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Costa Rica – New provisions on bonus incentives in the public sector
Publications || 2019 || Costa Rica – New provisions on bonus incentives in the public sector

Costa Rica – New provisions on bonus incentives in the public sector

by charbds, 18 February, 2019

February 18, 2019
Issac Quesada / iquesada@bdsasesores.com
Attorney at law BDS Costa Rica

Over the last two years, the public sector has undergone the most significant changes in their different employment regimes. This time, we will be discussing the change that took place on December 4, 2018 as a result of the enactment of the Law on the Strengthening of Public Finances (LFFP), also known as “Tax Plan” which directly changes the way in which public sector workers have been traditionally compensated, i.e. base salary plus bonus incentives.

Even though there are a few laws on bonus incentives that were effective for certain sectors (Law Against Corruption and Unlawful Enrichment, General Internal Control Act, Municipal Code, etc.), the truth is that every institution has implemented a number of incentives in different ways, and many institutions have created bonus incentives through a specific Regulation or a Collective Bargaining Agreement. According to Report DFOE-SAF-OS-00001-2018 issued by the Office of the General Comptroller of the Republic in 2018, at the time there were 127 bonus incentives just considering the Executive Branch. The Ministry of Public Education had 74 different salary incentives while the Ministry of Public Safety had 42.

As a first modification, the LFFP limited the creation of bonus incentives and sets forth that they may only be created by law. In response to a constitutionality enquiry appeal submitted in connection with this law, however, the Constitutional Chamber of the Supreme Court ruled that this will apply without prejudice to the provisions of any collective bargaining agreement, which is why in light of the current legislation bonus incentives may only be created through special law or collective bargaining agreement.

On the other hand, the LFFP only regulates 4 of the existing bonus incentives. The first incentives affected are the compensatory payment on account of the legal prohibition to exercise the employee’s profession outside of his/her current position and the full-time job incentive, which payment percentage has been affected. The LFFP also clarifies which professions are covered by each bonus incentive, as both are of different nature. Also, the scope and term of application of the full-time job incentive are delimited, which should be negotiated under a technically justified contract signed for a term between 1 to 5 years.

On the other hand, the annual bonus and professional career incentives are subject to a more complex scenario for the public administration. As for the annual bonus incentive, it should be converted into a fixed amount. Firstly, the annual incentives for any years before the LFFP may not be affected, but the percentage of this incentive may not keep increasing with respect to the base salary. The 2019 annual incentive should be calculated with basis on the base salary of the first half of 2018, and should also be converted into a fixed nominal amount. Finally, as for future annual incentives, each institution must set the fixed annual bonus amount for every salary level, which will be paid in June each year exclusively to workers with “Very good” performance evaluation results. It should be noted that the amount paid on a yearly basis may not vary if the employee is promoted or if the base salary increases, a situation that significantly limits the growth of the amounts paid for said incentive.

The professional career incentive also involves major challenges, as from now on no points will be earned for any training courses given by the institution itself, and points will only be compensated during a 5-year term, which leads to the need of changing the management systems to keep record on the institution that gave the relevant training and for how long these points have been earned.

In principle, all these variations will directly apply to new employees appointed in the Public Administration, but also entail particular situations such as promotions, assignment of additional roles (recargos), and transfers of employees that entered the institution before the LFFP, and therefore all these situations should be thoroughly analyzed in observance of any vested rights and legal consolidated situations of workers.

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