Having a Solidarian Association (from the Spanish language concept “Asociación Solidarista”) in the company is considered an essential employment benefit for many candidates looking for better working opportunities. In fact, one of the first questions asked by candidates in their job interviews is whether the company has this type of association, as it is considered a great advantage for employees. Many employers in Costa Rica conclude that their hiring processes are more effective, and they are more able to attract the right talent when membership into this type of Association is part of what the company can offer.

If your company operates in Costa Rica, employs at least twelve workers and still does not have a Solidarian Association, we can guide you through understanding the legal implications for both, workers, and employers, as well as the legal process for its constitution.

Is it a “Worker’s Union”?

One of the main concerns employers have in relation to these groups is whether they are Unions; however, Solidarian Associations are far from being such. In fact, Costa Rican law created this possibility for workers to affiliate to an employment organization based on solidarity between the employer and the employees, to differentiate it from the purposes that Unions fight against the employers.
These associations mainly deal with credit issues (thus, having roles with some similarity to internal credit unions for the company’s employees) and deal with other items for the comfort and benefit of the employees, such as negotiation of preferred rates on contracts with suppliers of services and merchandise that appeal to the workers, organizing social events, etc.

Why is it considered an “employment benefit” for workers?

Solidarian Associations are constituted only by employees. Their affiliates transfer a percentage of their salaries to the Association and the Association invests those savings and funds, so that at the end of the period, the earnings are distributed between all of them.

In fact, the employer does not have much involvement with the management of the Solidarian Association, other than transferring a monthly contribution, which according to the specific legislation, is of, at least one percent (1%) of the salary of each affiliated employe.

Those funds will be considered as a “severance reserve fund” which is paid to the affiliates upon termination of the employment.

“Severance” is generally paid by the employer only if the cause of termination is a dismissal without cause, however, if there is a Solidarian Association in place, the affiliated employees will be entitled to receive the payment of the contributions to the severance fund transferred by the employer during the affiliation period. In some cases, the employer might have to pay an extra amount, i.e. if the severance payment should be higher than what was already transferred by the employer, but, in general terms, that contribution provides a financial release to the company when deciding to terminate an employee and it creates a vested right in favor of the affiliates to receive the payment of severance, being this the main advantage.

This structure also allows a tax benefit for the employers, considering that the company’s contributions are a deductible expense from income tax, and the severance fund will help in recruiting the best candidates and keeping a satisfied staff.

How to constitute a Solidarian Association?

First, the Association should be created by at least twelve employees, who will meet in an Assembly to vote on specific matters, mainly the appointment of the Board of Directors and the approval of the Bylaws.

The notarized documents are filed into the Ministry of Labor and in about 4 to 6 weeks, the Association will be registered, and ready to open bank accounts to start receiving the funds. Once a year there should be a General Assembly, in which the BOD will report on the financial and administrative matters, and the affiliates will receive their earnings and appoint the new Board members, when applicable.

The legal process could seem quite simple, though it should be handled with great care in order to be effective. You can contact us at info@langcr.com and we will gladly assist you with more information.

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