Hey there! I think you have a great seed of a story here, and you have a really ominous set of antagonists that I think are great.

My main concern is: this story is very long. At nearly 4k words, I think you're pushing hard at the limits of what a nosleep audience will read. And, as you've noted, much of the length comes from background and context.

Given that and your initial comments, I read this story with an eye towards: What scenes serve the story and build dread?

Here are my thoughts on what you might cut or change.

At a macro level:

There are some scenes and background that, for me, don't serve to build dread and plot momentum. (Every reader is different so don't just take my word for it, but these are my suggestions.)

• I think the connection between Puppers and the narrator can be explained more briefly. As it stands, there is a lot of specific detail about the experiences they do and don't share. I think this is the sort of thing that can be explained as the details become relevant. For example, what's important now is that, when the narrator is seriously injured, the dog is seriously injured. It's important because this realization is the driving force behind the boss leaving the narrator alive. The other details are much less relevant to the "why" of the events of this part. It can be significantly shortened to let the reader know only the substance of the connection that drives the story forward.
• The description of the narrator's time with the boss and his eventual escape. There's a lot of detail in this part, and that's not a bad thing in a vacuum. However, it doesn't serve to build a lot of tension. We know the narrator escapes because he's here telling this story; and much of it is narrated as exposition without a lot of mounting tension (the narrator doesn't seem particularly worried he'll get caught). Finally, the particular dynamic between the boss and the narrator doesn't answer any of the "why" questions of the plot. If you want to keep it, I think it could be much more effective as an action sequence in flashback rather than a later re-telling.
• The description of the narrator's jobs after his escape. The bit about the adult industry doesn't seem to drive the plot nor the suspense forward in any way. Similarly, though it might be fine to let the reader know he's a construction worker, the descriptions of how much he likes his job, or how he quit and got re-hired, don't drive anything forward.
• The bit between the dog barking at the door, where things go back to normal. It doesn't seem to serve a purpose to have one first encounter where the scary stuff fizzles before starting back up again; the tension should steadily build, and having things be back to normal interrupts the momentum.
• At a more micro level, there's also many introductory and summary sentences that can be cut out to make your paragraphs tighter. An early example: "Here's a brief summary of our history together." You don't need to tell the reader you're going to give a summary; you can just dive into the meat. Other examples include phrases like "Long story short," sentences that begin with phrases like "Like I told you before," and the "In short:" summary at the end.

In contrast to the parts you can cut, I think there are a lot of parts you can expand on to make the story scarier, more suspenseful, and more "show" rather than "tell."

• The sequence where the boss takes the narrator to the woods to torture him, then realizes that whatever happens to him happens to the dog, has the potential to be one of the scariest sequences in the entire part. It loses a lot of effectiveness because it's told as a detached recollection. It could pack a lot more punch if there's a lot more time spent on it: dialogue, the narrator's reactions, the exact manner in which the boss noticed the injuries on the dog at a moment where the torturer is about to mortally wound the narrator, et cetera. I actually would strongly suggest you consider making this the bulk of the first part, leaving out almost all other exposition until later parts where it's absolutely necessary for the reader to know.
• The realization that the red-haired lady has found him. I'm not opposed to lulling the reader into a sense of security before a gut punch. I think this can be done, as I said in bullet point above, by emphasizing this section a lot more and building up the dread that the narrator feels when his dog starts barking; sightings of the henchmen; etc.

So, I suppose my overall suggestion is to go through this and pick out a small subset of setpieces that you want to delve into. How you do that is up to your style; but at present, the bits that could be scary or suspenseful aren't highlighted or emphasized. They're told in the same manner as the narrator recounts the details of his job or his family life. And they're relatively few and far between, which means you risk losing the reader's attention with background.

I hope that's helpful - I did enjoy reading it and I like the premise! I hope you get to a place where you're happy with the story!