In Costa Rica, Social Security is a kind of health insurance and retirement plan to cover every worker. This is an obligation for every employer according to the law. Regardless of what some people say, there is no way to legally avoid it. If you have a worker, you have to pay Social Security for him/her. All and every document or agreement between an employer and its workers is overridden by the Social Security law. Therefore, it will be totally null any clause stating that the worker will pay her/his own Social Security, or stating that in some specific cases there will not be social security and the worker give up any rights about it.
If there is a labor relationship, the Social Security must be paid and, in all cases, it will be very risky not to do it so. If employer is not reporting the workers or if he/she has reported them but has not paid the Social Security, the employer will have to pay for any medical treatment given to the worker, his wife and children in a Social Security Hospital or private Hospital or clinic. The fact that the employer pays the Social Security later, (after the worker or his/her family has received the treatment) will not release the employer from the responsibility of paying for any treatment given before the payment. Social Security health insurance covers pregnancy and even accidents happened to the workers and his family while they were not at work. Therefore, if your worker has been repairing his/her house roof during his/her free time and falls, you will have to pay for the treatment or any compensation if you have not been paying his/her Social Security. Social Security does not cover the treatment for accidents at work. The employer must buy and pay a Labor Risk Insurance (“Seguros de Riesgo del Trabajo”) which will be covering that and which is less expensive than Social Security. (Please see our article about this other Insurance).
The Social Security medical insurance and tax is administrated by CCSS (which stands for “Caja Costarricense del Seguro Social”). As of today (Jan, 2010) this is equal to 35.54% of the total amount of wages paid, including commissions. Employer must pay 26.37% and the worker must pay the remaining 9.17%. According to the law, each time the worker is going to be paid, the Employer must withhold 9.17% , add his 26.37% and paid it all to the CCSS. (Payment to CCSS is made once a month). If the Employer did not withhold the worker’s percentage, even so, the employer still will be obligated to pay it to Social Security Administration (from his own funds in this case).
Each employer must have and pay the Social Security for every worker, even if the worker has his own Social Security Insurance and/or is working for somebody else. (There is no legal way to avoid it.)
Fines and liabilities for not complying with this are very high and problematic. In some cases, Social Security Administration may collect the money within the next 10 years. Withholding the worker’s part (9.17%) and not paying it on the next period to the CCSS can even put the employer or its legal representative in prison. Therefore, it is very important to pay attention to this matter.
If for example you hire a builder to make a house, it will be very important to make sure that all workers are properly cover by Social Security in all times. A clause in the “Building Agreement” stating that the builder will be liable for it, is not enough in most cases. If there is a problem, Social Security Administration will collect the money and will present the law suit against the property owner, regardless of the fact that there is a builder agreement. Later this owner must try to collect the money from the builder. However, very often is very difficult or even impossible to recover that money from such builder, so, the property owner will be paying everything at the end.
Dealing with a law suit presented by Social Security Administration against you is usually very expensive and difficult. So, the goal is to try to avoid this kind of law suit as much as possible.
Since dealing with this is sometimes a little bit complicated and it requires to be presenting reports and making payments every month, many foreigners prefer to hire the services of a registered Escrow Company, like our firm, to handle it.
Please Note: This material is for personal use only and is protected by Copyright Law. It is provided as general information only and does not constitute and is not a substitute for legal or other professional advice. Reliance on this material is solely at your own risk. Always consult your own legal or other professional advisors and discuss the facts and circumstances that apply to your specific case.