Thursday 17 June 2021

“Domestic” Outsourcing in Costa Rica


In business, outsourcing is used to contracting out a business process to a third-party. Outsourcing became popular in the United States near the turn of the 21st century, and includes both foreign and domestic contracting, and sometimes includes offshoring or relocating a business function to another country. Financial savings from lower international labour rates is a big motivation for outsourcing/offshoring.

Costa Rica is a major outsourcing services provider, particularly in the technology and services industries.

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However, outsourcing is now taking on a new twist: outsourcing a domestic worker or maid.

Outsourcing the services of a maid can be a money saver for the employer, to the detriment of the employee. More important, outsourcing a domestic worker does not have a legal framework in Costa Rica.

domestic_sufferingThis means that some “vivillos” (nasty employers), hire a maid – foreign or national – on an outsourcing basis to avoid the “prestaciones” – the severance pay and benefits when the working relationship comes to an end.

Walter Villalobos, assistant director of inspections at the Ministry of Labour (Ministerio de Trabajo or MTSS) confirms that the phenomenon is taking root in the country and precisely for the lack of a law, leaving the worker defenceless, as the current laws cannot be used to resolve labour conflicts with respect to outsourcing.

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Villalobos explained that the minimum salary cannot be avoided through outsourcing, but both parties must make it clear who will cover expenses such as social security (Caja), private insurance, severance, bonus, etc.

If those items are not clear from the beginning there will is a potential problem and most likely the employee will be on the losing end, given there is no law to support the contract.

Where it gets complicated, says Villalobos, is when the contractor – the person hiring the service – has the power to give orders to the subcontractor – the maid, as the obligations in this case become joined and when it comes to termination, the contractor turned employer now must pay severance, that includes vacation pay and aguinaldo, etc.

“The contract relationship gets complicated, for only an employer has the right to give orders to an employee. Simply everyone who gives the maid orders becomes the employer, which then are jointly responsible for paying benefits”, explains Villalobos.

Villalobos was emphatic that salaries are untouchable, no matter the type of working relationship established.

By law, a domestic worker’s salary can only reduced by 9% to cover the cost of social security (Caja). Nor can a domestic worker be force to purchase private insurance to avoid payment to the Caja, at her own expense.

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We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

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