Friday 29 September 2023

Unemployment in Costa Rica expected to rise in January, according to employers

Employers will have to pay 100% of the salary to workers who suffered a reduction due to the pandemic; Difficulty in extending the cut in working hours by half complicates recovery

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29 September 2023 - At The Banks - Source: BCCR

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QCOSTARICA – In January unemployment is expected to increase, while the economic recovery would suffer a setback, according to several business leaders consulted.

Legislator María Inés Solís of the PUSC regretted that the government of Carlos Alvarado excluded from the legislative agenda, the regulations to cut working hours in the private sector by half, due to a dispute with legislators.

The rise in unemployment is expected to occur because in January the law that allows employers to cut the working day in half will no longer be in force.

Thus, employers will have to provide their employees with full-time work and pre-pandemic salary, and full payment to the Caja (social security and other labor conditions.

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Companies faced with cash flow not enough to maintain operations would be forced to lay off employees, according to Alonso Elizondo, executive director of the Chamber of Commerce.

“Avoiding layoffs is very difficult when you are between a rock and a hard place, with the survival of the business at risk,” added the businessman.

Legislators had planned to extend the measure allowing employers to continue to alter working conditions such as cutting the working day and pay in half until March 2021 due to the economic crisis caused by the pandemic.

However, a dispute with the government over a US$250 million loan from the IDB and a Covid-19 outbreak in the Legislature prompted lawmakers to advance the year-end recess.

Legislators will be back at work (with full pay) on January 11.

“We hope that the bill will be approved without delay after the legislative recess,” said José Álvaro Jenkins, President of the UCCAEP.

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In its later report, National Institute of Statistics and Census of Costa Rica (INEC), unemployment is estimated at 22%, that is more than ten percentage points before the pandemic.

The regulations in question were already approved in the first debate by the deputies, but due to the situation, the initiative that empowers companies to cut the working day – and the salary – of workers without being sanctioned for it if they can demonstrate to the Ministry of Labor a loss in their earning due to the pandemic, never reached the second and final vote.

According to Elizondo, the movements that have been made in the sector to avoid layoffs have consisted of maneuvering with the working hours of all employees in such a way as to keep as many jobs as possible.

Jose Salas, Human Talent Advisor for the Chamber of Industries, explained that if an adequate business climate is not provided, such as companies not being sanctioned for cutting the workday, then this situation will affect negatively the economic recovery.

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