#CostaRica 🇨🇷 #BDS_Article: Between Celebration and Compliance: Key Labor Law Issues to Prevent Your Company from Paying the Price This Season

1. Use of “Seasonal” Employment Contracts

Although indefinite-term employment contracts are the general rule, seasonal contracts are frequently used to address temporary business needs resulting from increased sales or production during specific periods. Their main characteristic is that, once the season ends, they do not generate severance pay or notice obligations. However, they do not exempt the employer from registering the employee with the social security system or from providing workers’ compensation coverage.

There are important rules that are often overlooked. If the same employees are hired repeatedly for the same seasons, a discontinuous fixed-term employment relationship may arise, which would give rise to severance obligations upon final termination. This situation may also occur when seasonal contracts are used for positions that are essential to the company’s ordinary operations.

It is therefore essential to clearly define the cause of the temporary nature of the contract in writing. Simply referring to a “high season” may not be sufficient in the context of a labor inspection. Best practice is to expressly identify the specific activity, for example, “2025 Christmas Sales Campaign.” Salary payments must follow the same timing and conditions as the rest of the payroll. Documentary formality and consistency are the best safeguards against future labor claims.

At this time of the year, in addition to the Christmas atmosphere, traditional gatherings, and family dinners, a number of recurring labor law issues also tend to surface—issues that companies should always keep very much in mind. It can be said that there are at least five recurring topics during this season that every employer should be aware of and comply with in order to avoid significant legal consequences.

2. Payment of the Christmas Bonus (Aguinaldo)

One of the hottest topics in the country. Fundamentally, it must be remembered that it must be paid within the first twenty days of December and must be calculated by taking into account the worker’s salary and extra-salary amounts earned from December of the previous year through November of the current year, at the time of the calculation.

It must also be taken into consideration that every worker, upon termination of the employment relationship, must receive the Christmas bonus to which they are entitled, provided the employment relationship exceeded one month in duration. Likewise—and no less important—it should be mentioned that there was a case in Costa Rica in which failure to pay the Christmas bonus on time was considered the criminal offense of unlawful withholding. Although it was an exceptional case, it remains a precedent that must be considered with great care.

Another aspect that often generates many questions is how this labor entitlement is calculated for those who did not work the entire year. In those cases, the Christmas bonus is determined proportionally based on the total ordinary salary earned at the time of payment, divided by twelve to obtain the monthly base and multiplied by the months actually worked. Periods shorter than one month must be settled on a fractional basis, maintaining exact proportionality with the days worked. To avoid discrepancies, it is good practice to attach to the payment receipt a complete breakdown of the calculation, so that the worker has clear and verifiable traceability of the amount received.

3. Work performed on public holidays. This must be compensated at double the value of the ordinary hourly rate. The main precaution companies should take is to communicate sufficiently in advance the need to have workers report to work on those days and to properly document both that notice and the employees’ commitment to report to work on the holiday, unless there is an objective cause that would justify not doing so.

A common question in the management of holidays concerns those that fall on the worker’s weekly rest day. In that scenario, if the person is asked to work it, the hours worked must likewise be paid at double time, and there is no obligation to reschedule the rest day. For example, December 25, which this year falls on a Thursday, must be paid at double time for those who are called in to work, even if Thursday is their weekly rest day. It is common to assume that, in such case, an additional compensatory day must be granted; however, the regulations are clear that the applicable legal consequence is only double pay, regardless of whether the holiday coincides with the employee’s usual workday.

4. Corporate parties. The main precaution with these types of events relates to the presence of alcohol, especially if it is sponsored by the company. Keep in mind that this could eventually compromise the use of the workers’ compensation insurance policy in the event of an accident during the activity or on the return trip from the party to employees’ homes.
5. Gifts provided by the company. Cash-based gifts fall into tricky territory, since they could have salary characteristics and their consequences (this is not determinative, but it may raise red flags). Non-cash gifts could have tax implications. What is common during this season are “perks” or gratuities—meaning what is given not based on individual performance criteria, but simply by the company’s will as a sign of appreciation toward its workers.

All of these topics have deeper levels of complexity depending on the characteristics of your organization. Therefore, if, when reviewing this list, you identify matters that have not been adequately addressed to date, this could be a good time to analyze how to correct or strengthen them with your legal advisers in order to close the year without risks and enjoy the holiday season with peace of mind.

Cristhian Monge Arce
Partner, BDS Asesores