#CostaRica 🇨🇷 #BDS_Informs: Sunday, August 31 Is a Public Holiday: Learn About the Applicable Rules for Payment and Observance
On Sunday, August 31, 2025, Costa Rica will commemorate the “Day of the Black Person and...
An inspection by the Ministry of Labor and Social Security (MTSS) usually raises various concerns. However, the primary fear is not the presence of a government official or the employee interviews, but rather the financial repercussions of the process itself.
To demonstrate this, we will share four real scenarios based on recent MTSS inspection policies. This cases clearly illustrate the risks a company faces for violating labor laws, particularly regarding the projected financial costs. It is worth noting that Article 398 of the Labor Code sets a range of fines that a company may be required to pay from 1 to 23 base salaries. As of today, one base salary is equivalent to ₡462,200 (four hundred sixty-two thousand two hundred colones). Let’s review the cases and their projected costs:
- ₡462,200 colones. This is a relatively minor fine for violations such as: failing to implement a sexual harassment policy; failing to or using an employment contract that lacks the essential elements of an employment relationship. Depending on the number of employees or repeated violations, this amount can increase significantly.
- ₡400,000 colones. A more serious issue arises when an MTSS inspection reveals that an employee has been earning an unskilled worker's wage for a year (or sometimes 5, 8, or more), while performing higher-level tasks like handling cash registers, technological devices, or complex internal procedures. In these cases, the issue goes beyond a simple fine. The worker is advised to claim the wage differences that they were denied month after month. This projected amount is for just one year and does not include fines, interest, legal fees, or indexation.
- ₡3 to 4 million colones. This scenario is similar to the previous one, involving permanent unpaid overtime that has accumulated over an average of five years (based on the minimum wage). While the initial liability may not seem significant, the employees' years of service can work against the employer. When this projection is multiplied by the number of employees, the resulting amounts can quickly become unmanageable.
An additional factor to consider in the situations above is a potential proceeding before the CCSS (Costa Rican Social Security Administration). To the described amounts, approximately 60% must be added to cover unreported wage sums, their corresponding employer and employee contributions, fines, and interest.
- ₡462 million colones. This number is not a mistake. If your company has not yet complied with the Law on the Protection of Whistleblowers and Witnesses of Corruption Against Workplace Retaliation, you should know that certain actions are penalized with fines ranging from 100 to 1,000 base salaries. Furthermore, in addition to creating new protections, this law requires some companies to implement internal complaint reporting channels. All of this has been in effect since 2024.
Quantifying the financial risks of non-compliance with labor legislation helps put things into perspective. It allows companies to determine whether the risks they assumed are worth it and, more importantly, encourages them to consider strategies to eliminate or reduce these liabilities over time.
Cristhian Monge Arce
Partner, BDS Asesores
