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Hiring Employees and Labor Laws

There are lots of things you need to know before you consider hiring employees to help you with any business you decide to do in Costa Rica. The good news is that in Costa Rica you have a large pool of competent and bilingual employees to choose from. Costa Rica has a huge set of very strict rules and laws protecting workers wages and benefits. Of all the laws in the country these are some of the laws that are most strictly enforced. These laws are very fair for the worker and are not unreasonable for any decent employer, especially since labor costs are low. For example, the average Costa Rican worker makes between $500 and $800 a month. To offset this low salary the governtment ensures that employees have rights to special benefits.

Requirements as an Employer and the Social Security System

As an employer you are required to make Social Security payments for an employee as well as deducting a contribution from all of the employee´s wages. Eight days after an employee begins

working for you, you must report them to the Social Security office. This is an important step to take to protect yourself in case a worker becomes ill or injured on the job. If you do not report them and something happens you could be responsible for paying a portion of their medical bills and sick leave out of your own pocket.  Your employee will need a Social Security card known as a “carnet” that shows they are covered under you, it is VERY important to demand that they give this to you upon hiring your employee. Otherwise, later on if something does happen to your employee and they do not have the card yet, managing the system becomes much more difficult and you could even face a lawsuit from your employees. Then you will begin making payments to the Social Security office.  By paying an employee’s Social Security this institution thereby provides health care, sick leave, and disability pensions. As an employer you are responsible for paying 20% of a worker’s gross salary and also must deduct 9% of the worker´s wages and pay both portions to the Caja Costarriccense del Seguro Social also known as the CCSS (Social Security office).It is not required in most cases, but is a good idea to take out an accident insurance policy even if they are only part time, premiums are minimal and this can protect you in case of a terrible accident.

Work hours and Wages

The maximum a worker can work domestically is 12 hours but most people do not expect much more than 8 hours. In most companies, most workers work five days a week, 8 hours a day.  In this average work day an employee usually has a half an hour to an hour lunch break depending on the company and a 15 minute coffee break in the mid morning and mid afternoon. For regular employees working Saturday or Sunday would require overpay. In construction, workers usually work a half day on Saturdays and receive a full day’s pay. If a worker is required to work on a holiday they will receive double overtime rates.

Wages are regulated by the government. They have a fairly all-inclusive list of positions and qualifications. Next to each job position there is a list of minimum wages depending on the specific type of job that is done. This list of over 250 jobs can be found at minimum wage by the Ministerio de Trabajo. Costa Rican employers are not likely to pay higher than what the law requires. This is the main reason foreigners decide not to work here due to the lower wages for the same amount of work or more than they are accustomed to doing.

Wages are adjusted twice a year by the Ministerio de Trabajo, once in January and once in July to offset inflation.

Vacation time and Obligatory Christmas Bonus

All workers are entitled to paid vacations.  Paid vacation time is given after the first month, for each month worked the worker receives one day, up to two weeks vacation for a full time worker who has worked a full year. Many workers can receive up to three weeks by negotiating with their employer.

Between December 1st and December 20th employees are required by law to receive a Christmas bonus called an Aguinaldo. This bonus is at least one month’s salary is given to employees who have completed at least one year of work prior to December 1st. If a worker has not completed the year they receive a portion of their bonus. For example, if the employee has worked 4 months then they will receive 1/3 of a month’s salary.

Firing, Quitting and Severance

When you hire an employee try and be very sure that they are right for the position so you can avoid having to let them go. Be sure to try and weed out potential employees that are likely to be frequently absent, show up late, not do what they are required, or steal.

The first thirty days of employment is a trail period in which the employee or employer may terminate without notice. However, vacation pay and an obligatory Christmas bonus (which is known as an Aguinaldo) must be paid to the employee in addition to the wages if the employee has worked more than 20 days in a 30 day period.

After a thirty day trial period an employee is entitled to severance pay as well as notice before being fired. For worker’s who have completed more than 90 days of work they are entitled to two weeks notice before being fired. After a year worked thereafter the employee is entitled to severance pay of one month’s salary up to a maximum of eight months pay and requires one month’s notices before being fired. If you do not you will have to pay the employee full wages for the notification period.

Unless an employee quits you are obligated to pay severance. You must pay an additional month’s pay for each year, or fraction over six months. The maximum severance is eight month’s pay. If a worker after the 30 days quits without giving proper notice they forfeit their rights to Aguinaldo.  When an employee quits it is extremely important that you have them sign a legal document in Spanish acknowledging that they by their own free will quit and that they have received their severance pay, vacation pay, Aguinaldo, etc. make sure this is signed in front of a witness. This is usually a good practice when you have fired an employee as well to make sure everyone is clear on what has been paid and that there is no longer a relationship.

Pregnancy in the Work Place

Pregnancy is one of the most delicate situations in the work place. If one of your employees becomes pregnant you are responsible to pay for additional employee benefits. If you find this inconvenient and decide to fire your employees expect to suffer SEVERE consequences.

In fact, even if you have a terrible employee who is pregnant it is highly recommended to hold out before firing them. There are several agencies that protect women’s rights that would be after you if you decided to fire a woman for being pregnant or while she is pregnant or nursing.

You also need to be careful if you fire a woman even if  you didn’t know she was pregnant. In this case you will most certainly be wrangled into a lawsuit and will have to prove beyond a shadow of a doubt that you had NO idea your employee was pregnant.

Women are given three months of paid maternity leave and one month of paid vacation time before the baby is born. Half of this is paid by you as the employer and the other half by the government.

Employee Obligations

By now you are probably thinking that the employer, employee relationship is pretty much a one-way street, and in a sense it is. However, not only the employer has obligations in this type of agreement, employees do too.

According to government regulations workers can be held responsible for damages they have caused whether on purpose or by accident. A domestic worker can be discharged without receiving severance if you can prove with witnesses that the employee was careless. In these instances, you need to have an extremely firm case to present to the Ministry of Labor, since they often tend to side with the worker.

Then you will begin making payments to the Social Security office. By paying an employee’s Social Security this institution thereby provides health care, sick leave, and disability pensions. As an employer you are responsible for paying 20% of a worker’s gross salary and also must deduct 9% of the worker´s wages and pay both portions to the Caja Costarriccense del Seguro Social also known as the CCSS (Social Security office).

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