Employer of Record 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.

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.

Employers in Costa Rica must comply with strict labor laws governing working hours and overtime to ensure employee rights and avoid legal penalties. Standard working hours vary by shift type: daytime shifts allow up to 8 hours per day and 48 hours per week, while night shifts are capped at 6 hours per day and 36 hours per week. Mixed shifts, which include both day and night hours, have a maximum of 7 hours per day and 42 hours per week. Certain industries, such as healthcare and transportation, may have specific exceptions due to the nature of their work. Additionally, managerial and exempt employees may not be subject to standard working hour restrictions, but their roles should be clearly defined in employment contracts.

Overtime in Costa Rica is strictly regulated, with a maximum of 4 overtime hours allowed per day. Employers must compensate overtime at 150% of the regular hourly wage, and work performed on public holidays is paid at 200% of the regular wage. Employees are entitled to mandatory rest periods, including a 30-minute meal break for shifts exceeding six hours. Failure to comply with these regulations can result in severe fines, operational suspensions, or legal action against the employer. Understanding and implementing these rules is crucial for maintaining compliance and fostering a fair and productive work environment.

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.

As of January 1, 2025, Costa Rica has implemented a 2.37% increase in minimum wages for the private sector. The specific rates vary based on job categories and skill levels. For instance, an unskilled worker earns CRC 12,236.95 per day, while a specialized worker receives CRC 15,983.95 per day. In monthly terms, a generic unskilled worker earns CRC 367,108.56, and a generic skilled worker earns CRC 413,023.56.

Employers must ensure compliance with these updated rates to avoid legal penalties. It's also essential to consider that while the statutory minimum wage sets the legal baseline, studies suggest that the living wage—what is necessary for a decent standard of living—may be higher, particularly in rural areas. Therefore, employers should consider these factors when determining compensation packages to ensure fair and adequate remuneration for all employees.

Employers in Costa Rica must navigate a range of payroll and employment tax obligations, including income tax withholding, social security contributions, and labor risk insurance. These taxes are calculated based on progressive income tax rates and specific contribution percentages, with deadlines varying by tax type. Additionally, mandatory benefits such as the 13th-month bonus (Aguinaldo) and overtime compensation must be accounted for. Failure to comply with these requirements can result in significant penalties and strained employee relations. Utilizing payroll management software can help employers streamline payroll processes, consolidate data, and ensure compliance with Costa Rican tax laws and regulations.

In Costa Rica, work permits and visas are crucial for employers hiring foreign workers or relocating international employees. The process involves meeting specific eligibility criteria, submitting applications, and ensuring compliance with immigration and labor laws. Key visa types include the Temporary Work Visa, Professional Visa, Investor Visa, Rentista Visa, and Digital Nomad Visa. Each category is tailored to different employment or residency situations, such as short-term employment, specialized professions, business investments, freelance work, or remote work. Employers must adhere to Costa Rican labor regulations, conduct labor market tests when necessary, and prepare documentation to facilitate a smooth hiring process.

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.

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.

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In Costa Rica, employers are legally required to provide several mandatory benefits to employees, including contributions to the national social security system (Caja Costarricense de Seguro Social, or CCSS), which covers healthcare, pensions, disability, and maternity benefits; labor risk insurance for work-related injuries; overtime pay at 150% of the regular wage for hours exceeding the standard 48-hour workweek; paid leave for statutory holidays; four months of maternity leave at full pay, with costs shared between employers and social security; sick leave with shared cost coverage; a minimum of two weeks of paid annual vacation after 50 weeks of continuous service; and a 13th-month salary, known as "Aguinaldo," paid in December.

To attract and retain top talent, many employers also offer supplemental benefits such as private health insurance, voluntary pension plans, life insurance, meal vouchers or transportation stipends, tuition reimbursement, work-from-home allowances, additional holiday bonuses, and flexible working hours. It's crucial for employers to comply with these mandatory benefits to avoid legal penalties and to consider supplemental benefits to remain competitive in the job market.

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