Guide to employment, payroll and benefits in

Costa Rica

Rivermate offers complete payroll, benefits and compliance services for

Costa Rica

01. Overview

Last updated: 

August 19, 2021

Currency
Costa Rican Colon
Capital
San Jose
Ease of doing business
69.2
Language
Spanish
Population
5094118
GDP growth
3.28%

02. Grow your team in

Costa Rica

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Costa Rica

, particularly if you don't have established local relationships. You can hire employees in

Costa Rica

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Costa Rica, formally the Republic of Costa Rica, is a Central American country bordered to the north by Nicaragua, to the northeast by the Caribbean Sea, to the southeast by Panama, to the southwest by the Pacific Ocean, and to the south of Cocos Island by Ecuador. In a land area of 51,060 square kilometers, it has a population of about 5 million people. San José, the capital and largest city, has a population of 333,980 inhabitants, with a population of about 2 million in the surrounding metropolitan area. The sovereign state is a unitary presidential parliamentary republic. It is recognised for its long-standing and stable democracy, as well as its highly educated and English-speaking workforce. In comparison to the global average of 4.4%, the country spends approximately 6.9% of its budget on education. Its economy has diversified to include sectors such as banking, business services for multinational firms, pharmaceuticals, and ecotourism, which were once heavily reliant on agriculture. Many foreign manufacturing and service companies operate in Costa Rica's Free Trade Zones, where they can take advantage of investment and tax incentives. Before coming under Spanish rule in the 16th century, Costa Rica was sparsely populated by indigenous peoples. It remained a colony of the empire until 1847, when it gained independence as part of the First Mexican Empire, then joined the Federal Republic of Central America, from which it officially declared independence in 1847. Following a brief civil war in 1948, Costa Rica disbanded its army permanently in 1949, becoming one of only a few sovereign nations without one. The country has consistently performed well in the Human Development Index, ranking 62nd in the world and fifth in Latin America as of 2020. The United Nations Development Programme has also cited it as having a far higher degree of human development than other countries with similar income levels, as well as a better record on human development and inequality than the region's median. In comparisons of the state of democracy, press freedom, and subjective satisfaction, it also performs well. According to the Press Freedom Index, it has the 7th freest press in the world, is the 37th most democratic country in the world, and is the 12th happiest country in the World Happiness Report.

04. Public holidays

05. Types of leave

Paid time off

After 50 weeks of continuous work, all workers are entitled to two weeks of leave (12 days) and two days of rest.

Public holidays

Costa Rica recognizes 11 public holidays.

Sick days

For the first three days of maternity leave, the boss and social security must each pay the person half of their wages. The employee receives 60% of their wages from the 4th day forward, and the contractor is no longer obliged to compensate.

Maternity leave

Employees who are pregnant are entitled to four months of paid maternity leave, one month of prenatal leave, and three months of postpartum leave. The boss is responsible for half of the fees, while the CCSS is responsible for the other half (Costa Rican Social Security Fund).

Paternity leave

Employees in the private sector are not entitled to any compensation under paternity leave.

Parental leave

Employees in the private sector are not entitled to any compensation under parental leave.

Other leave

06. Employment termination

Termination process

To dismiss an employee for cause in Costa Rica, the cause must be one of the grounds specified in Article 81 of the Labor Code. The termination must be adequately documented, since the employer bears the burden of establishing that the termination was justified. Employers are only responsible for paying salaries, proportionate vacation time, and the Christmas Bonus. Severance pay is payable to employees who are dismissed or laid off without reason. Severance pay is provided on the final day of work. If an employer dismisses an employee without cause, the employee is entitled to severance pay, locally known to as "Prestaciones Laborales."

Notice period

The legislation requires that a 30 day notice of impending termination be given. The employee is entitled to 30 days' pay if no advance warning is given. Regular pay continues for 30 days if the required number of days' notice is given, albeit the employee is entitled to one paid day each week to look for job.

Severance pay

When an employer dismisses an employee without cause or when an employee resigns for legitimate reason, the employee is entitled to severance pay. If an employee has worked for the company for more than three months but less than six months, he or she is entitled to seven days' salary. Employees who have worked between six and twelve months are entitled to fourteen days' salary.


If an employee has more than one year of service with the company, the following schedule applies for each year of service. A year of service will be worth 19.50 days in compensation. Every two to three years of service will be paid with twenty days. For four years of service, 21 days will be compensated. For five years of service, 21.24 days will be paid. For six years of service, 21.50 days will be compensated. Seven years of service will entitle the employee to 22 days of pay.

Probation period

The Costa Rican Labor Code has a specific provision that covers “Domestic Employees”. It provides a 30 day probationary period where either party may terminate the relationship without and severance responsibility. After the 30 day period the termination provision discussed above apply as well.

07. Working hours

General

The maximum number of working hours per day in Costa Rica varies according to the type of workday. Normal Working Days (Jornadas Ordinarias Normales) and Special Working Days (Jornadas Especiales o de Excepción) exist in Costa Rica. Both types of workdays can be classified as dayshifts or nightshifts. The maximum number of hours that can be worked in a week is 48.


Normal working hours are between 5 a.m. and 7 p.m. during the day. Nighttime jobs are those that occur between the hours of 7 p.m. and 5 a.m. Employees working nights may not work more than 36 hours per week. The maximum number of hours permitted per week for mixed shifts of day and night work is 42.


Saturdays are considered Special Working Days. Special Working Days are applicable to a variety of occupations, including domestic servants, who can work up to 12 hours per day.

Overtime

Overtime is compensated at time and a half, or the hourly wage plus 50%. Employers are permitted to require no more than four hours of overtime per day, for a total of 12 working hours.

08. Minimum wage

General

Costa Rica's minimum wage is determined by the job and skill level of an employee. For instance, a house cleaner earns approximately 205,047 colones per month in 2021, while those with a licentiate degree earn at least 682,607 colones per month.


Costa Rican compensation laws require employees to receive two bonuses per year: a Christmas bonus and an Aguinaldo bonus. The Christmas bonus must be paid between December 1 and December 20 and is equal to one month's wages. Additionally, the Aguinaldo is equivalent to one month's wages and is paid in two installments, one in June and another in December.

09. Employee benefits

General

Costa Rica has some of the greatest healthcare in Latin America. The health system consists of Medical Treatment (disease and pregnancy) and Compulsory Pension (disability, old age and death).

In Costa Rica, private insurance or a health plan are available. Additionally, private insurance policies are offered through the state-owned insurance business (INS). Dental work, optometry, well-visits, and yearly check-ups are all covered under private policies. Prescription medicines, some medical examinations, sick visits, and hospitalization are reimbursed at 80% of the cost. Costs associated with the surgeon and aesthetician are fully covered. Private medical insurance now costs between $60 and $130 per month per individual, depending on gender, age, and other factors.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Costa Rica

to hire a team takes time, money, and effort. The labor law in

Costa Rica

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Costa Rica

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Costa Rica

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Costa Rica

via our Employer of Record / PEO solution.

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