Dominican Republic faces challenges in labor formalization

In the Dominican Republic, the primary obstacle to labor formalization is not the initial cost of business registration, but the recurring expenses required to maintain formal employment. While administrative costs through entities like ONAPI are relatively low, the long-term financial burden of social security contributions and labor benefits poses a significant challenge for low-productivity businesses.

Employers must manage various mandatory costs, including 7.09% for Family Health Insurance, 7.10% for Old Age, Disability, and Survivorship Insurance, and additional contributions for occupational risk insurance. When combined with requirements for Christmas bonuses, vacations, severance pay, and tax obligations, the cost of sustaining a formal worker can become unsustainable for companies with low sales and limited productivity.