Most expats in Costa Rica have experienced the problem of firing an employee or have one leave unexpectedly. One of the biggest headaches is calculating what is owed to them.
What usually happens is the employee goes to the labor ministry and has the calculations made there. An employer never knows if the numbers are right or wrong. Since many employees exaggerate the truth, the amounts sometimes end up in the stratosphere.
Here is a secret for expats to get a handle on employee severance pay.
First a note: An employee’s pay off varies based on years worked. The more an employee has worked, the more they get in cesantía. This is equivalent to severance benefits. Every employee is entitled to them, if they do their job in a satisfactory manner. The amount an employee is entitled to in vacation pay also varies with time.
Expats usually cringe when they have to make these calculations or call a lawyer to do it for them. Believe it or not, most lawyers do not calculate the amounts correctly either.
The savior is on the Internet located here.
This Web page takes the pain out of employer-employee separation. There is some information on the Web site that is in English, but not the severance calculations, so here is a quick course to use this valuable resource. The process is simple, so just follow this example for an employee:
Go to the Web site. Several boxes are on the page to fill in. They are in groups, the first group is called Tiempo laborado or “time worked.” Type in the date in the box labeled Ingreso. This is the employee’s start date. One can use the calendar, but it may not work on some browsers. If not, be sure to input the date as it is represented in Costa Rican format. For example, the day after Christmas two years ago would be represented as 26/12/2009. The dates are in a day/month/year format. Use this date for this example to see if the result at the end is the same as in this example.
The next box is labeled Salida for the termination date. The employee in this example will lose their job at the end of this month so put 30/06/2011 or use the calendar.
The next group is called Tipo de pago or “type of payment.” There are only two boxes, one is labeled Mensual for “monthly” and the other Semanal for “weekly.” Monthly includes monthly and bi-monthly payments. Weekly includes payments by the week, day or hour. For this example, check monthly.
The next grouping is named ¿Le ha sido otorgado el preaviso en tiempo? This means “Was the worker given notice of termination.” The answer is either SI or NO or Parcialmente for some notice was given. If the latter is the case, put in the number of days the employee was given to look for another job before termination. For this example, check no.
The last group on this page is labeled Días de vacaciones por disfrutar. This means, “How many vacation days does the worker have coming.” For this example, use five.
On the right side of the page — on the top and on the bottom of the calculations tables — in small letters are arrows with the word Siguiente. This means “next.” Click one of the arrows.
On this page there are 12 boxes to fill in. These boxes represent the last twelve months of a workers monthly payments. Fill in the boxes with the correct amounts.
Any in-kind benefits should be included in this amount. In-kind benefits include housing, food, or anything else that fits this definition: Payments for goods or services in lieu of money for labor. The domestic worker in this example is provided lunch by the employer worth 20,000 colons a month. For this example, fill in the boxes with the number 155,000 colons, 135,000 – this is a bit more than what a domestic employee earns according to the labor law – and add the 20,000 of in-kind benefits – their lunch.
Again, on the right side of the page – on the top and on the bottom of the calculations tables — in small letters are arrows with the word Resultado. This means “results,” click one of the arrows.
On the page, the employee is presented the amount of what is called liquidación. To pay off the employee in this example would cost 472,750.00 colons. At today’s exchange rate that would translate into $945.50.
Having employees tends to be a pain. In Costa Rica — as in other parts of the world – the employees are really the bosses of the employers. Going to labor court is expensive, and unless an employer has an iron-clad case they will most probably lose.
The best advice is to have a good labor contract, give written reprimands when they are needed – but no more than two, the third is to terminate. Most importantly, and something most people, not even lawyers know, is an employer only has 30 days to act on any fault of an employee, otherwise, the fault expires.
When one needs to end an employment relationship, this handy calculator is easy to use and very accurate and very few people even know it exists.