Employer of Record in Cuba

Navigating the Cuban employment landscape requires a comprehensive understanding of local labor laws, which are influenced by the country's socialist principles and state-owned economy. Foreign companies generally cannot directly hire Cuban nationals. Instead, they must engage workers through authorized "hiring entities" (entidades empleadoras) sanctioned by the Ministry of Employment and Social Security, or by establishing a legal presence in the country. This unique framework ensures compliance with Cuban regulations and manages the formal employment relationship.

There are several pathways for foreign companies looking to expand their workforce into Cuba:

• Establishing a local entity: While this option allows for direct hiring and reduced risk exposure, it is typically a costly and time-consuming process, often less practical for businesses seeking flexible, rapid solutions.
• Through an Employer of Record (EOR): Services like Rivermate act as the legal employer, managing all aspects of employment on behalf of the foreign company, ensuring compliance, and simplifying the hiring process. This allows businesses to operate in Cuba without establishing their own legal entity.
• Hiring them as independent contractors: This offers flexibility and can be a more affordable alternative. However, it requires careful worker classification to avoid misclassification risks and penalties under Cuban law, as independent contractors (cuentapropistas) operate under civil or commercial agreements rather than the labor code.

How an EOR Works in Cuba

An Employer of Record in Cuba serves as the legal employer for your workforce, taking on critical responsibilities to ensure full compliance with local labor laws and regulations. This allows your company to manage the day-to-day tasks and performance of your team, while the EOR handles the administrative and legal aspects of employment.

An EOR typically takes care of:

• Payroll processing and tax deductions: Calculating, processing, and distributing employee salaries, including deductions for taxes and social security contributions.
• Compliance with Cuban labor laws: Ensuring all employment contracts and practices adhere to Cuba's strict labor code and worker rights regulations.
• Benefits administration: Providing mandatory employee benefits such as social security contributions, healthcare, and statutory leave.
• HR support and employment contract management: Drafting compliant employment agreements, managing employee relations, and providing ongoing HR support.
• Visa and work permit sponsorship: Assisting foreign nationals in obtaining necessary work permits and visas.

Benefits for Companies

Utilizing an Employer of Record service offers significant advantages for businesses looking to hire in Cuba without establishing a local entity:

• Legal compliance without local entity setup: Allows companies to expand into Cuba quickly and compliantly, bypassing the complex and lengthy process of forming a subsidiary.
• Reduced administrative burden and operational costs: The EOR manages all payroll, tax, and HR administrative tasks, freeing up internal resources.
• Faster market entry: Enables rapid onboarding of employees, significantly reducing time-to-market.
• Mitigation of legal and financial risks: The EOR assumes legal liability for employment compliance, protecting your business from potential penalties.
• Ability to test the market: Provides a flexible way to engage talent and explore market opportunities without significant long-term investment.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Cuba includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Cuba.

Cuba's evolving tax system requires employers to fulfill specific obligations, including remitting social security contributions, payroll taxes, and income tax withholding. Employers must calculate contributions based on employee gross salaries and remit these monthly to authorities. They are also responsible for withholding income tax from wages using government-provided tables and remitting these amounts regularly.

Employees may benefit from deductions such as standard allowances, contributions to pension plans, or healthcare payments, which can reduce taxable income. Accurate documentation is necessary to claim these deductions. Both employers and employees must adhere to monthly remittance schedules and file annual tax returns, with strict deadlines to avoid penalties.

Foreign entities and workers face additional considerations, including potential benefits from tax treaties, residency rules, and the tax implications of permanent establishments. Proper tax planning is essential for international compliance and minimizing liabilities.

Cuba's salary compensation system is shaped by its socialist economy, with the state controlling employment and wages. While base salaries are generally low, they are supplemented by various benefits such as bonuses, allowances, and subsidized goods. Salaries vary across sectors, with tourism and IT offering relatively higher wages. For example, hotel managers earn approximately $300–$700 USD/month, tour guides $200–$400 USD/month, and software developers $250–$600 USD/month. Minimum wages are mandated by the government, but specific figures for 2025 are pending.

Payroll is usually processed monthly in Cuban Pesos (CUP), with employers responsible for deductions such as social security and taxes. Bonuses and allowances are common, tied to performance, holidays, transportation, and meals. Wage levels are expected to gradually increase, especially in sectors attracting foreign investment, but overall growth remains constrained by economic conditions and government policies.

Cuba's labor laws guarantee employees several leave entitlements, including annual paid vacation, public holidays, sick leave, and parental leave. Employees are entitled to a minimum of 30 calendar days of paid annual vacation, with timing typically agreed upon between employer and employee. Public holidays such as Labour Day (May 1), Revolution Day (January 1), and Christmas (December 25) are observed, and work on these days usually warrants additional compensation or time off.

Parental leave includes paid maternity leave of approximately 18 weeks, with around 60% salary during this period, and about 2 weeks of paid paternity leave. Sick leave is granted upon medical certification, with salary compensation varying based on service and agreements. Other leave types like bereavement, study, and sabbatical are available depending on employer policies.

Cuba's labor laws mandate key employee benefits emphasizing social security, paid time off, maternity leave, national holidays, and wage guarantees. Employers and employees must contribute to the social security system, which covers retirement, disability, and survivor benefits. Mandatory benefits include paid vacations, sick leave, and maternity leave, with specific regulations guiding their duration and compensation.

Beyond these, many employers offer optional benefits such as performance bonuses, subsidized meals, transportation support, educational assistance, housing aid, life insurance, and supplementary healthcare, especially in larger or foreign companies. Healthcare in Cuba is universal and free, though some employers provide supplementary private healthcare options. Retirement benefits are primarily provided through the social security system, with standard retirement ages of 60 for women and 65 for men; early retirement may be available under certain conditions.

Employment agreements in Cuba are governed by the Labor Code, requiring specific legal compliance to be valid. Employers must include essential clauses such as job description, salary, working hours, probationary period, and termination procedures to ensure clarity and legal enforceability.

Cuban labor law recognizes various contract types suited for different employment scenarios, including indefinite, fixed-term, and special agreements. Key data points for employers include:

Mandatory clauses in employment contracts include job role, salary, probation period, and termination procedures, ensuring compliance with Cuban law. Employers are advised to seek legal guidance to navigate complex regulations and create enforceable agreements.

Cuba is gradually adopting remote work, driven by modern work preferences and talent access. While no specific remote work law exists, existing labor laws, including the Cuban Labor Code, govern these arrangements. Employers must clearly define remote work terms in contracts, ensure workplace safety, and comply with tax regulations. Key legal considerations include employment contracts, safety standards, and tax compliance.

Flexible options such as remote work, hybrid models, flextime, compressed workweeks, and job sharing are being explored, depending on job nature and company policies.

Employers should focus on legal compliance, technological infrastructure, and clear policies to implement sustainable remote work programs effectively in Cuba.

In Cuba, employment termination laws prioritize employee protection, requiring employers to follow strict procedures to avoid legal issues. Key considerations include notice periods, severance pay, grounds for termination, procedural steps, and employee protections. Failure to comply can lead to disputes and penalties.

Notice periods vary by length of service:

Severance pay is generally calculated as:

Termination grounds are categorized as with or without cause. With cause includes misconduct, theft, or violations, while without cause covers redundancy, business closure, or contract expiration. Employers must follow procedural steps such as documentation, written notice, consultation, accurate severance calculation, final payments, exit interview, and record-keeping. Employees are protected against wrongful dismissal through potential reinstatement, compensation, and legal challenges, emphasizing the importance of lawful termination practices.

Cuba's economic evolution is marked by a rise in independent contracting, offering opportunities for both local professionals and international businesses. Companies engaging Cuban talent must understand the legal distinctions between employees and contractors to avoid misclassification, which can result in legal and financial penalties. Key factors in classification include control, integration, economic reality, duration, and provision of tools. A formal contract is essential, detailing scope of work, payment terms, duration, deliverables, confidentiality, intellectual property rights, and termination clauses.

Intellectual property rights are crucial, with contracts needing explicit provisions for IP ownership, typically through assignment or work-for-hire clauses. Independent contractors in Cuba manage their own tax obligations, including income tax and social security contributions, and are responsible for their insurance. Common industries utilizing independent contractors include tourism, technology, arts, consulting, education, and professional services, leveraging their specialized skills and flexibility.

Foreign nationals seeking employment in Cuba must obtain appropriate visas and work permits before starting work. The main visa types include the Business Visa (A-7) for short-term activities, the Work Permit Visa (D-2) for employment with a Cuban or foreign company, the Investor Visa (D-1) for investors, and the Technical Assistance Visa (D-4) for experts. Employers play a key role in sponsoring and submitting applications through the Ministry of Labor and Social Security (MTSS), requiring documents such as passports, educational credentials, employment contracts, and police clearance. The approval process typically takes 2 to 4 months.

To qualify for a work permit, applicants must have a job offer, and employers must ensure compliance with Cuban labor laws. For permanent residency, a minimum of five years of legal residence, stable employment, good conduct, and societal integration are generally required. Dependents, including spouses and children, can obtain visas if proof of relationship, financial support, and health coverage are provided, though dependents cannot work unless they secure their own permits.