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Human Resources

HR Basics

All businesses, big and small, have to comply with a myriad of regulations surrounding Human Resources. Business demands eventually push companies to hire employees and in turn, based on the number of employees, additional laws apply.

There are several resources in Puerto Rico that help entrepreneurs with the management of their employees, instructing them about the relevant permits and regulations. Some of these are:

Independent Contractor vs. Employee: It is crucial that you make sure you classify your employees as independent contractors or employees. The penalties of the IRS and the Department of Labor and Human Resources of Puerto Rico may be high for a misclassification. You always leave the safe side when using the employee classification and paying him by the hour. Review the article "Understand the difference between employee and contractor" published by the IRS for a more complete understanding.

Finding Employees

You have determined that you need help and need to take the leap to hire employees.  The first step is preparing the business, and the next step is to find the right employee!  There are many different ways to find the right person:

  • Recruit your employees yourself

    • Networking with others – Word of Mouth

    • Job boards, online postings

    • Placing ads in newspapers or posting signs

    • Referrals from employees

    • Social Media

  • Use a temporary agency

  • Use a staffing agency

There are a few essential steps you should take in order to fill your position regardless of how you decide to recruit your employees:

  • Define your employment needs: What are the essential functions of the position to be filled (the primary reasons this position exists in your business, the top 5-10 job duties)? A job description, either formal or informal, will help to define the requirements of the position when recruiting and hiring the right person. Read this article from the SBA on writing effective job descriptions.

  • Develop interview questions: Your questions should be relevant to the position, legal, and consistent for each candidate. Look for a good fit for your company's culture as well as the right skills. Take notes on a separate piece of paper (not the job application or resume).

  • Check personal and professional references for each final candidate: According to the Fair Credit Reporting Act (FCRA), background checks may only be conducted after a conditional offer of employment has been made. Learn more about background checks from the FCRA.

Temporary Agencies

Recruiting yourself requires you getting the word out to friends, colleagues, the public and anyone who might be interested in working for your company. Most startup companies find their employees through active networking and referrals from friends.

Temporary agencies can be used to fill a wide variety of positions from clerical to manufacturing, to professional and even executives. There are several reasons companies may use a temporary agency to fulfill employment needs:

  • Companies that have fluctuations in the workload due to peak production periods

  • Seasonal operations

  • Employees on vacation or leave of absence

  • New business or growth that requires additional employees quickly

  • The desire to do a "trial" run with a prospect prior to hiring

Staffing or recruiting agencies focus on finding the right candidate for the position based on criteria defined by the company looking to hire and typically charge a percentage of the first year salary for the service. The best recruiting agencies have knowledge of the market, are familiar with employment trends, current wages, who and where the candidates are and can offer other solutions if there are no candidates.

Managing Employees

You have hired employees! What are you going to do to keep them? Here are some important things that you should take into consideration for your employees:

1. Develop consistent policies and follow them: SBA has information on how to develop an employee handbook. Many small businesses do not have time to do this alone. This process can be accelerated by hiring a qualified human resources consulting firm or by seeking legal advice.

2. Change your mindset: instead of being the one who does everything, you will be the leader.

3. Research and learn about how to handle all types of employees, from those with high performance to those who are difficult to manage.

4. Many times small businesses and startups do not realize the value of time and how much time is spent on effectively managing their employees. Delegating the administrative management of employees, payroll and accounting to external contractors can help save huge amounts of time that can be spent on the operation and operation of the business.

5. There are rules that still apply in all businesses, such as directing by setting the example and treating your partners as you like to be treated. Likewise, knowing how to do the jobs within your business can help create credibility and respect from your employees towards you.

Paying Your Employees

Pay your employees on time and will consistently increase your company's retention level significantly. You must determine how and when to pay your employees, always being faithful to the scheduled calendar. Delegating payroll responsibilities to a third party is a good idea for all employers who are not accountants by profession. It allows you, as a business owner, to have more time to focus on other aspects of the business, while leaving the important task of complying with tax deposits to a professional. However, it is always important to remember that although a third party has that responsibility, tax obligations fall on the owner. 

Below you will find information that you should know when being an employer:

 Practical Guide Regarding the Fair Labor Standards Act

 The Wage and Hour Division of the US Department of Labor

The Department of Labor requires that hours worked be documented for non-exempt employees (all employees paid on an hourly basis). There are several options available to measure the hours your employees work:

● Manual Time Sheet

● Swipe Identification Card

● Measurement System based on a Web Page

● Assistance Control Clock

When is payday? Payment frequency options are:

● Weekly - 52 times a year (paid every week)

● Semi monthly - 24 times a year (paid twice a month)

● Biweekly - 26 times a year (paid every two weeks with a delay of the week, the most common)

● Monthly - 12 times a year (paid once a month)

There are different payment methods you could use, including checks and direct deposit. Check with your accountant to verify what are the appropriate methods for your business. Likewise, based on the options that are within your reach, you should ask your employees which option they prefer and that they sign a document evidencing the option they selected.

Exempt vs. Not Exempt

Classifying employees as exempt from overtime or non-exempt hours (those who must be paid time and a half for all the hours they work after they meet 40 weeks) is another crucial decision related to the payment of your employees. Misclassification of employees can lead to penalties, penalties and the payment of back wages to employees who are owed overtime.


The Voice of Houston published an article providing the definition of a full-time exempt employeeThe Labor Bulletin provides information on exempt and non-exempt employees. The most important thing to remember is that you must evaluate each position for the specific tasks assigned, not for the job title, in order to correctly determine the eligibility of an employee as exempt or not exempt. Remember that when in doubt, you take a safe step by paying your employees by the hour.