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Severance in Costa Rica: what is paid and how it is calculated

Four items, each with its own rule. And a severance table that almost every published version reproduces cut off at year eight.

8 min readTicuenta
What is paid on a dismissal without cause: notice, severance, untaken holiday and the proportional Christmas bonus. If the employee resigns, there is no notice in their favour and no severance. But the holiday and the bonus are paid all the same.

Notice

Either side may end an indefinite contract without cause by giving notice to the other. The periods are these:

Time workedNotice
3 to 6 continuous months1 week
Over 6 months and up to 1 year15 days
Over 1 year1 month
Two details of article 28 that get overlooked. Notice is always given in writing. And it can be skipped by paying the salary for that period, without that affecting severance. During the notice period the employer must also give the employee one day off per week to look for work.

Severance, with the complete table

It is due when an indefinite contract ends through dismissal without cause, through one of the grounds that entitle the employee to leave because of the employer, or for another cause outside the employee's will.

Length of serviceDays of salary
3 to 6 months7 days
Over 6 months and under 1 year14 days
Year 119.5 days
Year 220 days
Year 320.5 days
Year 421 days
Year 521.24 days
Year 621.5 days
Years 7, 8 and 922 days
Year 1021.5 days
Year 1121 days
Year 1220.5 days
Year 13 onwards20 days

From year 2 onwards, each row is paid “per year worked or fraction greater than six months”.

The error that circulates widely. You often read that the table “ends at 22 days in year 8”. It does not end there: it goes on down to 20 days from year 13. What does exist is a different cap: in no case is more than the last eight years of employment compensated.

Which salary it is calculated on

Notice and severance are calculated on the average pay of the last six months of the contract — or of the time worked, if shorter. Not on the last salary.

The difference matters when there were commissions, overtime or a recent raise: a six-month average can sit well below, or well above, the last month's pay.

Holiday and bonus: always paid

  • Untaken holiday

    On termination for any cause, the employee is entitled to be paid for holiday not taken. The legal minimum is two weeks for every fifty weeks of continuous work.

  • If they did not reach fifty weeks

    They are entitled to a minimum of one day of holiday for each month worked, paid on leaving.

  • Proportional Christmas bonus

    The part of the period they earned, calculated exactly like the December bonus. How the bonus is calculated.

And a tax detail that is expensive to forget. Untaken holiday paid in a settlement is taxable pay: its income tax goes into the month's withholding along with the rest of the payroll. It is not withheld separately inside the settlement.

What does not break length of service

Continuity of employment is not broken by illness, holiday, lawful strike or analogous causes. And any contract clause aimed at cutting that continuity is absolutely void — the familiar trick of renewing a contract every eleven months does not erase length of service.

What about the labour capitalisation fund?

It is a separate fund, run by a pension operator. The employee withdraws it from the operator when employment ends: it is not money the employer pays out in the settlement.

Its relationship with severance comes from the Worker Protection Act, the same law that reformed article 29. Before deducting anything from severance on that account, it is worth checking with an employment adviser: it is one of the points where hand-made settlements go wrong most often.

From Ticuenta

A settlement is not another payroll

It is recorded on its own and releases the severance provision that has been building up month by month.

See how it works

About this article. Notice is article 28 of the Labour Code; severance and its table, article 29, as reformed by the Worker Protection Act No. 7983; the calculation base and continuity, article 30; holiday, articles 153 and 156. This is not employment law advice: for a specific case, consult the Ministry of Labour or your lawyer.

Verified as of 24 September 2026. Rules change. This is information, not legal or tax advice.

Sources: Current legal texts (Sinalevi) Ministry of Labour

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