Employer of Record in Costa Rica

Guide to Hiring Employees in Costa Rica

Your guide to hiring employees in Costa Rica, covering the employment landscape, employer of record responsibilities, working customs, and local labor laws.

Hiring Employees In Costa Rica
Employer Of Record In Costa Rica

Capital City

San José

Currency

Costa Rican Colón

 (

)

Timezone

GMT-6

Payroll Frequency

monthly

Tax Year

January 1st - December 31st

Employer Tax

27.67% - 28.67%

Languages

Spanish

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How to Hire Employees In Costa Rica

Hiring in Costa Rica for the first time can be overwhelming, especially when navigating unfamiliar employment laws.  Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success.  Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Costa Rica in the following three ways:

  • Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Costa Rica.
  • Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Costa Rica’s labor laws and tax regulations.
  • Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Good To Know

Costa Rica's cultural alignment with Western work values facilitates the integration of foreign management practices.

The country offers enticing business incentives, including tax benefits, fostering a pro-business environment.

With a stable democracy and high per capita income, Costa Rica stands out in the Americas.

Its services sector, driven by an educated workforce, comprises a significant portion of the Gross National Product, making it attractive for sourcing skilled talents.

Employment and Labor Laws in Costa Rica

Businesses can only operate smoothly in Costa Rica if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Costa Rica below, to avoid any compliance issues.

Employment Contract Requirements

In Costa Rica, verbal agreements are acceptable for short-term agricultural tasks lasting up to 90 days, but written contracts are mandatory for other situations. Contracts must be in Spanish or English and provided within a month of starting work. They should include:

  • Identification of both parties
  • Job responsibilities and duties
  • Workplace(s)
  • Employee's salary and other benefits

Onboarding Process

We can help you get a new employee started in Costa Rica quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Costa Rica

In Costa Rica, the standard workday is eight hours, up to a maximum of 48 hours per week. Employees can work up to nine hours a day if it doesn't affect their health, with a mandatory 30-minute rest period.

Overtime in Costa Rica

In Costa Rica, working over 48 hours per week constitutes overtime, compensated at 150% of regular wages. Holiday work earns employees 200% of their regular pay. Up to 4 hours of overtime can be worked per day.

Probation Period in Costa Rica

In Costa Rica, probation periods vary by job and are typically specified in the employment contract, lasting around three months. During this time, the employer can terminate the contract without cause and without compensation.

Employer of Record in Costa Rica

An Employer of Record (EOR) acts as the legal employer for workers in Costa Rica, taking on key responsibilities to ensure compliance with local labor laws and regulations. The EOR facilitates the hiring process for businesses that want to employ workers without establishing a legal entity in the country.

The employer of record in Costa Rica is responsible for:

  • Employment Compliance: Ensure all employment contracts comply with Costa Rica's labor laws and regulations, including proper classification of employees.
  • Payroll Management: Calculate, process, and distribute employee salaries in accordance with Costa Rica's payroll laws, including deductions for taxes and social security contributions.
  • Tax Filing and Contributions: Handle the registration, filing, and payment of employer taxes and social security contributions to the relevant authorities.
  • Employment Contracts: Draft and maintain compliant employment agreements, detailing salary, benefits, working hours, and termination terms in line with Costa Rica's legal requirements.
  • Benefits Administration: Provide mandatory employee benefits as required by Costa Rica's labor laws, such as health insurance, pension contributions, and statutory leave.
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Payroll Management in Costa Rica

Fiscal Year in Costa Rica

January 1st - December 31st is the 12-month accounting period that businesses in Costa Rica use for financial and tax reporting purposes.

Payroll Cycle in Costa Rica

The payroll cycle in Costa Rica is usually monthly, with employees being paid as specified in the employment cotract.

Minimum Wage in Costa Rica

The minimum wage for employees in Costa Rica is typically 2,325 CRC per hour, amounting to ~372,000 CRC per month for a typical 40 hour work week.

Bonus Payments in Costa Rica

In Costa Rica, the provision of a 13th-month salary is compulsory, and these payments are required to be disbursed annually by December 20th.

Employment Taxes in Costa Rica

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 26.67% on top of the employee salary in Costa Rica.

Tax TypeTax Rate
Social Security 27.67% - 28,67%
Occupational Risk Insurance1% - 2%

Employee Payroll Tax Contributions

In Costa Rica , the typical estimation for employee payroll contributions cost is around 10.5%.

Tax TypeTax Rate
Social Security10.5%

Individual Income Tax Contributions

In Costa Rica, income tax follows a progressive rate ranging from 0% to 25%, calculated based on individual income.

Income BracketTax Rate
0 - 941,000 CRC0%
941,001 CRC - 1,381,000 CRC10%
1,381,001 CRC - 2,423,000 CRC15%
2,423,001 CRC - 4,845,000 CRC20%
4,845,001 CRC - And above25%

Pension in Costa Rica

Employers in Costa Rica contribute 5.42% (included in social security contribution) of employees' monthly earnings to social insurance, covering old age, invalidity, and survivors' benefits. To qualify for old-age benefits, individuals must be at least 62 years old (men) and 60 years (women) and contribute for a minimum of 300 months. Early retirement is available, however this may reduce the pension amount paid compared to that paid at standard retirement age.

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The tax-related information provided in this guide is intended for general guidance and informational purposes only. Reach out to our dedicated team for insights on remote hiring in Costa Rica tailored to your needs.

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Work Permits & Visas in Costa Rica

Annual Leave & Company Policies In Costa Rica

Mandatory Leave Entitlement in Costa Rica

The annual leave entitlement in Costa Rica is 14 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Costa Rica

Costa Rica observes 13 national public holidays.

HolidayDate
New Years Day1 January
Juan Santamaria Day11 April
Maundy ThursdayApril, exact day varies
Good FridayApril, exact day varies
Labor Day1 May
Annexation of Guanacaste Day25 July
Lady of the Angels Day2 August
Assumption Day / Mothers DayAugust, exact day varies
Day of the Black Person and Afro-Costa Rican CultureSeptember, exact day varies
Independence Day15 September
Cultures National DayOctober, exact day varies
Abolition of the Army1 December
Christmas DayDecember 25

Paid Time Off in Costa Rica

After completing one year of service, employees in Costa Rica are entitled to 12 working days of annual paid leave. Additionally, Costa Rican employers often offer additional vacation days as part of employee benefits.

Maternity Leave In Costa Rica

Pregnant employees in Costa Rica receive 112 days of paid maternity leave, made up of 28 days before delivery and continuing for 84 days after. The employer and the Costa Rican Social Security Fund split the payment equally for the entire duration. After returning to work, the employee is entitled to breastfeeding breaks of 1 hour per day subject to a certificate provided by social security.

Paternity Leave In Costa Rica

In Costa Rica, new birth parents receive two days per week for the first four weeks as paternity leave. During this time, the employee receives 50% of their salary from the employer and the remaining 50% from the Social Security Administration (CCSS).

Sick Leave In Costa Rica

In Costa Rica, employees receive full pay for the first 3 days of sick leave, with the employer covering 50% and Social Security paying the remaining 50%. From the fourth day onward, Social Security covers 60% of the daily wage, and the employer is not required to contribute, however can top this payment up at their discretion. A medical certificate is required within 48 hours for Social Security payment eligibility.

Parental Leave In Costa Rica

In Costa Rica, parental leave is structured through specific provisions for maternity, paternity, and adoption, rather than a unified "parental leave" policy. Adoptive parents, regardless of gender, are eligible for a three-month paid leave upon adopting a minor. In cases of joint adoption, parents can decide how to divide this leave between them.

Employment Termination and Severance Policies in Costa Rica

Termination Process in Costa Rica

The process of terminating employment in Costa Rica varies based on contract type, collective agreements, and the reason for termination. Contracts can end through legal provisions, mutual agreement, or as mandated by the law. Valid reasons for termination include:

  • Dishonesty
  • Negligence
  • Fraud
  • Redundance

Notice Period in Costa Rica

In Costa Rica, the notice period for employees depends on their length of service:

  • 0-3 months: No notice required
  • 3-6 months: 1 week notice
  • 6 months - 1 year: 15 days notice
  • 1 year or more: 1 month notice

Severance in Costa Rica

Workers in Costa Rica who resign or are terminated, whether with or without cause, are entitled to severance pay based on their length of employment and salary. The number of severance days is determined as follows:

  • 7 days for 3 to 6 months of service
  • 14 days for 6 to 12 months of service
  • 19.5 days for 1 year of service
  • 20 days for 2 years of service
  • 20.5 days for 3 years of service
  • 21 days for 4 years of service
  • 21.25 days for 5 years of service
  • 21.5 days for 6 years of service
  • 22 days for 7-13 years of service
  • 20 days for 13 or more years of service

Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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ABOUT THE AUTHOR

Jesse Weisz

Jesse is an experienced R&D Analyst at Playroll, a leading Employer of Record (EOR) provider. With a strong background in data analysis and market research, Jesse specializes in identifying emerging trends and driving innovation in global HR solutions. She is an all-rounder, critical thinker and success-seeker (often inextricably linked to being a late-night tea drinker).

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FAQS

FAQs About Hiring In Costa Rica

Questions and Answers

What Is an EOR in Costa Rica?

An Employer of Record (EOR) in Costa Rica is a third-party organization that legally employs workers on behalf of your company. The EOR handles all local employment tasks, including compliance with labor laws, payroll, taxes, benefits, and employment contracts. This allows businesses to easily hire talent in Costa Rica without the need to set up a legal entity there, saving time and ensuring compliance with local regulations.

Can I Hire in Costa Rica Without an Employer of Record?

Yes, you can hire in Costa Rica without an Employer of Record, but this typically requires setting up a legal entity in the country. Establishing a local entity involves navigating registration processes, tax systems, and employment regulations. This can be costly and time-consuming, often taking between 4-6 months to enter a new market. An EOR provides an alternative by allowing you to hire talent quickly and compliantly without the need to establish a legal presence in Costa Rica.

How Much Does It Cost To Employ Someone In Costa Rica?

The cost of employing someone in Costa Rica includes more than just their salary. You also need to consider mandatory contributions such as taxes, social security, insurance, and benefits. These additional costs can vary based on the role, location, and specific employment laws in Costa Rica. When using an Employer of Record, there are additional service fees, usually charged as a percentage of the employee's salary or as a monthly or annual fee. This ensures compliance and covers administrative tasks.

What Is the Minimum Wage In Costa Rica?

As of January 1, 2024, Costa Rica's minimum wage rates are:

  • 2,325 CRC p/h CRC per month.
  • Applies nationwide across all sectors.
  • Adjustments typically occur annually.

How Does an EOR Help You Run Payroll In Costa Rica?

An EOR simplifies payroll management in Costa Rica by handling all aspects of salary payments, tax deductions, and compliance with local labor laws for your international employees. The EOR calculates gross pay, deducts necessary taxes and contributions, and ensures employees are paid accurately and on time. They also manage year-end tax reporting and compliance filings, reducing the administrative burden on your team and minimizing the risk of errors or penalties.

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