#CostaRica 🇨🇷 #ArticlesBDS: Telework. What Should Employers Provide?
The Law Regulating Telework (hereinafter the “Law”) which entered into force in Costa Rica back...
In accordance with the national legal framework on social security, all employers and workers are required to make a contribution to social security based on ordinary and extraordinary wages received by the latter on a monthly basis.
Currently, this total contribution is defined as 26.50% for employers and 10.50% for workers. Out of this percentage, employers contribute 9.25% for the Illness and Maternity Insurance, and 5.25% for the Disability, Old Age and Death Insurance; on the other hand, workers contribute 5.50% for the Illness and Maternity Insurance (SEM), and 4.00% for the Disability, Old Age and Death Insurance (IVM).
The Minimum Contributory Base (BMC) is an amount set forth on a yearly basis by the Board of Directors of the Costa Rican Social Security Administration (CCSS) and that constitutes a minimum above which contributions for Disability, Old-age and Death insurance, as well as Illness and Maternity insurance are mandatory, regardless of the salary reported for the worker.
The foregoing means that, if the BMC defined by the CCSS is higher than the worker's reported salary, the worker-employer contributions will be calculated based on said higher amount rather than salary received, except for the following exceptions:
- Unemployment or entry of new workers occurring in intermediate periods of the month.
- Reports of disabilities or leave without pay that span more than fifteen days.
- Simultaneous work with several employers or with an independent employer and insurance, receiving lower wages and income with all or some of them.
- Domestic service subject to the conditions of reduced minimum tax bases
On the contrary, if the reported salary is higher than the BMC, the percentages indicated for social contributions will be taken based on this higher salary.
The temporary reduction of the BMC has a direct impact for many workers and employers, considering that many workers are currently in situations in which their salary has been considerably reduced due to the effects of the legal actions that employers have taken to face the decreased income during the COVID-19 national emergency; among them, the temporary suspension of employment contracts and the reduction of working hours.
In this sense, if, for example, a worker in an unskilled occupation earned the minimum wage of 316,964.69 colones per month, and his/her working day was reduced by 50%, he/she would currently be earning a salary of 158,482.35 colones per month.
Before the reduction of the BMC, this worker would have had to continue paying contributions on 294,619 colones for SEM, and on 275,759 colones for the IVM. In other words, the BMC would be higher than your current salary and, therefore, your contribution is calculated on the higher amount and that also implies a greater withholding, as well as a greater contribution for the employer, than if it were calculated on your real salary.
On the other hand, if a reduction to 73,654 colones is considered for the SEM and 68,940 colones for the IVM, the worker in our example and his/her employer will contribute based on the real wage currently earned, which is higher than the BMC, and no longer on amounts higher than 200 thousand colones, as explained above.
In this way, the reduction of the BMC benefits workers and employers who, for one reason or another, have seen their salary decrease below the BMC that existed prior to February 2020.
Collaboration by our lawyer: Lucía Solórzano / lsolorzano@bdsasesores.com
This and other pieces are available on our Café Laboral blog with La Nación newspaper.