Posted Nov 2015
Under Costa Rican labor laws, domestic workers are considered employees, and as such, you are required to pay certain benefits. A lot of people do not realize this until the employee is laid off, then a few weeks later you get a notice from the labor court indicating that you have been sued by your former employee.
Unless you have a service agreement under which the services provided are on a contractual basis, the government will assume that the domestic worker is an employee, and you as the employer must pay certain benefits.
The purpose of this post today, is to make sure that you pay what you are supposed to pay according to the law. This is applicable to both regular employees as well as domestic workers. I make the distinction between regular employees for people who are on a full time or part time basis. Domestic employees may provide services for a few hours a couple of times a week, which makes it difficult for foreigners to understand why they may have benefits.
This is a brief list of benefits under Costa Rican Law:
Termination of Contract
When the labor contract terminates, whether the employee resigns or you fire the employee, you will need to pay certain benefits. Let’s review them briefly.
If you let your employee go, you will need to do the following:
|Calculation of Cesantía|
|Time Worked||Amount to Pay|
|3 to 6 months||Seven Days|
|6 to 12 months||Fourteen Days|
|1 year||19.5 days|
|2 years||20 days per year work or fraction over six months|
|3 years||20.5 days per year work or fraction over six months|
|4 years||21 days per year work or fraction over six months|
|5 years||21.24 days per year work or fraction over six months|
|6 years||21.5 days per year work or fraction over six months|
|7 years||22 days per year work or fraction over six months|
|8 years||22 days per year work or fraction over six months|
|9 years||22 days per year work or fraction over six months|
|10 years||21.5 days per year work or fraction over six months|
|11 years||21 days per year work or fraction over six months|
|12 years||20.5 days per year work or fraction over six months|
|13 years||20 days per year work or fraction over six months|
So, based on the table above, if you had an employee working for three years and earning $10 per day, you are required to pay 20.5 days of salary per each year the employee worked for you. In this scenario, as we are basin the salary at rate of $10 per day, you will need to pay the employee a total of $615 in cesantía.
For other types of work that is not domestic, Section 28 of the Labor Code indicates that the notice should be as follows:
|Notice for Termination of work contract|
|Time Worked||Term of Notice|
|3 to 6 months||One week|
|6 months to 1 year||15 days|
|More than one year||1 month|
So, based on the table above, if you had an employee working for three years and earning $10 per day, you are required to pay 20.5 days of salary per each year the employee worked for you. In this scenario, as we are basing the salary at rate of $10 per day, you will need to pay the employee a total of $615 in cesantía.
For instance, if you were supposed to give them one month notice, but the termination is immediate, then you will need to pay them one month salary.
Needless to say, if the employee resigns, you are not required to give them notice. Thus, you are not required to pay them for that notice.
To summarize, all employees are entitled to receive, vacation, aguinaldo, social security and workers compensation insurance.
If you let the employee go, you are required to pay vacation, aguinaldo, cesantía and give notice to the employee. If the employee leaves, you are only required to pay aguinaldo and vacation.
Under current labor regulations, a domestic worker is considered an employee. So you have to be compliant with this responsibilities for housekeepers, gardeners, and home repairs services. This is also applicable to security guards or people watching your house or property. In some instances, people stay in Costa Rica for only a few months out of the year, and for the remainder of the year they have someone watching over the house. In situations like this, the person watching over the house should also be covered. Labor courts interpret this situation as an employment relation and expects the owner of the house to pay benefits for the person who is taking care of the house. The law calls for courts to protect the rights of employees, and courts follow this to the black letter of the law.
If you will be hiring domestic help, you have to options when it comes to liabilities. Number one, to pay all of the benefits. Number two, to sign an agreement for domestic services, for which the worker should be registered with CAJA as an independent worker and with the revenue service as well. Sometimes, the house keeper will tell you that she is registered as an employee with a different employer, and she may not sign a contract either. If that is the case, do not hire that employee. Do not expose yourself to liabilities.
Contract for Services
Doing a contract for services will limit your liability. But, as noted lines above, the labor courts have the tendency to be more protective of the employee. So, in some instances, regardless of whether you did a contract for services or not, you may still be liable.
If you decide to do a contract for services in order to avoid doing payroll and benefits for the house keeper, you will need to take the following elements into consideration:
In other cases where you have an established business, such as a hotel, or a restaurant, and the employment relation is more clear, needless to say you have to comply with all labor regulations, pay all of the benefits and sign the appropriate work contracts.
You have also be careful with house sitters. If you have someone taking care of your place while you are gone, that person can be considered an employee. Costa Rican labor courts have interpreted this situation as a labor relation to the detriment of home owners. The suggestion is to also do a house sitting agreement where it is indicated that it is not a lease and it is not a labor agreement.
I hope this post to be helpful. Please feel free to suggest other topics for future posts.