The Government of Costa Rica announced new labor and social security measures to mitigate the impact of COVID-19 on the workplace. Please find below the details of the actions taken so far:

  • Temporary relief from social security contributions: The Costa Rican Social Security Administration has taken the following measures to temporarily relieve the financial burden on employers and self-employed employees and to ensure the continuity of business activities:
  • The collection of debts due to late payment or undue retention of social security contributions from employers and independent employees is postponed until June 30, 2020.
  • Until August 31, 2020, there will be a reduction of the interest rate for payment arrangements and agreements that are in force or those new ones to be signed with the Social Security Administration. This measure will temporarily take as a reference the Passive Basic Rate calculated by the Central Bank of Costa Rica plus one percentage point (previously it was two percentage points).
  • In cases of employers who are not currently in arrears but will become during these months, a payment agreement may be executed under which they will have to pay as an initial premium only the debts of the social security contributions provided for in the Worker Protection Law. This measure will be applicable until June 31, 2020.
  • In cases of independent employees who are not currently in arrears but will become during these months, a payment agreement may be executed under which they will have to pay as an initial premium only five percent (5%) of the amount of social security contributions due. This measure will be applicable until June 31, 2020.
  • Temporary 75% reduction of the Minimum Contribution Base: The Costa Rican Social Security Administration approved a reduction of the Minimum Contribution Base in health insurance and pensions for employer and independent employees´ contributions for the months of March, April and May 2020. These reductions will be as follows:
  • Health Insurance: reduced from 294,619 colons to 73,654 colons.
  • Pension Insurance: reduced from 275,759 colons to 68,639 colons.
  • Adequacy of the procedure for the temporary suspension of employment contracts: On March 20, 2020 the “Regulation for the procedure for the temporary suspension of employment contracts in cases related to subsections a) and b) of Article 74 Labor Code was published, where guidelines were established to adapt the legal procedure before the MTSS and make the process faster.
  • Approval of Bill to Authorize the Reduction of Working Hours to Face the National Emergency (Law No. 21.854): The main changes by this new regulation include:
  • The possibility for private sector employers to file a request before the Ministry of Labor and Social Security for a reduction in the work shift of their employees in a 50%, when it is proven that the employer suffered an economic damage as a direct consequence of a declaration of national emergency.
  • The employer must demonstrate an economic damage, which can be demonstrated in accordance with any of the following situations:
    • In the case of a sanitary closure order issued by the competent authority;
    • In case of a decrease in gross income, when it is reduced by at least 20% compared to the same month of the previous year (in the case of employers with more than one year of activity);
    • In the event of a decrease in gross income, when it is reduced by at least 20%, considering the average gross income of the last three months prior to the declaration of the national emergency (in the case of employers with less than one year of activity);
    • In all other cases in which the employer is affected by the event that caused the declaration of the emergency, for which he must provide all relevant documentation and evidence.
  • The employer may reduce by up to 50% the number of hours of the ordinary working shift agreed with the employees.
  • By way of exception, when the employer can demonstrate a reduction in its income that reaches or exceeds 60%, the reduction of the working hours may be authorized up to 75% of the weekly work shift agreed with the employees.
  • In the aforementioned cases of reduction of the work shift, the employer must initiate the process of authorization before the Ministry of Labor and Social Security within three working days after such reduction.
  • The reduction of the working day may be established for a period of up to three (3) months, a period that may be extended by up to two (2) equal periods, if the effects caused by the event which originated the declaration of the emergency are maintained, and the employer so demonstrates.
  • The working shift of women who are pregnant or breastfeeding cannot be reduced.
  • In the case of a reduction that does not affect all employment agreements, the measure must be applied proportionally, considering the gender composition of the payroll, in respect of the same or equivalent positions.
  • Employees affected by a reduction in their work shift, the suspension of employment agreements, or dismissal as a result of the event giving rise to the declaration of an emergency, may have access to existing unemployment programs.