This comprehensive guide provides an overview of the essential regulation aspects of Labor Law in Costa Rica. Local Labor Law abides by all necessary International Labor Law requirements.
In principle, regarding employment law in Costa Rica, the primary governing legislation is the Labor Code. However, it is essential to note that matters related to disciplinary sanctions, internal regulations, and procedures should be regulated through circulars, memoranda, guidelines, or the Internal Work Regulations duly approved by the Ministry of Labor and Social Security of Costa Rica and the Labor Inspection Office.
- Employer: An employer refers to any natural or legal person, whether private or under public Costa Rican Law, who engages the services of another individual through a labor contract. This contract can be expressed or implied, verbal or written, individual or collective.
- Employer Representative: Employer representatives include directors, managers, administrators, and individuals who hold managerial or administrative positions on behalf of the employer.
- Employee: An employee is any natural person who provides material or intellectual services through an express or implied employment contract. This contract can be verbal or written, individual or collective. Any person that is allowed to work can be an employee.
Employment Contract in Costa Rica
Costa Rica’s law allows and recognizes unwritten or verbal and written employment contracts. The following provisions outline the critical aspects of employment contracts:
Unwritten or verbal contract: An oral employment contract is permissible only in specific situations, such as a. Agricultural or livestock farming business in Costa Rica. b. Temporary work that does not exceed ninety days.
Written contract: The average Costa Rican type of contract. The agreement must be in writing and include the following essential information: a. Names, surnames, nationality, age, sex, marital status, and domicile of the contracting parties. b. Identity document numbers. c. Precise designation of the employee’s residence if the work is to be performed in a location other than their place of residence. d. Description of the position, salary, place of work, contract duration, work schedule, and any other stipulations deemed appropriate by the parties.
Defined or determined time contract: An employment contract may only be stipulated for a specified duration when it arises from the nature of the service. If the contract expires, but the causes that led to its establishment persist, it will be treated as an indefinite contract if it benefits the employee. A fixed-term contract cannot exceed one year of employment to the employee’s detriment. However, in cases where services require special technical preparation, the duration may extend to five years under the same conditions. It is important to note that any fixed-term contract is subject to extension.
Indefinite-term contract: An indefinite-term employment contract is intended to provide paid work indefinitely without a predetermined end date.
Social Security and Policies: Ensuring Workers’ Well- Bening
Introduction: In Costa Rica, social security plays a vital role in safeguarding the welfare of employees. This section highlights the key aspects of social security and related policies established by law, including salary regulations and the critical concept of Aguinaldo.
Enrollment and Contributions:
- Employers are required to enroll their employees in social security through the Costa Rican Social Security (CCSS).
- The employer must pay the CCSS equivalent to the employee’s salary monthly, while the employee contributes a percentage of their earnings.
- Employers are responsible for deducting the applicable social charges from the workers’ wages and promptly remitting the amount to the CCSS.
- Failure to comply with these obligations will result in personal liability for the employer to cover the unpaid fees.
Occupational Risk Policy:
- Alongside social security contributions, employers must enroll their employees in an occupational risk policy with the National Insurance Institute (INS).
- The payment amount for this policy may vary based on the employee’s obligations.
- Employers can make annual, semi-annual, or quarterly payments toward the occupational risk policy.
- The determination of salary amounts considers factors such as the nature of the work, quantity and quality of the tasks performed.
- Workers should receive equal pay, considering job equality, working hours, and efficiency conditions.
- Discrimination based on age, ethnicity, sex, religion, race, sexual orientation, marital status, political opinion, national descent, social origin, disability, union affiliation, economic situation, or any other analogous form is strictly prohibited.
- All employees can earn at least the minimum wage that covers their basic needs and families.
- The minimum wage (all employees are entitled to a minimum and cannot receive less than the minimum established by law) is periodically established through executive decrees published every six months.
- Employers are obligated to increase wages every six months only if employees receive the minimum amount prescribed by law or if there is an agreement between the parties.
- If a worker already receives a salary higher than the minimum, the employer is not obligated to provide a further increase.
- Aguinaldo refers to an “additional salary” that employers are required to pay their workers (entitled to a Christmas bonus) within the first 20 days of December each year, regardless of the type of contract.
- All workers, without exception, are entitled to this benefit.
- The bonus amount is calculated by summing all ordinary and extraordinary wages earned by the worker from December of the previous year until November of the payment year.
- The total sum is divided by twelve, resulting in the amount to be paid as the Christmas bonus.
- Social bonuses and other types of bonuses are exempt from discounts. Only court-ordered alimony payments can be deducted after the employer receives a wage embargo decree.
Workday and Work Schedule: Striking The Right Balance
Introduction: Understanding the intricacies of the work day and work schedule is crucial for both employers and employees in Costa Rica. This comprehensive guide sheds light on the basics of Costa Rica employment, and labor rights, including the three types of working hours, days of work, regulations concerning schedule modifications, breaks, holidays, and the termination of the working relationship.
Types of Working Hours:
- Daytime Hours: Spanning from 5:00 a.m. to 7:00 p.m., it is required to work 8 hours a day and usually doesn’t exceed 48 hours a week since the usual in Costa Rica is 48 hours. In specific cases, the work time can be extended to 10 hours.
- Nocturnal Hours: Covering the hours of night shift, between 7:00 p.m. and 5:00 a.m., these hours amount to six hours per day and 36 hours per week. The daily duration cannot be extended.
- Mixed Hours: Encompassing shifts that start on one day and end on another, these hours constitute seven working hours per day and 42 hours per week. The daily duration can be extended up to eight hours.
Work Schedule Modifications:
- The work schedule is a crucial element of the employment contract, and both parties must agree upon any modifications.
- Employers can alter the schedule if it is stipulated in the employment contract and the worker accepts the changes.
- Communicating any modifications within a reasonable period is essential, ensuring that they do not cause objective harm to the worker.
- The typical workday schedule cannot go over eight hours of work, while the extraordinary workday schedule has a maximum of 12 hours per day.
- Any work performed outside the agreed-upon time limits within the workday is considered extraordinary and must be reimbursed at 50% higher than the stipulated wages.
- It is important to note that overtime hours are exceptional and temporary, and fixed hours of overtime must be agreed upon in good faith and with prior notice. Workers are generally obligated to work overtime except for valid reasons that justify their refusal.
Breaks and Holidays:
- Every Costa Rican worker has the right to a 24-hour day of absolute rest after every six consecutive workdays; in other words, the employee is entitled to two weeks of paid vacation for each fifty weeks of employment. (11.5 months of employment).
- Annual paid vacation days are granted, with a minimum of two weeks for every fifty weeks of continuous employment with the same employer or a proportional amount for shorter service periods (one day for each month worked). When the employee is ceased, for any reason, the law requires that he must be paid for any unused vacation time.
- Regarding daily rest, employees are entitled to a one-hour break (or a 45-minute lunch break and two 15-minute breaks), during which they are not at the employer’s disposal and may have their meals. If the daily rest is less than one hour, the employee must be paid for this time and counted as part of the daily workday.
- Employers who provide shorter rest periods than the daily rest are considered to be showing generosity, and such deductions cannot be made from the indicated daily rest period.
Paid Maternity Leave:
- Special regulations are used mentioned in the Costa Rican Labor laws regarding maternity. The employer has to allow paternal leave for one month before birth and three months after delivery for a total of four months of maternity leave. The employer has to pay 50 percent of the salary for all four months of paid maternity leave. The Social Security Administration (CCSS) has to pay the other 50 percent of the salary for the four months of leave. Terminating the services of a pregnant woman is not recommended since regular wages from the date of dismissal to the eighth month of pregnancy would be needed to be paid. This can lead to issues in labor court.
Paid Sick Leave:
- Costa Rican Labor Code stipulates that an employer has to pay at least 50 percent of the salary for the first three days of an employee’s sick leave while the Social Security Administration (CCSS) pays the other 50 percent. The CCSS pays 60 percent of the salary from the fourth day of the sick leave on. The CCSS compensates employees on sick leave only if the employee submits a medical certificate obtained from an accredited CCSS doctor.
Termination of the labor Relationship
- The Labor Code of Costa Rica indicates that contracts can be terminated for various reasons:
- Dismissal without employer liability: The employee is eligible to receive vacation pay and proportional bonuses. The grounds for dismissal must be stated in the dismissal letter delivered to the worker.
- Dismissal with employer responsibility: The employee can receive advance notice and is entitled to severance pay in addition to vacation pay and proportional bonuses. If the employee has worked with the employer for more than three months but less than six months, then they are entitled to the equivalent of seven days’ wages. If the employee has worked from six months to one year they are entitled to fourteen days of wages. If the employee has worked for more than one year, the severance must be calculated. Resignation: When the worker decides to resign, they must receive vacation pay and proportional bonuses. c. Unilateral breach of contract: If the employer fails to fulfill their labor obligations, the worker may terminate the employment relationship, holding the employer responsible. d. Termination of the employment relationship:
- Defined time contracts: The duration is predetermined and stated in the agreement.
- Indefinite time contracts: Any part of the contract can end the contract, without just cause, giving prior notice to the other.
- Contract for a specific task: The relationship is terminated once the contracted work is completed.