In Costa Rica you must have cause to fire an employee at will. If you don’t have cause you may still fire the employee but it will trigger severance payments to the employee by the employer. To terminate an employee for cause it must be based upon one of the grounds set forth in Article 81 of the Labor Code. The dismissal must be well substantiated since the employer carries the burden of proving that the termination was for cause should the employee file a complaint against the employer with the Labor Court. If you terminate the employee without cause then you must compensate the employee with severance which is referred to locally as “Prestaciones Laborales” as follows:
(i) Pre-Termination Notice (Pre-Aviso) Before you can fire your employee you have two options. You can provide them with legal notice of the termination and they can work out this pre-notice period or in lieu of this you can pay them the pre-notice period so that they leave the employment immediately. The payment must be based upon the total average wage earned during the preceding 6 months or fraction thereof if they have not worked for six months. The amount of notice required depends on the length of time which the employee has worked for that particular employer. If your employee has worked for you:More than 3 months but less than 6 months then notice =1 weekMore than 6 months but less than 1 year then notice = 2 weeksMore than 1 year then notice = 1 month.
(ii) Severance Pay (Cesantia) If an employee is terminated without cause by the employer or if the employee quits for cause, they are entitled to severance pay. If the employee has worked with the employer for more than three (3) months but less than six (6) months then they are entitled to the equivalent of seven (7) days wages. If the employee has worked from six (6) months to one (1) year they are entitled to fourteen (14) days of wages. If the employee has worked for more than one year then the following schedule applies for each year worked up to a maximum of eight years:
| No of Years Worked | Days of Severance Payment |
| 1 | 19.5 |
| 2 | 20 |
| 3 | 20.5 |
| 4 | 21 |
| 5 | 21.5 |
| 6 | 2.15 |
| 7 | 22 |
| 8 | 22 |
| 9 | 22 |
| 10 | 21.5 |
| 11 | 21 |
| 12 | 20.5 |
| 13 | 20 |
(iii) Accumulated Vacation Pay (Vacaciones) When an employee is terminated, any unused vacation time must be paid. The employee is entitled as part of their severance one day for each month worked. As such if your employee worked for you for 8 months and did not take any vacation period upon termination they are entitled to 8 days wages as vacation severance.
(iv) Pro-rated Christmas Bonus If you terminate your employee prior to December you must still pay them the pro-rated Christmas Bonus. To calculate the amount of the bonus, add the total wages paid to the employer from December 1 through November 30 and divide that amount by twelve (12). For domestic servants (live in maid) the law requires that you add an additional 50% to the wages paid as in kind payments (food and housing) in calculating their Christmas bonus.
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