June 11, 2007


Honduras has a legal custom known as prestaciones. Basically it is a monetary payment due to employees who quit or are fired from their jobs. I think that the custom comes from the fact that there are no real retirement benefits for most employees, no social security, and no unemployment benefits. The amount is roughly 5% of the total amount that the employee has been paid over the years. The calculation is a little more complicated than that − this is just to give you an idea.

I have mixed feelings about prestaciones. On the one hand, when a worker loses his job through no fault of his own, he should be entitled to some payment to tide him over until he can find another job. Employers shouldn't be allowed to discard employees on a whim and they should be required to contribute something to the person's retirement.

On the other hand, when workers get fired for doing a bad job, or stealing, or not coming to work, I don't think they deserve a reward. But in Honduras, it is virtually impossible not to pay prestaciones no matter what the situation.

Here is an example: Workers were building a house for an American couple. The Americans found out that not only were they building their house, they were also building a house for the contractor, on the Americans' time and with the American's money and materials. The workers and a ferretería (hardware store) employee were in collusion with the contractor.

When the Americans fired the contractor, the contractor's employees stole all the American's tools. A few days later they filed suit to sue the Americans for the wages not paid by the contractor and for prestaciones. I haven't heard the outcome, but I hope the Americans have a good attorney, because it is likely that they will lose the case.

Prestaciones result in very bad employees working forever at a job because the employer cannot afford to come up with the lump sum to pay them off. I think this is a big reason for the low quality of customer service in this country. Some employees do their best to get fired so they can collect the windfall.

One hardware store owner told us that he knows that he has very lazy and rude employees but that he can't afford to fire them. I say that he can't afford not to.

Some of the larger employees, like Dole Pineapple, have found ways around prestaciones. The bulk of their workers are provided by a "temporary" labor agency, who rotates them in and out every 3 months to avoid the liability for prestaciones and other benefits. This, in my opinion, is shameful. But jobs are next to impossible to find for field workers so there is really nothing they can do.

One Dole employee was recently fired after 14 years. He went to an attorney to find out about getting prestaciones to tide him and his family over until he could find another job. He only asked for L10,000 ($529 U.S.) but the attorney made a claim to Dole for L.27,000 ($1,429 U.S.) and kept the difference.

The employee had asked El Jefe's mother to go with him to the attorney. She is well respected in the village where they live and is often asked to accompany people when they have a problem to work out. In this case, I'm not sure if she was asked because the worker couldn't read or not, but that is often the case.

She looked over the papers and asked the attorney why would he try to cheat this poor man? But the attorney told the man to sign the paper (which said he received L. 27,000) and the man, not wanting to cause a fuss with such an important man as an attorney, did so. He received L.10,000 and the attorney pocketed L.17,000. El Jefe's mother was so upset that she ended up in the hospital later that evening.

If you are interested in other aspects of Honduran labor law, page 12 of this Doing Business in Honduras document gives some highlights. The minimum wage of U.S. $153 mentioned in the document is per month. This document oddly does not mention prestaciones.

Whatever the concept of prestaciones was developed for, it's not working. Often the people who deserve them, don't get them, and the people who don't, do.

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