termination of employment in Costa Rica: laws & severance policies

Legal Grounds for Termination of Employment in Costa Rica

The process of terminating employment in Costa Rica varies based on contract type, collective agreements, and the reason for termination. Contracts can end through legal provisions, mutual agreement, or as mandated by the law. Valid reasons for termination include:

       
• Abandoning work during working hours without a valid reason or permission.
       
• Engaging in political propaganda that undermines democratic ideals.
       
• Working under the influence of alcohol or drugs.
       
• Misusing company tools or resources.
       
• Carrying firearms at work without authorization.
       
• Dishonesty, slander, immoral acts, or causing harm to colleagues.
       
• Revealing company secrets.
       
• Negligence and endangering workplace safety or property.
       
• Unjustified absences of two consecutive days or more than 48 hours in a month.
       
• Fraud and providing false information about professional qualifications.
       
• Receiving a prison sentence.
       
• Violating the terms of the employment contract.

• Redundance of the position.
   

Employment Laws and Severance Policies in Costa Rica

Notice Period in Costa Rica

In Costa Rica, the notice period for employees depends on their length of service:

Severance Pay in Costa Rica

Workers in Costa Rica who resign or are terminated, whether with or without cause, are entitled to severance pay (known as "cesantía) based on their length of employment and salary. The number of severance days is determined as follows:

• 7 days for 3 to 6 months of service
• 14 days for 6 to 12 months of service
• 19.5 days for 1 year of service
• 20 days for 2 years of service
• 20.5 days for 3 years of service
• 21 days for 4 years of service
• 21.25 days for 5 years of service
• 21.5 days for 6 years of service
• 22 days for 7-13 years of service
• 20 days for 13 or more years of service

Probation Period in Costa Rica

In Costa Rica, probation periods vary by job and are typically specified in the employment contract, usually lasting three months. During this time, the employer can terminate the contract without cause and without compensation.

Process for Ending Employment in Costa Rica

       
• Providing written notice of termination.
       
• Ensuring compliance with notice period obligations.
       
• Settling final payments, including severance, unused vacation, and the proportional aguinaldo.
       
• Returning company property.
       
• Providing necessary termination documents.
   

Employee Rights During Termination in Costa Rica

Unfair Dismissal Protections

Employees who believe they were unfairly dismissed can file complaints with labor courts, which may require employers to justify the termination.

Grievance Procedures

Employees can raise disputes about their termination or working conditions through grievance procedures. If internal resolution fails, they can escalate complaints to the Ministry of Labor or pursue legal action.

Final Pay and Benefits

       
• Outstanding wages.
       
• Compensation for unused vacation days.
       
• Proportional aguinaldo (Christmas bonus).
   

What Termination Documentation Is Required by Law?

       
• Termination Letter: A written notice specifying reasons for termination.
       
• Final Payslip: A breakdown of final payments.
       
• Employment Certificate: A document stating the employee's tenure and role, provided upon request.

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How to Stay Compliant as An Employer in Costa Rica

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.