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Costa Rica

Discover everything you need to know about Costa Rica

Hire in Costa Rica at a glance

Here ares some key facts regarding hiring in Costa Rica

San Jose
Costa Rican Colon
GDP growth
GDP world share
Payroll frequency
Working hours
48 hours/week

Overview in Costa Rica

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Costa Rica, a small Central American country, is known for its rich biodiversity, encompassing 5% of the world's species. It has a history of indigenous civilizations, Spanish colonization, and a notable transition to independence in 1821. Unique for abolishing its military in 1948, Costa Rica focuses on social welfare and environmental conservation, earning it the nickname "Switzerland of Central America."

The country excels in sustainable tourism and has a robust social safety net, contributing to its high rankings in happiness and human development indices. However, challenges like income inequality persist. The workforce is young and increasingly educated, with a high literacy rate and proficiency in multiple languages, benefiting sectors like tourism, technology, and customer service.

Costa Rica's economy is service-oriented, with significant contributions from tourism and technology. Agriculture remains vital, with key exports including coffee and bananas. The manufacturing sector, especially in medical devices, is also prominent. The workplace culture emphasizes personal connections and work-life balance, reflecting the national "Pura Vida" philosophy.

Emerging sectors with growth potential include renewable energy, creative industries, and biotechnology, supported by a highly-skilled workforce and a commitment to sustainability.

Taxes in Costa Rica

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In Costa Rica, employers are required to contribute significantly to the Caja Costarricense de Seguro Social (CCSS), which manages public healthcare and pensions. The employer contribution rate is 26.67% of an employee's gross salary, divided among healthcare, maternity, disability, old age, death benefits, and occupational hazard insurance. Additional mandatory contributions include 0.5% to Banco Popular for social development and 1.5% to the Instituto Nacional de Aprendizaje for vocational training.

Employers must register with the CCSS, accurately calculate and remit contributions, and maintain detailed payroll records. They also withhold income tax and remit it to tax authorities, with progressive tax rates applicable based on income levels.

Employees contribute 9.5% of their gross salary to the CCSS, split between healthcare and maternity benefits (5.5%) and disability, old age, and death benefits (4%). They may also authorize deductions for various personal expenses.

Costa Rica's VAT system imposes a standard rate of 13% on most services, with certain services eligible for a reduced 4% rate or a 0% rate if exported. Businesses must register for VAT if they meet specific thresholds, charge VAT on invoices, and file monthly returns.

The country offers various tax incentives to attract foreign investment, particularly in Free Trade Zones, where companies can enjoy exemptions from multiple taxes. Additional incentives are available for investments in specific regions outside the Greater Metropolitan Area and for activities like research and development or environmentally sustainable practices. Businesses must meet certain criteria to qualify for these incentives and apply through the Costa Rican Investment Promotion Agency (CINDE).

Leave in Costa Rica

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In Costa Rica, employees are entitled to various types of leave as outlined in the Labor Code. Key points include:

  • Annual Leave: Employees qualify for two weeks (12 working days) of paid annual leave after 50 weeks of continuous service with the same employer. This leave accrues over time and scheduling should be mutually agreed upon by both employer and employee to suit both parties' needs.

  • Sick Leave: While not explicitly mandated by the Labor Code, sick leave is generally available with a valid medical certificate, often detailed in collective bargaining agreements or company policies.

  • Maternity Leave: Female employees are entitled to four months of paid maternity leave, typically split as one month before and three months after childbirth, with payments often covered by the social security system.

  • Other Leave: The Labor Code allows for bereavement and study leave under certain conditions, and employees may also be entitled to leave for civic duties.

Additionally, Costa Rica observes several secular and religious holidays, including New Year's Day, Juan Santamaría Day, Labor Day, and Christmas Day, among others. Employers must keep accurate records of all types of leave. Collective agreements may provide more generous leave entitlements than the minimum standards set by the Labor Code.

Benefits in Costa Rica

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Costa Rica's social security system, managed by the Caja Costarricense de Seguro Social (CCSS), provides a range of mandatory employee benefits funded by both employers and employees. Key benefits include:

  • Social Security: Covers health insurance, disability insurance, and death and survivors' benefits.
  • Paid Leave: Includes annual vacation, sick leave, maternity leave, and paternal leave.
  • Thirteenth Salary (Aguinaldo): A mandatory year-end bonus based on the employee's annual earnings.

Additionally, employers may offer optional benefits such as:

  • Supplemental Health Insurance: For broader coverage beyond the public system.
  • Voluntary Pension Plans: To enhance retirement savings.
  • Work-from-Home Allowances: To support remote work setups.
  • Meal Vouchers and Transportation Stipends: To assist with daily expenses.
  • Tuition Reimbursement: For professional development.
  • Holiday Bonuses and Cell Phone Bills: For added employee benefits.
  • Life Insurance: For additional financial security.

The CCSS mandates health insurance enrollment for all employees, providing access to a network of public hospitals and clinics. Employers contribute significantly to this insurance, ensuring comprehensive healthcare coverage. Employees can also opt for private health insurance for more extensive services.

Costa Rica's retirement system includes the public pension system (IVM) and a mandatory savings program (ROP), supplemented by voluntary personal pension plans. These systems aim to provide financial security in retirement, with benefits calculated based on salary and contribution periods.

Workers Rights in Costa Rica

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Summary of Costa Rican Labor Code and Employment Regulations

Termination of Employment:

  • With Cause: Includes employee misconduct (e.g., repeated absences, insubordination, violence), inefficiency, and external factors like economic needs or restructuring. Employers must prove the cause.
  • Without Cause: Requires adherence to notice periods and severance pay, which depends on the length of service.

Discrimination Protections:

  • Discrimination based on gender, ethnicity, disability, age, religion, health status, political opinion, and marital/family status is illegal.
  • Victims can seek redress through Labor Courts, the Constitutional Court, or the Public Defender's Office.

Employer Responsibilities:

  • Implement anti-discrimination policies and training.
  • Maintain documentation and handle discrimination complaints promptly.

Working Hours and Rest:

  • Maximum of 8 hours per day for daytime and 6 for nighttime, with overtime paid at 150%.
  • Employees are entitled to rest breaks and at least one day off per week.

Ergonomics and Safety:

  • Employers must ensure ergonomic workplace setups and conduct risk assessments.
  • Obligations include providing safety training and forming Occupational Health Committees.

Employee Rights:

  • Right to a safe workplace, refuse dangerous work, and participate in health and safety management.
  • Entitled to information, training, and possibly medical surveillance for specific risks.


  • The Ministry of Labor and Social Security, Costa Rican Social Security Fund, and Occupational Health Council enforce regulations and provide oversight.

This comprehensive framework aims to ensure fair treatment, safety, and health in the workplace, reflecting Costa Rica's commitment to protecting workers' rights.

Agreements in Costa Rica

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Costa Rica offers various types of employment agreements, each tailored to different work circumstances, governed by the Costa Rican Labor Code. The main types include:

  • Regular Employment Contract: This is an indefinite contract without a predetermined end date, offering long-term employment unless terminated by just cause.
  • Temporary Employment Contract: Used for specific durations not exceeding one year, these automatically convert to regular contracts if the employment extends beyond the agreed period.
  • Verbal Employment Contract: Recognized under certain conditions such as short-term agricultural work, these contracts provide less security and are recommended to be supplemented by written agreements for clarity.

Additional Considerations:

  • Collective Bargaining Agreements may override individual contract provisions in some sectors.
  • Employment contracts should detail essential information such as personal identification, job responsibilities, salary, benefits, and termination conditions.
  • Probationary Periods are commonly set at three months, allowing termination without notice or severance during this time, though not legally defined.
  • Confidentiality and Non-Compete Clauses are crucial for protecting business interests, with specific legal requirements for enforceability, including reasonable compensation and scope.

Understanding these elements is crucial for both employers and employees to ensure compliance and protect their respective rights.

Remote Work in Costa Rica

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Costa Rica's "Law to Regulate Telework," enacted in 2022, establishes a legal framework for remote work, ensuring that remote workers have the same rights as onsite employees, including minimum wage, vacation time, and social security benefits. The law mandates clear employment contract terms for telework, covering work hours, communication, performance evaluation, and data security. Employers are responsible for training, occupational health, safety of remote workers, and handling tax and social security deductions.

The country boasts a robust technological infrastructure, with widespread high-speed internet in urban areas and improving access in rural regions. Employers are tasked with maintaining effective communication, using collaboration tools, and implementing strong data security measures to protect sensitive information. They may also voluntarily cover equipment costs or internet expenses.

Flexitime and job sharing are not explicitly covered by Costa Rican labor laws but are permissible under certain labor code articles allowing negotiated work schedules. Employers choosing to implement these must set clear guidelines and expectations.

The law also emphasizes data protection, aligning with principles similar to the EU's GDPR, requiring employers to ensure data security, transparency, and employee rights concerning their personal data. Employers must collect minimal necessary data, ensure encryption, implement strong access controls, maintain data backups, and have a plan for data breach incidents.

Working Hours in Costa Rica

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  • Working Hours and Overtime in Costa Rica: The Costa Rican Labor Code sets a standard workweek of 48 hours and a daily limit of 8 hours. Exceptions exist for managerial roles, which can extend up to 72 hours weekly. Overtime is permitted up to 4 extra hours daily, making a total of 12 hours including overtime. Overtime pay is 1.5 times the regular rate, and double on weekends and public holidays.

  • Employee Rights and Enforcement: Employees must consent to overtime, and employers cannot modify contracts to avoid overtime pay. The law mandates a minimum 30-minute rest period during the workday, counted as working time, and one full rest day per week, usually Sunday.

  • Night Shifts and Weekend Work: Night shifts are limited to 6 hours daily and 36 hours weekly, occurring between 7:00 PM and 5:00 AM. Weekend work requires employee consent and pays double the regular hourly wage.

These regulations aim to protect employee well-being and ensure fair compensation, although enforcement can be inconsistent, especially in the informal sector.

Salary in Costa Rica

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Understanding competitive salaries in Costa Rica involves considering various factors that influence compensation levels, ensuring fair pay for employees and helping businesses attract and retain talent. Here are the key elements:

  • Cost of Living: Costa Rica's lower cost of living compared to developed nations results in lower average salaries but higher purchasing power.

  • Industry and Occupation: Salaries vary across industries, with tech generally offering higher wages than tourism or hospitality. Specialized roles typically earn more than entry-level positions.

  • Experience and Education: More experienced and highly educated employees command higher salaries.

  • Location: Urban areas like San José offer higher wages than rural regions.

  • Additional Factors: Company size, foreign language skills, and specific skill sets also influence salary levels. Costa Rica's tiered minimum wage system, outlined in the Labour Code, ensures minimum standards for both skilled and unskilled workers, with periodic adjustments for inflation and economic growth.

  • Mandatory Bonuses: The 13th Month Salary, or Aguinaldo, is a mandatory bonus providing an extra month's pay each December.

  • Optional Allowances and Benefits: Employers may offer supplemental healthcare, meal and transportation vouchers, tuition reimbursement, voluntary pension plans, work-from-home stipends, and cellphone bill payments.

  • Payroll Cycles: Salaries are typically paid monthly, with mandatory social security contributions withheld by employers.

  • Overtime and Holiday Pay: Overtime is paid at 1.5 times the regular wage, and working on national holidays earns double the regular wage.

These components help define the framework for competitive and fair compensation in Costa Rica, benefiting both employees and employers.

Termination in Costa Rica

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  • Notice Periods: Costa Rica's labor laws require employers to provide notice before terminating an employee, based on the length of service. Employees who have worked for 3-6 months must receive one week's notice, those with 6 months to a year require two weeks, and those over a year need one month's notice. There is no notice requirement for employees with less than three months of service.

  • Options During Notice Period: Employers may either allow the employee to work through the notice period or pay them a lump sum for the equivalent period. Employees can choose to work during the notice period or resign with notice, retaining their rights to wages and benefits until their last working day.

  • Unfair Dismissal: If an employee is terminated without just cause and without the required notice, they may be eligible for compensation for the notice period not provided.

  • Severance Pay: Employees terminated without a valid cause are entitled to severance pay, calculated based on their average salary over the last six months and their length of service. Specific severance amounts are defined for different lengths of service.

  • Additional Benefits: Terminated employees are also entitled to unpaid vacation, unused sick days, and a proportional amount of their annual 13th-month bonus.

  • Exceptions to Severance: Severance is not required if an employee resigns, if the employment contract expires naturally, or if termination is due to serious misconduct or other valid causes outlined in the Labor Code.

  • Termination Procedures: Employers must follow specific procedures when terminating employment, including providing a written termination notice. For terminations without employer liability, a detailed notice of the grounds for termination must be provided, and the employee may request a due process hearing.

  • Documentation: Employers should meticulously document any disciplinary actions or performance issues to support a termination without liability.

Freelancing in Costa Rica

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In Costa Rica, the distinction between employees and independent contractors is clearly defined by labor law, impacting control, personal service, and payment structure. Employees are under the employer's control, provide personal service, and receive regular wages with tax deductions. In contrast, independent contractors maintain autonomy, can delegate tasks, and handle their own taxes.

Contractual agreements for independent contractors should detail the scope of work, payment terms, confidentiality, and termination conditions. Effective negotiation practices are crucial, including setting competitive rates and clear project scopes to prevent scope creep.

Independent contracting is prevalent in IT, creative industries, tourism, and professional services. The legal framework supports freelancers, particularly in intellectual property (IP) rights, where the default ownership lies with the creator unless otherwise stated in a contract.

Freelancers must manage their tax obligations, including income tax and VAT if applicable, and maintain accurate financial records. While insurance isn't mandatory, options like general liability, professional indemnity, and health insurance provide security.

Overall, understanding these distinctions and legal requirements is essential for operating successfully as an independent contractor in Costa Rica.

Health & Safety in Costa Rica

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Costa Rica has a robust legal framework to ensure worker health and safety, anchored by the Constitution and detailed in the Labor Code and General Regulations on Occupational Safety and Health. The Ministry of Labor and Social Security (MTSS) oversees policy enforcement and inspections, while the Costa Rican Social Security Fund (CCSS) handles healthcare and disability benefits for work-related injuries and illnesses. Employers are required to maintain safe environments, assess risks, provide training, and report accidents. Workers have rights to hazard information, refuse unsafe work, and participate in safety measures. Enforcement includes fines, closures, and potential criminal charges for severe violations. The focus extends across various sectors with specific regulations for different hazards.

Dispute Resolution in Costa Rica

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Labor Courts in Costa Rica, part of the Judicial Branch, handle labor disputes, social security matters, and workers' rights violations through a structured process of claim filing, conciliation, trial, and appeals. The highest appeal level is the Labor Cassation Chamber of the Supreme Court.

Arbitration Panels in Costa Rica

Arbitration Panels offer an alternative dispute resolution mechanism, as permitted by the Labor Code, for cases that can be settled through compromise, excluding strictly legal matters. The arbitration process involves agreement, arbitrator selection, hearings, and awards.

Types of Audits and Inspections

Various audits and inspections are conducted in Costa Rica to ensure compliance with labor, tax, environmental, and other sector-specific regulations by respective governmental bodies. These include the Ministry of Labor and Social Security, the General Directorate of Taxation, and the Ministry of Environment and Energy.

Frequency and Importance of Audits and Inspections

Inspections vary in frequency based on factors like industry risk and company history. They are crucial for ensuring fair business practices, protecting public interests, maintaining government revenue, and avoiding penalties and reputational damage.

Consequences of Non-Compliance

Non-compliance can lead to severe penalties such as fines, business closure, criminal charges, and reputational damage. Costa Rica provides several reporting mechanisms for violations, including internal company channels, government agencies, the judicial system, and NGOs.

Whistleblower Protections

Costa Rica protects whistleblowers through Law No. 10437, which prohibits retaliation and ensures confidentiality, offering remedies for those affected by retaliation. Whistleblowers are encouraged to report in good faith and document their concerns.

International Labor Standards

Costa Rica adheres to international labor standards, having ratified all eight fundamental ILO conventions, which influence its labor laws and practices. The country actively works on aligning its legislation with these standards and addresses ongoing challenges in labor rights, particularly for informal and migrant workers, and public sector collective bargaining.

Cultural Considerations in Costa Rica

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In Costa Rica, effective communication and negotiation in business settings are influenced by cultural nuances such as indirect communication, formality, and the significance of non-verbal cues. Costa Ricans prefer to avoid direct conflict and value maintaining harmony, often using humor or subtle hints to convey criticism. Formality is observed in the workplace, with a preference for using titles and the formal pronoun "usted," though this does not necessarily indicate strict formality due to the friendly and warm office environment.

Non-verbal communication is also crucial, with importance placed on maintaining eye contact, respectful body language, and a calm tone of voice. Negotiations in Costa Rica lean towards building relationships and trust through extensive small talk before business discussions, and favor integrative negotiation strategies that aim for mutually beneficial outcomes.

Costa Rican businesses typically follow a hierarchical structure but with a collaborative approach, valuing input from all team members and fostering a strong sense of camaraderie. Leadership styles balance authority with mentorship and democratic participation.

Additionally, the Costa Rican work culture emphasizes a healthy work-life balance, with several statutory holidays and regional observances that can impact business operations. Understanding and respecting these cultural and business practices is key to successful interactions and negotiations in Costa Rica.

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