Question

Q: why do you think the cuban government requires non-cuban businesses to hire and pay workers only through the government

Answer 1

The Cuban 'Código de Trabajo' is the current law which since 2014 regulates how foreign businesses can hire Cuban staff.

In very exceptional cases, firms can hire workers directly but, in general, it has be done through public agencies known as 'hiring entities'. In fact, workers are employed by these entities, and not by the foreign enterprises. Wages are paid by foreign companies in CUCs (Cuban convertible currency) together with a compensation called heberes.  Then, the hiring entities pay the haberes to the employees in the Cuban local peso currency (CUPs).

Hence, hiring entities is a large source of funding for the Cuban goverment, as they receive full 'Western' wages, but only transfer the quantity called haberes to the employees, which is in line with the Cuban wage level. So they earn the difference as an income tax. Also, the public sector is able to control the population occupations in great detail through those agencies.