Free Zones going down the tubes.

[HOWMAR]

I see that liquidation and other benefits are calculated from the amount of worker`s salary, correct?

But what if I hire a salesperson to be paid commission only from each sale that he makes?

What will be my liability to him if he did not make even a single sale and I close my business and terminate him?

Hard to believe that an employee would still be working for you after 90 days (time period required to qualify for liquidation) without earning a single commission, but if that were the case, liquidation probably would be enforced utilizing minimum wage.

 

[cobraboy]

There is a different minimum wage scale in the Free Zones, lower than those outside the Free Zones for similar job classifications. Also, the Free Zones are exempt from paying the 10% profit sharing required of non-Free Zone companies.

10% profit sharing? Are there specific accounting guidelines to determine this?

I'm curious-is there any study that shows what % of employers pay all the taxes they accrue? Or is it like how electricity is paid for?

 

[batich]

Hard to believe that an employee would still be working for you after 90 days (time period required to qualify for liquidation) without earning a single commission, but if that were the case, liquidation probably would be enforced utilizing minimum wage.

Thank you! In RE business 90 days (or even more) without a sale is not an unusual thing.

THank you for reply and clarification.

 

[HOWMAR]

10% profit sharing? Are there specific accounting guidelines to determine this?

See Articles 224-227 of the Labor Code.
For example,
Article 224 states that the profit sharing is equal to 10% of net profits of the corp. payable within 120 days of closing of the fiscal year.

Article 227 states: "participation by the workers must be calculated on net benefits before determining the net taxable income and the bonuses which correspond to the members of the Board, Directors, Administrators or Managers."

There are caps for length of service. An employee of less than 1 year is capped at monthly salary X months worked/18. An employee of 1-3 years is capped at 45 days salary and an employee over 3 years is capped at 60 days salary.

I'm curious-is there any study that shows what % of employers pay all the taxes they accrue? Or is it like how electricity is paid for?

The real question is how many report true numbers for income taxes? The Labor Department would use the corporate tax returns to figure profit sharing.

But to be clear, Free Zone companies are exempt from profit sharing per Article 226.

 

[Onions&carrots]

And, no, I'm not kidding. One thing is for sure: one poster said there may need to be changes in the labor laws to keep FZ companies from leaving; I guarantee you the changes do NOT include raising the wages, etc.

Good point cobraboy, supply and demand is the only factor. Either way the DR workers lose. If they cut their wages to be more productive or if they up-n-leave, the DR worker loses.

With all these negatives, what actually keeps the few Zona Franca industries here?

Would any here say that the DR has become more expensive than Costa Rica?

 

[laurapasinifan]

I cant say for sure...but a company that my company makes sub assemblies for in the medical field used to assemble the product in Puerto Rico... then moved it to the DR....it is in a free trade zone....and I know both the company in the free trade zone that is assembling the parts and the company that sellls the finnished product send employees back and forth between america and the DR.....I guess it would be a little more of an obsatcle to send employees back and forth bewtween asia.....so i wonder if the closeness is also a factor...that may even outwiegh a slightly cheaper labor rate........plus I am not sure about this either, but finding bilingual employees that speak english and spanish, would be a lot easier than ones that speak chinese and english

anyone have a better handle on that subject?

bob