do business in the Dominican Republic - Pellerano & Herrera

Pellerano & HerreraAttorneys at law103In the event of unjustified dismissal, employees are entitled to severance paymentscalculated as follows:from 3 to 6 months seniority, 6 days' salary,from 6 to 12 months seniority, 13 days' salary,from 1 to 5 years seniority, 21 days' salary for every year or fraction, andfrom 5 years seniority or more, 23 days' salary for every year or fraction.The employer must also give prior notice of the dismissal to the employee,as follows:from 3 to 6 months seniority, 7 days,from 6 to 12 months seniority, 14 days, andfrom one year seniority or more, 28 days.Prior notice is not necessary if the employer pays the worker the salary correspondingto such period.None of these payments is subject to income tax. If the employer does not makethe payment on time, the worker will be entitled to receive an additional day'ssalary for each day of delay.Social Security Obligations: Law 87-01On 10 May 2001, Law 87-01 on Social Security was enacted.This statute modifiescompletely the social security system in the country, which was based on Law1896 on Social Security Dominican Institute (“IDSS”) and was obsolete and inefficient.Its purpose is to provide mandatory and universal coverage under nondiscriminatoryconditions to all Dominican nationals and foreigners residing inthe country against risks of old age, disability, old age unemployment, sickness,maternity, childhood and labour risks.The implementation of this new legal framework is a great challenge for theGovernment, employers, and the whole population, and it will signify a gradualprocess that will certainly require several years before it may be fully put intoeffect.The law provides a transition period of ten years for the gradual constructionof the new social security system.a) Dominican Social Security System. Law 87-01 creates the Dominican Systemof Social Security (“SDSS”), formed of a complex framework of State, mixed andprivate agencies, such as the National Council of Social Security (policy-makingorgan), Treasury of Social Security (to collect contributions, distribute and payfinancial resources), Superintendence of Pensions, Superintendence of Healthand Labour Risks, National Health Service, Pension Funds Administrators, HealthRisks Administrators, Providers of Health Services, etc.It regulates the functioning of all these entities, establishing the respectiverights and obligations of all participants, including the State, employers and beneficiaries.b) Categories and Financing. Law 87-01 sets forth three regimes for the paymentof social security obligations:Contributive regime, which applies to workers in public bodies and privatecompanies and shall be financed jointly by employers and workers;