help with Global Payroll?
Establishing a payroll process in the Dominican Republic may present challenges for foreign entities due to various regulations that must be adhered to. However, Multiplier stands out as a company that excels in this area, providing expert guidance and support to streamline the payroll process in the country.
We offer global payroll solutions in more than hundred and fifty countries around the world. We have in-depth knowledge of the local rules and regulations. Our experienced professionals work 24×7 to manage your payroll policies in the Dominican Republic so that you can concentrate on other crucial aspects of your business.