Although the unemployment rate fell in 2022, unemployment remained a major issue for Costa Rica’s economy. Unemployment affected women and youth at higher rates. According to the National Statistics Institute (INEC), as of December 2022 the unemployment rate was 11.7 percent, or 287,000 unemployed workers. The unemployment rate among the male population was estimated at 8.7 percent and the female population at 16 percent. The unemployment rate among youth (from 15 to 24 years old) was 28.6%. Some 43.9 percent of the labor force worked in the informal sector (43.4 percent among males and 44.5 percent among females), while 89.9 percent of individuals with informal employment were self-employed and 28.5 percent received a salary. The underemployment rate decreased to 9.7 percent, down 3.3 percent compared to the previous reporting year. INEC reported that from October to December 2022, 355.000 persons in the labor force (employed and unemployed), representing 14.4 percent of the total workforce, were negatively affected by COVID-19. Roughly 97,000 workers had a reduction in salary or income associated with suspension or reduction in working hours or had to suspend their own activity or business due to the pandemic. This represented 4.5 percent of the employed population, of which 59 percent were male and 41 percent were female. Some 258,000 unemployed persons, 6 percent of the workforce, were negatively affected by the pandemic. Of those, 45 percent were men and 55 percent were women. Some 74.7 percent of unemployed persons who indicated they were affected by the pandemic, said they could not find a job due to COVID-19; 25.3 percent stated they were fired, suspended, or closed their business or activity due to the pandemic.
When analyzing occupation by economic activity, INEC reported some activities continue to suffer at higher rates from pandemic-related effects. From October to December 2022, the negative effects were higher than average for employed persons working in hotels and restaurants (10.9 percent negatively affected), communications and other services (10.1 percent negatively affected), and manufacturing (5.7 percent negatively affected).
According to the central bank of Costa Rica, strong economic performance in 2022 supported increased job creation and increased business and consumer confidence. While the creation of around 80,000 new jobs in 2022 supported a reduction in the unemployment rate, it remained above its historical level (9.9% between 2010 and 2019). Additional labor market indicators, such as underemployment and informality, also improved compared to the previous reporting year. Workers in the informal sector were not covered by wage, hour, and occupational health and safety laws and inspections, nor were they enrolled in the public health system.
The Costa Rican labor force has high educational standards. The country boasts an extensive network of publicly funded schools and universities, while Costa Rica’s national vocational training institute (INA) and private sector groups provide technical and vocational training.
The growth of Costa Rica’s service, tourism, and technology sectors has stimulated demand for English-language speakers. The limited pool of workers with English and technical skills constrains the ability of foreign and local businesses to expand operations. The University of Costa Rica noted in 2021 a gap between English language proficiency between public and private schools following an analysis of language proficiency assessment results. In 2022, the Comptroller General of the Republic conducted an audit at the Ministry of Public Education on the efficiency and effectiveness of the secondary technical education that confirmed the language proficiency deficiencies.
The government implemented a controlled entry of foreign migrant workers (Migration Traceability System, SITLAM) through the northern and southern borders. In a joint effort, the Costa Rican Social Security System (CCSS), Ministry of Labor and Social Security (MTSS), and the Costa Rican Coffee Institute implemented a program to enroll coffee workers in the health insurance system, while considering turnover, migratory conditions, and harvest seasons and protecting workers’ families. Each coffee producer must send a list of its coffee workers to the nearest Costa Rican Coffee Institute office to implement the benefit.
The government does not track shortages or surpluses of specialized labor skills. Foreign nationals have the same rights, duties, and benefits as local employees. The government is responsible for ensuring that foreign nationals do not displace local employees. Labor law provisions apply equally across the nation, both within and outside free trade zones. The Immigration Law and the Labor Ministry’s regulations establish a mechanism to determine in which cases the national labor force would need protection. The Labor Ministry prepares a list of recommended and not-recommended jobs to be filled by foreign nationals.
There are no restrictions on employers adjusting employment to respond to fluctuating market conditions. The law does not differentiate between layoffs and dismissal without cause. There are concepts established in the law related to unemployment and dismissals such as the mandatory savings plan (Labor Capitalization Fund or Fondo de Capitalizacion Laboral, FCL), the notice of termination of employment (preaviso), and severance pay (cesantia). The FCL, which employers fund with contributions, functions as an unemployment insurance; the employee can withdraw the savings every five years if the employee has worked without interruption for the same employer. Costa Rican labor law requires that employees released without cause receive full severance pay, which can amount to close to a full year’s pay in some cases. Although there is no insurance for workers laid off for economic reasons, employers may voluntarily establish an unemployment fund.
In response to government-ordered temporary business closures due to the Covid-19 pandemic, in 2020 the Labor Ministry implemented the temporary suspension of employment contracts, a procedure established in the Labor Code, which grants employers the option of stopping the payment of wages temporarily during an emergency. Executive orders (Nos. 42522-MTSS and 42248-MTSS) established the procedures for employers to request the temporary suspension of labor contracts with their employees. Employers requested the suspension of contracts through the Labor Inspectorate of the Labor Ministry. In 2022, the Labor Ministry continued implementing the temporary suspension of employment contracts but only in sectors most adversely affected by the COVID-19 pandemic due to the restrictions and closures imposed by authorities.
The National Assembly approved a law (Law 9832) in 2020 to reduce working hours during the pandemic. Under the law, if income in a company decreases by 20 percent, compared to the income during the same month in 2019 or compared to the income of the previous three months, the employer can reduce the employees’ hours and salary up to 50 percent. If the decrease in income is greater than 60 percent, the reduction in salary can reach 75 percent. Legislators initially authorized this reduction for three months, and employers could request extensions for two equal terms (9 months) and then to five terms (15 months) as the emergency continued. In May 2021, the National Assembly approved an extension (Legislative Order No. 9982) in the tourism sector that authorized a reduction for four equal terms with previous approval from the Labor Ministry.
In 2020, the National Assembly authorized employees whose labor contracts were terminated or suspended or whose salaries were reduced during the state of emergency declaration to withdraw their contributions to the FCL plan (Law 9839).
Costa Rican labor law and practice allows some flexibility in alternate schedules; nevertheless, it is based on a 48-hour week made up of eight-hour days. Workers are entitled to one day of rest after six consecutive days of work. The labor code stipulates that the workday may not exceed 12 hours. Use of temporary or contract workers for jobs that are not temporary in nature to lower labor costs and avoid payroll taxes does occur, particularly in construction and in agricultural activities dedicated to domestic (rather than export) markets. No labor laws are waived to attract or retain investment. All labor laws apply in all Costa Rican territory, including free trade zones. The government has been exploring ways to introduce more flexibility into the labor code to facilitate flexible work schedules.
Since 2019, Costa Rica has a teleworking law that promotes, regulates, and implements virtual work both in the private and public sectors (Law 9738). The law allows a voluntary agreement between employer and employee to carry out teleworking. This agreement can be signed at the beginning of the employment relationship or later.
Costa Rican law guarantees the right of workers to join labor unions of their choosing without prior authorization. Unions operate independently of government control and may form federations and confederations and affiliate internationally. Most unions are in the public sector, including in state-run enterprises. Collective bargaining agreements are common in the public sector. “Permanent committees of employees” informally represent employees in some private sector enterprises and directly negotiate with employers; the outcomes of these negotiations are expressed in “direct agreements,” which have a legal status. Based on 2021 statistics, 15 percent of formal sector employees were union members. The Labor Ministry reported that during 2022 there were 118 collective bargaining agreements, including 32 in the private sector. In 2022, the Ministry reported that collective bargaining agreements covered 10.1 percent of the working population, 53.4 percent within public sector entities and 0.9 percent within the private sector. The Ministry reported a total of 41 “direct agreements” mainly in the agriculture sector during 2022, as compared to 49 in 2021.
In the private sector, many Costa Rican workers join “solidarity associations,” through which employers provide easy access to saving plans, low-interest loans, health clinics, recreation centers, and other benefits. A 2011 law solidified that status by giving solidarity associations constitutional recognition comparable to that afforded labor unions. Solidarity associations and labor unions coexist at some workplaces, primarily in the public sector. Business groups claim that worker participation in permanent committees and/or solidarity associations provides for better labor relations compared to firms with workers represented only by unions. However, some labor unions allege private businesses use permanent committees and solidarity associations to hinder union organization while permanent workers’ committees displace labor unions on collective bargaining issues in contravention of internationally recognized labor rights.
The Ministry of Labor has a formal dispute-resolution body and engages in dispute-resolution when necessary; labor disputes may also be resolved through the judicial process. The Ministry of Labor’s regulations establish that conciliation is the mechanism to solve individual labor disputes, as defined in the Alternative Dispute Resolution (ADR) Law (No. 7727, dated 9 December 1997). The Labor Code and ADR Law establish the following mechanisms: dialogue, negotiation, mediation, conciliation, and arbitration. The Labor Law promotes alternative dispute resolution in judicial, administrative, and private proceedings. The law establishes three specific mechanisms: arbitration to resolve individual or collective labor disputes (including a Labor Ministry’s arbitrator roster list); conciliation in socio-economic collective disputes (introducing private conciliation processes); and arbitration in socio-economic collective disputes (with a neutral arbitrator or a panel of arbitrators issuing a decision). The Labor Ministry must authorize all labor conciliation and arbitration centers. The Labor Ministry also participates as mediator in collective conflicts related to strikes, facilitating and promoting dialogue among interested parties. The law provides for protection from dismissal for union organizers and members and requires employers found guilty of anti-union discrimination to reinstate workers fired for union activities.
The law provides for the right of workers to conduct strikes, but it prohibits strikes in public services considered essential (police, hospitals, and ports). Strikes affecting the private sector are rare and do not pose a risk for investment.
Child and adolescent labor is uncommon in Costa Rica, and it occurs mainly in the informal agricultural sector. In 2020, the government published the results of a child labor risk identification model and a strategy to design preventive measures at local level. In 2022, the government implemented a project for the prevention of child labor in the province of Limón. The government also implemented the Houses of Joy (“Casas de la Alegría”) during the coffee harvest season 2022-2023. These are daycare centers for children of workers in different coffee regions of the country, mainly in the Brunca, Los Santos, and Western Valley regions. These centers operate under the supervision of the National Administration of Education, Nutrition, and Comprehensive Care Centers (CEN-CINAI).
Chapter 16 of the U.S.-Central American Free Trade Agreement obliges Costa Rica to enforce laws that defend core international labor standards. The government, organized labor, employer organizations, and the International Labor Organization signed a memorandum of understanding to launch a Decent Work Program for the period 2019-2023, which aims to improve labor conditions and facilitate employability for vulnerable groups through government-labor-business tripartite dialogue.
On March 8, 2022, the government enacted a public employment law (Law 10.159) to standardize wages and benefits for positions with equal responsibilities in the public sector. The law entered into force on March 10, 2023.
Employee and employer contributions to Costa Rica’s social security system (CCSS) are mandatory. Employees and employers who have failed to pay into the CCSS pension and health insurance system must make back-payments covering up to 10 years of missed payments before they can enroll in the system. In May 2022 the government signed a law authorizing a one-time forgiveness of CCSS debts (Law 10.232) for independent employees and employers to encourage their enrollment. Independent employees and employers who had previously been dissuaded by high back payment requirements from enrolling in the CCSS pension and health insurance system can now contribute, giving additional sustainability to the CCSS pension and healthcare system. At the close of the reporting period a parallel bill was under consideration in the National Assembly, which would reduce from 10 to four years the term for which independent workers would be responsible for making back payments to the CCSS.
On June 3, 2022, the Law to combat employment discrimination against pregnant women (Law N° 10211) entered into force. This law reforms Articles 94, 94 bis, 95, 96, 97 and 100 of the Labor Code.
Bill No. 21.182, which proposes allowing a compressed workweek with extended shifts of 12 hours per day for four days per week, with three days off, was under consideration in the National Assembly at the end of the reporting period.