PREMIUM PAY PROGRAM FOR PRIVATE SECTOR EMPLOYEES AND WORKERS

Through Executive Order of May 6, 2021, the Governor of Puerto Rico ordered the Disbursement Oversight Committee to authorize and supervise the procedure for the distribution and disbursement of the Coronavirus State and Local Fiscal Recovery Fund (CSFRF).  The funds must be used on or before December 30, 2024, for the following purposes:

1. Respond to the public health emergency caused by COVID-19, as well as to its negative economic impact, which includes assistance to homes, small businesses and not-for-profit organizations, or aid to industries affected by the pandemic, such as tourism, travel, and hospitality.
2. Provide an additional compensation to employees and workers of the state government that carry out essential tasks during the public health emergency caused by COVID-19, and grant subsidies to employers that have employees and workers that carry out essential tasks subject to the eligibility criteria that are to be established for these purposes.
3. Render government services in as much as the state or territory’s income has been reduced due to the public health emergency caused by COVID-19 and compared to the income collected during the last fiscal year before the emergency.
4. Make needed investments on water and sewage systems or on broadband network infrastructure.

The Governor assigned $200 million of the CSFRF funds to implement additional compensation payments, known as Premium Pay, to essential workers of both the public and private sector. 

In accordance with the Executive Order, the Committee approved the Guides of the Premium Pay Program for the payment of this compensation to Essential Employees and Workers of both the private and public sector.  The objective of this Program is to provide an economic benefit of $2,000 to each employee or worker that provided and continue to provide essential services during the COVID-19 pandemic. 

Therefore, the Treasury Department (TD) issued Internal Revenue Circular Letter 21-19 (CC RI 21-19) to establish the eligibility criteria and the process to request the additional compensation, Premium Pay, for the employees and workers that qualify. 

The following commercial activities are considered eligible to obtain the benefit of this Program: security services, health services or health professional services provided directly to patients, supermarkets, grocery stores, drugstores, cargo transport, and not-for-profit entities that provide direct services to the community. 

The Program excludes those employees or workers of hospitals and Diagnostic and Treatment Centers, as these are eligible to receive payments through a separate program to be managed by the Financial Advisory and Fiscal Agency Authority of Puerto Rico (AAFAF), through the funds provided by ARPA Law that provides aid to hospitals and Diagnostic and Treatment Centers. 

Eligibility Requisites

Eligible Employee

Any individual that complies with the following requisites is eligible to receive the benefits of this Program:  

1. The employee or worker has earned a basic annual salary or compensation of less than $40, 000 on calendar year 2020.
2. The employee or worker must be working for an Eligible Employer at the moment of submitting the request; and has completed at least 500 hours of in-person essential work beginning on March 1, 2020.

It is understood that an Eligible Worker carries out essential work if: 

1. Conducts critical functions for the continuity of the needs and essential operations to safekeep the well-being and public health of the residents of Puerto Rico.
2. Complies with any of the following criteria:
   • Carries out functions or tasks that require regular in-person interaction with patients or with the public.
   • Carries out functions or tasks that involve management of inventory, used items, or that will be used by patients or public.
   • Works with a person that complies with any of the above-mentioned criteria, and that also works for the same Eligible Employer.

The Premium Pay compensation cannot increase the total salaries beyond 150% of the average annual salary of $30,750.  The salaries must be calculated on the basic annual salary of the employee, excluding additional payments such as overtime, differential shifts and bonuses not associated to the employee’s productivity. 

Eligible Employer

The additional compensation, Premium Pay, will be granted to each Eligible Worker whose Eligible Employer has included him on the request submitted to the TD.  An Eligible Employer must comply with the following criteria: 

1. Must be an employer of the private sector either as an individual business, a partnership, or a legal entity.
2. The business was operating during natural year 2020 and must be operating at the moment of submitting the request.
3. The business must be engaged in the following activities: security services, health services or health professional services provided directly to patients, supermarkets, grocery stores, drugstores, cargo transport, and not-for-profit entities that provide direct services to the community. 
4. The Merchant’s Registry Certificate must be in effect and must include one of the NAICS Codes established by the guides.

Process to Request the Additional Compensation, Premium Pay 

Any Eligible Employer must submit the request through his SURI account.  Beginning on September 15, 2021, the TD will set up a link for this purpose. 

In addition, the employer must confirm the following information for each eligible worker: 

• Provided and continues to provide essential services, risking his health to comply with the daily needs of the community.
• Has worked for at least 500 hours from March 1, 2020, to the present carrying out essential tasks at the employer’s business.
• Continues to work for the employer making the request.
• Earned an annual salary or compensation of $40,000 or less for the 2020 or 2021 calendar years.

Once the TD receives the request, it will revise the information, proceed to verify it and then issue a notice to the employer informing him on whether or not the request has been approved.  The TD will then proceed to deposit the Premium Pay of $2,000 to the employee’s bank account as informed on the request by the employer. 

Payments for the additional compensation, Premium Pay, are subject to the availability of the funds assigned to the Program.  Thus, disbursements will be made on a first come, first served basis.

Premium Pay and Income Tax

Payment for the additional compensation, Premium Pay, is not considered as income neither for the employer nor for the employee.  It is not subject to income tax payment. 

Likewise, the Eligible Employer cannot take as a deduction on his income tax return the additional compensation, Premium Pay, granted to the employee.

NOTE:  The information included in this Bulletin is only a summary of the contents of CC RI 21-19.  We encourage you to contact us at TCG to receive detailed information on the Program, discuss the eligibility requisites and coordinate the filing of the request.