As the holiday season approaches, it’s essential to remind companies of one of their primary obligations during this time of year: the payment of the christmas bonus (known in Costa Rica as aguinaldo). According to the Judicial Power’s Usual Dictionary, the aguinaldo is defined as a “special complementary payment or benefit provided by the employer to the employee, typically at the end of the year, equivalent to one month's salary (…).”
In Costa Rica, since the enactment of the Christmas Bonus Payment for Private Sector Employees Act (Law No. 2412) in 1959, all organizations with an employment relationship are required to make this annual payment to their employees in accordance with the law.
To clarify the most frequently asked questions about the aguinaldo, here are key insights based on the relevant legal framework:
1. Do only private companies pay the aguinaldo?
No. Every worker is entitled to this benefit, regardless of the type of organization they work for. Employers in all sectors—whether multinational corporations, public institutions, cooperatives, small and medium-sized enterprises (SMEs), foundations, NGOs, or others—are obligated to pay the aguinaldo.
2. How much is the aguinaldo?
A full aguinaldo for one year of work is equivalent to one month's salary, making it comparable to a thirteenth salary. However, the exact amount depends on the length of time the employee has worked during the year.
3. How is the aguinaldo calculated?
The amount of the Christmas bonus is calculated based on the average of ordinary and extraordinary salaries accrued from December 1st of the previous year to November 30th of the year in which it is paid. When referring to salaries, it is not used for the calculation of: the Christmas bonus of the previous year, partial severance payments, allowances received during periods of disability (except in the case of pregnant women and other leaves for paternity, adoption, etc. included in article 95 of the Labor Code), or per diems. However, amounts corresponding to vacation pay, overtime, and bonuses of a salary nature would be included.
4. What if the employee has less than one year of service?
In this case, the aguinaldo is prorated based on the time worked, provided the employee has worked at least one month. For example, if the employee started working on June 1, they would only be entitled to half of the Christmas bonus (6 months of work). However, if they started on November 15, they would not be entitled to the Christmas bonus for that year.
5. What happens if the employment relationship ends?
If the employment relationship is terminated, the corresponding Christmas bonus shall be included in the termination payment.
6. When must the aguinaldo be paid?
Employers are required to pay the aguinaldo no later than December 20 of each year.
7. What are the consequences of failing to pay the aguinaldo?
Failure to pay or delaying payment of the aguinaldo constitutes the crime of wrongful withholding, which is subject to criminal prosecution under procedural law. Additionally, this omission is considered a serious breach by the employer, allowing the employee to terminate the labor relationship with just cause and retain all rights, as stipulated in article 83 of the Labor Code.
8. Does the aguinaldo affect other labor entitlements or social security contributions?
No. The aguinaldo is an independent payment and does not factor into calculations for severance pay, notice periods, or vacation entitlements. Moreover, as it is not considered salary, it is not subject to employer-employee contributions to social security.
9. Is the aguinaldo subject to income tax?
No. Pursuant to article 35 of the Income Tax Law, the aguinaldo is an income not subject to income tax, provided that it does not exceed one twelfth of the wages earned in the year. In other words, if the company grants a benefit in which it pays more than what is stipulated in the Law, the excess proportion must be considered for the payment of the tax.
In addition, in accordance with article 8 of the Income Tax Law, the christmas bonus is a deductible expense from gross income in the same proportion as indicated in Article 35, so it should not be included for tax purposes.
10. Can employees waive the aguinaldo in exchange for another benefit?
No. The law governing the aguinaldo is of public order, meaning it is mandatory and cannot be waived or modified by agreement between the parties.
11. Can the aguinaldo be offset?
No. The aguinaldo enjoys the same legal protections as severance pay and notice periods. According to Article 30 of the Labor Code, it cannot be offset under any circumstances.
12. Can the aguinaldo be garnished?
The aguinaldo can only be garnished for child support payments, as stipulated in Article 30 of the Labor Code.
It should be remembered that the payment of the Christmas bonus is an obligation of all companies, so it is advisable to make a correct financial planning that allows to comply satisfactorily with the legislation, without exposing oneself to the serious consequences of a late payment or omission of the same.
At Bufete Godínez y Asociados, we are leaders in business consulting for labor law in Costa Rica. Our team of labor law specialists is ready to provide top-tier legal support for managing and resolving your company's labor matters. If you need personalized legal guidance to ensure compliance with labor regulations or to address disputes, we are here to help. Click here to learn more and schedule a consultation with our labor law experts.
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