Terminating an Employee in Costa Rica: Cause, Notice, Severance and Final Pay

Terminating an employee in Costa Rica is not simply a matter of announcing that the working relationship has ended.

The employer must first determine:

• Whether the termination is with or without cause
• Whether the alleged misconduct is serious enough to justify dismissal
• Whether the employer acted within the required timeframe
• Whether prior warnings or progressive discipline were necessary
• Whether the employee has special protection against dismissal
• Which amounts must be included in the final settlement
• How the termination decision and payment should be documented

The most expensive termination mistake foreign employers make is often not dismissing someone without cause.

It is attempting to classify a weakly documented dismissal as with cause, paying no notice or severance, and later having a court determine that the employer did not prove a legally sufficient reason.

The employer may then face the same notice and severance it originally tried to avoid, together with unpaid benefits, interest, litigation expenses and possible exposure arising from retaliation or discrimination.

Employers should establish proper contracts, payroll records and disciplinary procedures before problems arise. Our compliance checklist for hiring your first employee in Costa Rica explains the steps employers should address at the beginning of the relationship.

Terminating an Employee in Costa Rica: With Cause or Without Cause?

Costa Rican employers generally need to distinguish between two basic termination paths.

Termination Without Employer Responsibility

This is commonly called dismissal with cause, or despido sin responsabilidad patronal.

The employer alleges that the employee committed a sufficiently serious breach recognized under Article 81 of the Labor Code. When the cause is valid and properly proved, the employer generally does not owe preaviso or cesantía.

The employee must still receive amounts already earned, such as:

• Outstanding salary
• Proportional aguinaldo
• Unused or proportional vacation
• Earned commissions
• Other unpaid compensation

Termination With Employer Responsibility

This is commonly called dismissal without cause, or despido con responsabilidad patronal.

The employer ends an indefinite employment relationship without relying on a legally sufficient employee fault. The employee is generally entitled to:

• Preaviso, or payment in lieu of notice
• Cesantía
• Outstanding salary
• Unused and proportional vacation
• Proportional aguinaldo
• Earned commissions and other compensation

MTSS guidance describes dismissal with employer responsibility as the end of the employment relationship when no just cause exists and confirms that preaviso and cesantía arise in that situation.

The Expat Database also provides an overview of severance pay and termination in Costa Rica, including the distinction between dismissals with and without employer responsibility. Because that article was published in 2021, it should be treated as supplementary background and checked against current law and administrative criteria. (The Expat Database)

Employers Do Not Need to Invent Cause

A private employer can generally end an indefinite employment relationship without alleging misconduct, provided the employer pays the applicable termination obligations and does not violate a protected status or discriminatory prohibition.

This is sometimes the safer option when:

• The employee is not a good operational fit.
• Performance is disappointing but poorly documented.
• The business is restructuring.
• The position is being eliminated.
• Trust has deteriorated without a provable serious breach.
• The employer wants to avoid a prolonged factual dispute.

Paying a lawful termination package may be less expensive than trying to prove serious misconduct on incomplete evidence.

What May Qualify as Serious Misconduct?

Article 81 of the Labor Code lists grounds that may justify termination without employer responsibility.

These include, depending on the facts:

• Serious insults, defamation or physical aggression involving the employer or coworkers
• Theft, property offenses or intentional damage
• Disclosure of protected business secrets
• Inexcusable conduct that seriously compromises workplace safety
• Repeated unjustified absences meeting the statutory threshold
• Refusal to follow lawful instructions
• Serious breach of employment duties
• Other grave conduct making continuation of the relationship unreasonable

For unjustified absences, Article 81 includes absence without permission or justification for two consecutive days, or more than two nonconsecutive days within the same calendar month.

The existence of a listed category does not mean every incident automatically supports dismissal.

The employer must still establish:

• What happened
• When it happened
• Who was involved
• Why the conduct was serious
• How it affected the employment relationship
• Whether the employee had an explanation
• Whether the employer acted consistently
• Whether the sanction was proportionate

Serious Misconduct Is Fact-Specific

The same general category can produce different outcomes.

For example, an employee’s disagreement with a manager is not automatically serious disrespect.

A minor accident is not automatically inexcusable negligence.

One isolated absence is not automatically statutory abandonment.

A mistake involving company property is not automatically intentional damage.

The employer must distinguish between:

• A performance problem
• Ordinary negligence
• A minor disciplinary violation
• Repeated misconduct
• A single grave act
• Conduct that actually meets Article 81

The legal label should follow the evidence. The evidence should not be stretched to fit the desired label.

Poor Performance Is Usually Not an Easy For-Cause Dismissal

Foreign employers frequently say:

“The employee is not performing, so we have cause.”

Poor performance can eventually support disciplinary action, but the employer normally needs more than general dissatisfaction.

A defensible performance case should identify:

• The employee’s required duties
• Objective performance expectations
• Specific failures
• Dates and examples
• Training or support provided
• Prior feedback
• Written warnings where appropriate
• A reasonable opportunity to improve
• Continued failure after notice

Statements such as these are usually too vague:

• “Not proactive enough”
• “Bad attitude”
• “Not meeting expectations”
• “Doesn’t fit the culture”
• “Not committed”
• “We lost confidence”

Those descriptions may explain why the employer wants to end the relationship, but they do not necessarily prove serious misconduct.

When performance is weak but the documentation is not, termination with employer responsibility may be the safer route.

Progressive Discipline

Costa Rican law does not require the same mechanical number of warnings in every case.

A single grave act may justify immediate dismissal.

Less serious or correctable conduct usually calls for a proportionate disciplinary process.

A practical progressive system may include:

1. Verbal counseling documented internally
2. Written warning
3. Final written warning
4. Termination if the conduct continues

The exact sequence depends on:

• Seriousness
• Repetition
• Employee history
• Workplace policies
• Prior similar cases
• Whether the conduct can be corrected
• Whether trust has been irreparably broken

The 2024 MTSS legal criterion on dismissal without employer responsibility addresses dismissal letters, lesser sanctions and factors relevant to employer discipline.

Written Warnings Matter

A written warning should not be a generic accusation.

It should state:

• Date of the warning
• Date and time of the incident
• Specific conduct
• Rule, duty or instruction involved
• Relevant evidence
• Employee explanation, where obtained
• Required correction
• Consequences of repetition
• Signature or acknowledgment process

Avoid emotional language and personal attacks.

The purpose is to create an accurate record and give the employee clear notice of what must change.

What If the Employee Refuses to Sign a Warning?

A refusal to sign does not make the warning disappear.

The employer should:

• Note that the employee refused.
• Record the date and time of delivery.
• Use witnesses where appropriate.
• Provide or send the employee a copy.
• Preserve evidence of delivery.
• Avoid forcing or threatening the employee.

The signature should ordinarily acknowledge receipt, not necessarily agreement.

A warning can state that signing confirms receipt and does not require the employee to agree with its contents.

Do Not Manufacture a Disciplinary File at Termination

One of the worst practices is creating several warnings on the day the employer decides to dismiss.

A file containing three same-day warnings for incidents that allegedly occurred over several months may look artificial.

If the business tolerated the conduct without documenting or correcting it, a court may question whether it was truly serious enough to justify immediate dismissal.

Discipline should occur when the problem happens, not be reconstructed after the relationship deteriorates.

The Employer Must Act Promptly

An employer should not wait indefinitely after learning of misconduct.

Delay can suggest that:

• The conduct was not considered serious.
• The employer forgave or tolerated it.
• The dismissal is motivated by something else.
• The alleged incident is being used as a pretext.

The precise disciplinary timing can depend on when the authorized decision-maker obtained sufficient knowledge and whether an investigation was reasonably necessary.

The safest approach is to:

1. Preserve the evidence immediately.
2. Conduct a focused investigation.
3. Give the employee an appropriate opportunity to respond.
4. Make the decision without unnecessary delay.
5. Document why any investigation required additional time.

Do not continue relying on the employee for months and then revive an old incident only after a new dispute arises.

Investigating Misconduct

Before dismissing for cause, the employer should establish the facts.

A proportionate investigation may include:

• Interviewing the employee
• Interviewing witnesses separately
• Reviewing time records
• Preserving emails and WhatsApp messages
• Reviewing video lawfully obtained
• Examining accounting or inventory records
• Reviewing company policies
• Confirming prior warnings
• Assessing whether others were treated similarly

The investigation should be narrow and legitimate.

The employer should not:

• Search personal devices without authority
• Access private accounts improperly
• Threaten witnesses
• Coach employees on what to say
• Alter digital evidence
• Publicly accuse the employee
• Promise benefits in exchange for testimony

Consistent Discipline Matters

An employer weakens its case when it dismisses one employee for conduct tolerated from others.

For example:

• One employee is dismissed for arriving late twice while others are routinely late.
• One employee is dismissed for personal phone use when managers openly allow it.
• One employee is dismissed for refusing an unsafe instruction.
• A pregnant employee is suddenly disciplined for conduct ignored before the pregnancy announcement.
• A worker who complained about overtime is dismissed for a minor rule violation previously handled informally.

Consistency helps demonstrate that the reason is genuine rather than retaliatory or discriminatory.

The Termination Letter

Article 35 of the Labor Code makes the termination letter particularly important when the employer dismisses without employer responsibility.

The letter should clearly describe the factual grounds for termination. If litigation follows, the facts stated in the dismissal letter are the facts the employer may rely on judicially.

This means the letter should not merely say:

• “Loss of trust”
• “Poor conduct”
• “Repeated violations”
• “Article 81”
• “Failure to perform”
• “Company decision”

The letter should identify:

• The specific incident or incidents
• Dates
• Conduct
• Relevant duty or policy
• Prior warnings, if relied upon
• Why the conduct supports termination
• Effective termination date

The letter should be factually complete but not inflated with unsupported accusations.

Why the Dismissal Letter Should Be Reviewed Before Delivery

Once the letter is delivered, it is difficult to repair a vague or inaccurate statement.

An employer should not dismiss first and then ask counsel to create a legal theory later.

The sequence should be:

1. Review the evidence.
2. Decide whether cause is supportable.
3. Draft the letter.
4. Verify every factual statement.
5. Review protected-status issues.
6. Calculate the final amounts.
7. Deliver the termination consistently with the decision.

Notice: Preaviso

Preaviso is advance notice that one party gives the other when ending an indefinite employment relationship in circumstances covered by Article 28.

The statutory minimum generally depends on continuous service:

Continuous service	Minimum notice
Less than 3 months	No Article 28 notice
3 to 6 months	1 week
More than 6 months to 1 year	15 days
More than 1 year	1 month

Article 28 establishes these periods.

Working the Notice Period or Paying It

An employer may give the employee advance notice and allow the employee to continue working through the period.

Alternatively, the employer may end the work immediately and pay the corresponding notice amount.

During a worked notice period, the employment relationship continues. Salary, instructions, duties and ordinary obligations remain in place.

The Labor Code also provides the employee with one paid day per week during the notice period to seek new employment.

When Payment in Lieu of Notice Is Safer

Immediate separation may be more practical when:

• The employee handles sensitive information.
• Trust has substantially deteriorated.
• The employee controls money or accounts.
• Continued presence could disrupt operations.
• The employer has already appointed a replacement.
• Workplace conflict is significant.

The employer should not require the employee to leave immediately and then claim that the employee voluntarily failed to work the notice period.

The decision and payment should be documented clearly.

Preaviso and Resignation

Preaviso can also apply when an employee resigns after the applicable service threshold.

However, employers should be cautious before automatically deducting an alleged notice amount from the employee’s final salary or benefits.

Any proposed deduction or employer claim should be reviewed for legal support and proper documentation.

The employer may waive its right to receive notice.

Severance: Cesantía

Cesantía is an indemnity generally owed when an indefinite employment relationship ends through unjustified dismissal or another qualifying reason not attributable to the employee.

It is not simply one full month for every year.

Article 29 uses a statutory day schedule based on length of service and limits the compensable period to the final eight years of the employment relationship.

For shorter service, Article 29 generally provides:

• Seven days of salary after at least three but no more than six months
• Fourteen days after more than six months but less than one year

After one year, a statutory table applies.

Readers may also review our earlier overview of severance pay in Costa Rica. The current employee’s start date, compensation and termination circumstances should still be reviewed individually.

Article 29 Severance Table

The current statutory schedule includes:

Year of service	Salary days used for that year
Year 1	19.5 days
Year 2	20 days
Year 3	20.5 days
Year 4	21 days
Year 5	21.24 days
Year 6	21.5 days
Year 7	22 days
Year 8	22 days
Year 9	22 days
Year 10	21.5 days
Year 11	21 days
Year 12	20.5 days
Year 13 and following	20 days

The statute contains specific treatment for annual fractions and caps ordinary cesantía at the last eight years. Calculations should be performed using the current Article 29 text and the employee’s exact service period.

Do Not Estimate Cesantía Casually

Foreign employers sometimes multiply monthly salary by years of service.

That shortcut can be wrong because the calculation may depend on:

• Exact start date
• Exact termination date
• Service fractions
• Applicable salary average
• Variable compensation
• Salary in kind
• Article 29 day schedule
• Eight-year cap
• Existing association or benefit structures
• Whether the termination legally triggers cesantía

Use a documented calculation prepared for the specific employee.

What Salary Base Should Be Used?

Termination calculations should reflect the legally relevant compensation base rather than only the latest nominal base salary.

Review whether compensation includes:

• Ordinary salary
• Commissions
• Regular bonuses
• Overtime
• Recurring allowances
• Salary in kind
• Other remunerative payments

An employer that pays a low base salary plus large recurring commissions may significantly undercalculate the settlement if it uses only the base figure.

The appropriate averaging period and treatment vary by benefit, so the final settlement should show each calculation separately.

These calculations should be reconciled with the employer’s broader Costa Rica payroll rules for minimum wages, working hours, overtime and paid holidays.

Final Settlement: What Must Be Included?

The final settlement, commonly called the liquidación, should separate each amount rather than present one unexplained lump sum.

Depending on the case, it may include:

Outstanding Salary

All ordinary salary earned through the final date.

Overtime and Premium Pay

Unpaid overtime, holiday work, rest-day work or other payroll amounts.

Earned Commissions

Commissions already earned under the lawful compensation plan.

Proportional Aguinaldo

Qualifying salary earned during the current aguinaldo period divided according to the statutory formula.

Unused Vacation

Earned and proportional vacation not taken before termination.

Preaviso

When owed and not worked.

Cesantía

When the termination qualifies under Article 29.

Other Amounts

These may include:

• Contractual bonuses
• Reimbursements
• Accrued benefits
• Salary in kind requiring valuation
• Amounts arising from a more favorable policy or collective agreement

MTSS legal guidance distinguishes final amounts owed in a dismissal with employer responsibility, including aguinaldo, vacation, preaviso and cesantía.

For a broader explanation of vacation, aguinaldo and protected leave, review our guide to employee benefits in Costa Rica.

Termination With Cause Does Not Eliminate Every Payment

An employer that validly dismisses for cause may avoid preaviso and cesantía.

It still must pay earned amounts.

The employer should not withhold:

• Final salary
• Accrued vacation
• Proportional aguinaldo
• Earned commissions

as punishment for misconduct.

If the employer believes the employee caused financial loss, any recovery or deduction must have a lawful basis. The employer should not create an informal penalty by confiscating benefits.

When Should Final Payment Be Made?

Employers should calculate the settlement before or immediately around termination rather than leaving it unresolved.

Costa Rican employers often hear different informal claims about an automatic fixed payment deadline. The safer practice is to prepare and tender payment promptly once the relationship ends.

Delay can:

• Increase conflict
• Encourage an MTSS complaint
• Create uncertainty over what was paid
• Make the employer appear unwilling to comply
• Complicate the employee’s transition

Where a calculation is genuinely disputed, the employer should still identify and pay the undisputed amounts rather than withholding everything.

Does the Employee Need to Sign?

An employee may sign:

• Acknowledgment of the termination letter
• Receipt of payment
• Settlement breakdown
• Conciliation agreement
• Return-of-property document

The employee’s refusal to sign does not cancel the employer’s duty to pay.

If the employee refuses, the employer should document:

• The calculation
• Payment method
• Date payment was offered
• Any transfer completed
• The employee’s refusal
• Witnesses or correspondence
• Property-return issues separately

Do not hold earned compensation hostage to obtain a signature.

A Basic Receipt Is Not Always a Complete Release

A document stating “I have received everything and waive all claims” may not automatically extinguish every employment right.

Costa Rican labor rights include mandatory protections that are not always freely waivable through a private generic receipt.

For higher-risk cases, a formal settlement or conciliation through an appropriate process may provide greater certainty than a one-page employer-drafted waiver.

The settlement should itemize the real amounts rather than hide them inside one global number.

Conciliation

When the parties dispute cause, hours, salary or final amounts, conciliation can be economically sensible.

A properly documented settlement may resolve:

• Contested severance
• Overtime
• Commissions
• Vacation balances
• Aguinaldo
• Contractor misclassification
• Disputed start date
• Property-return issues
• Mutual confidentiality terms, where lawful

The settlement should not be an undocumented cash payment made merely to “make the problem go away.”

Protected Employees

Before any termination, determine whether the employee has special protection.

Protected categories may include:

• Pregnant employees
• Employees in the lactation period
• Workers using certain parental leaves
• Union-protected employees
• Adolescents
• Complainants in sexual-harassment matters
• Other workers protected by a statutory or collective fuero

The current Labor Code identifies these protected categories within the special protection procedure.

Pregnancy and Lactation

Article 94 generally prohibits dismissal of an employee during pregnancy or lactation except for justified serious cause.

Even when the employer believes serious cause exists, it must pursue the required prior authorization process before the labor authority and prove the misconduct.

An employer should not:

1. Deliver the dismissal.
2. Remove the employee.
3. Seek approval afterward.

The authorization must come first.

An unlawful dismissal may lead to immediate reinstatement with restoration of rights.

Complaints and Retaliation

The Labor Code prohibits dismissing or retaliating against workers to prevent them from seeking assistance from labor authorities.

Extra scrutiny is necessary when termination occurs shortly after the employee:

• Complained about overtime
• Requested CCSS registration
• Reported an injury
• Filed a harassment complaint
• Contacted MTSS
• Asked for vacation or aguinaldo
• Raised a safety concern
• Participated in protected organizing

Even when another reason exists, suspicious timing and weak documentation can make the dismissal appear retaliatory.

Medical Incapacity and Workplace Injuries

Ordinary medical incapacity does not always create the same explicit dismissal authorization process as pregnancy.

However, termination during incapacity can create substantial risk when:

• The employer’s real concern is the illness.
• The condition may involve disability discrimination.
• The employee has an active INS occupational claim.
• The employer criticized the employee for taking leave.
• The timing follows immediately after the medical event.
• The employer failed to consider lawful accommodation.
• The employee is protected by another special rule.

Obtain legal review before dismissing someone who is actively incapacitated or receiving occupational-risk treatment.

Domestic Workers

Domestic workers are protected by the Labor Code and may be entitled to notice, severance and accrued benefits.

The employer should not assume that an informal household arrangement can be ended by simply telling the worker not to return.

A domestic-worker final calculation may include:

• Outstanding salary
• Proportional aguinaldo
• Vacation
• Preaviso
• Cesantía
• Other unpaid amounts

The recordkeeping may be simpler than corporate payroll, but the legal obligation is real.

Outlier Legal Services provides additional context on the obligations connected with domestic workers and maid service in Costa Rica, including notice and severance where applicable. (Outlier Legal Services)

The Alleged “Trial Period”

Employers often assume the first three months are entirely obligation-free.

Article 28 and Article 29 generally begin preaviso and cesantía thresholds at three months, but this does not mean the employee has no rights before then.

From the beginning, the employer remains responsible for matters such as:

• Salary
• Minimum wage
• CCSS
• INS coverage
• Aguinaldo
• Proportional vacation where applicable
• Working hours
• Overtime
• Discrimination protections

Repeatedly dismissing and rehiring employees before three months to prevent termination rights can be viewed as an attempt to evade continuity and seniority.

Common Expat Mistake: “I Lost Trust, So It Is Automatically a For-Cause Dismissal”

Loss of trust may describe the employer’s reaction.

It does not replace proof of the underlying facts.

A strong termination case identifies:

• What the employee did
• Which duty was breached
• How serious it was
• What evidence exists
• When the employer learned about it
• Whether the employee was heard
• Why the response was proportionate
• Whether similar cases were treated consistently

When the employer cannot answer those questions, “loss of trust” may be better understood as a reason to terminate with employer responsibility rather than a complete legal cause.

The Most Expensive Termination Mistake

The most expensive mistake is dismissing for cause without enough evidence.

The employer believes it is saving preaviso and cesantía.

Instead, the employer may create a dispute over:

• Unjustified dismissal
• Incorrect final payment
• Unpaid salary components
• Retaliation
• Discrimination
• Reinstatement
• Legal expenses
• Institutional scrutiny

The employer may also damage its own case through an angry termination meeting, a vague letter or WhatsApp messages admitting that the real reason was something else.

Termination Meeting Checklist

Before the Meeting

• Confirm the legal employer.
• Confirm the employee’s start date.
• Review protected status.
• Decide with cause or without cause.
• Review supporting evidence.
• Prepare the termination letter.
• Complete the settlement calculation.
• Arrange payment.
• Identify company property.
• Select appropriate witnesses.
• Disable access at the appropriate time without destroying evidence.

During the Meeting

• State the decision clearly.
• Deliver the letter.
• Avoid debate or personal criticism.
• Explain the payment process.
• Request company property.
• Permit the employee to collect personal belongings safely.
• Avoid threats or pressure.
• Document any refusal to sign.

After the Meeting

• Pay the amounts owed promptly.
• Preserve all records.
• Update CCSS and payroll administration.
• Maintain confidentiality.
• Do not discuss accusations with other employees unnecessarily.
• Respond professionally to later requests.

Records to Preserve

The employer should preserve:

• Employment contract and amendments
• Job description
• Policies
• Time records
• Payroll records
• Vacation records
• Aguinaldo records
• Performance reviews
• Warnings
• Investigation records
• Relevant emails and messages
• Termination letter
• Settlement calculation
• Proof of payment
• Evidence of delivery
• Property-return records
• CCSS and INS documentation

Do not delete the employee’s email account before preserving potentially relevant information.

Employee Claims After Termination

As a general rule, labor rights and actions arising from employment contracts prescribe one year after the relationship ends, subject to special rules and events that interrupt prescription.

Requests for a dismissal letter, MTSS conciliation filings, INS claims and judicial or extrajudicial collection actions may affect the limitation analysis.

Employers should therefore preserve records beyond the period in which they expect an immediate complaint, especially because CCSS, tax and other institutional records may have separate retention and review periods.

When to Get Legal Help

Obtain advice before termination when:

• The employer intends to allege cause.
• The evidence is disputed.
• Performance documentation is weak.
• The incident occurred weeks or months earlier.
• The employee is pregnant or lactating.
• The employee is medically incapacitated.
• There is an active INS claim.
• The employee recently complained.
• The employee is union-protected.
• The worker filed a harassment complaint.
• Compensation includes commissions or salary in kind.
• The employment began as a contractor relationship.
• The employee has long seniority.
• Several employees will be terminated.
• The company is restructuring or being sold.
• The employee has access to sensitive systems or funds.

The legal review should occur before the termination communication, not after.

Frequently Asked Questions

Can an Employer Dismiss an Employee Without Cause?

Generally, an indefinite private-sector relationship can be ended without alleging cause if the employer pays the applicable obligations and does not violate protected-status or anti-discrimination rules.

What Is Dismissal With Employer Responsibility?

It is a termination in which the employer does not rely on legally sufficient employee fault and generally owes preaviso and cesantía, together with other accrued amounts.

What Is Dismissal Without Employer Responsibility?

It is a for-cause dismissal based on a serious ground recognized by law. The employer must be able to prove the cause.

Is Poor Performance Automatically Just Cause?

No. Poor performance ordinarily requires specific expectations, evidence, feedback and appropriate discipline. General dissatisfaction is not enough.

Are Three Warnings Always Required?

No. There is no universal three-warning formula. A grave act may justify immediate dismissal, while less serious conduct generally requires proportionate progressive discipline.

What Should a Written Warning Include?

It should identify the specific conduct, date, applicable duty, required correction and potential consequences of repetition.

What If the Employee Refuses to Sign?

Document the refusal, use appropriate witnesses and preserve proof that the warning or termination letter was delivered.

How Quickly Must the Employer Act?

The employer should investigate and decide promptly after obtaining sufficient knowledge. Unnecessary delay can undermine the seriousness of the alleged cause.

Is a Termination Letter Required?

A written letter is critical in a for-cause dismissal because the facts stated in it generally limit what the employer may later allege in court.

How Much Preaviso Is Owed?

The general minimum is one week after three to six months, 15 days after more than six months up to one year, and one month after more than one year.

Can Preaviso Be Paid Instead of Worked?

Yes. The employer may generally pay in lieu of having the employee work the notice period.

What Is Cesantía?

It is a statutory severance indemnity generally arising in an unjustified dismissal or another qualifying termination not attributable to the employee.

Is Cesantía One Month per Year?

Not precisely. Article 29 uses a schedule of salary days by year and generally caps ordinary compensation at the final eight years.

Does an Employee Dismissed for Cause Receive Nothing?

No. Earned salary, proportional aguinaldo, unused vacation, commissions and other accrued compensation remain payable.

What Belongs in the Final Settlement?

Depending on the case: outstanding salary, vacation, aguinaldo, commissions, overtime, preaviso, cesantía and other accrued benefits.

Must the Employee Sign Before Being Paid?

No. A refusal to sign does not remove the employer’s payment obligation.

Can an Employer Dismiss a Pregnant Employee for Serious Misconduct?

Potentially, but the employer must first follow the special authorization procedure and prove a legally sufficient serious cause.

Can the Employer Fire Someone Immediately After They Complain to MTSS?

Doing so creates significant retaliation risk. The employer should preserve the existing conditions and obtain legal review before taking adverse action.

Do Domestic Workers Receive Severance?

They may receive notice, severance and other accrued amounts when the legal conditions are met, even when the arrangement was informal or part-time.

What Is the Safest Termination Rule?

Do not decide the legal classification of the dismissal based on emotion. Review the evidence, protected status and complete financial exposure before communicating the decision.

Legal information notice: This article provides general information about employee discipline and termination under Costa Rican law. It does not constitute legal advice for a specific employer, employee or dispute. Termination rights depend on the contract, facts, employee status, evidence and current law.

Last reviewed: July 2026