Employer of Record in Costa Rica

Costa Rica holds a unique place in global trade and development due to its geographical location. Situated on the land bridge between North and South America, it is flanked by the Caribbean Sea and the Pacific Ocean. This gives it access to major Atlantic and Pacific trade routes, allowing it to act as a transit point for trade, investment and logistics across the Americas, Asia and Europe.

Multinational companies in the US, Canada, Europe and Asia-Pacific have established business hubs and regional operations in Costa Rica. The advantages for these businesses are the English-speaking workforce, strong professional talent, lower labor costs and time-zone compatibility.

Costa Rica’s most significant export globally is medical device manufacturing and biomedical engineering. Its life sciences and manufacturing ecosystem is heavily anchored in investments from the US and Europe.

Many of the professionals in Costa Rica already have experience with international reporting standards, global compliance, distributed teams and US, European and Asian management practices. This reduces onboarding and training requirements for foreign employers.

Costa Rica has stable legal, financial and employment frameworks. Companies looking to employ Costa Rican employees will need to set up a local legal entity. This may not be the ideal first step if you’re testing the market, want to employ only one worker, or want to support regional operations without establishing a local business. In these situations, an Employer of Record provides a flexible pathway to access local talent and scale operations.

How an Employer of Record (EOR) Works in Costa Rica

Using an EOR in Costa Rica simplifies hiring. Here is how it works:

1. You Find the Talent. You recruit and select the best Costa Rican talent for your company.
2. The EOR Hires Your Candidate. The EOR legally hires the employee on your behalf through a local, compliant employment contract.
3. The EOR Manages HR. They handle all administrative tasks. This includes global payroll, taxes, social security contributions, and benefits.
4. You Manage Your Employee. You manage your employee’s day-to-day work and responsibilities. The EOR is the legal employer, but you direct their work.
5. Your Team Grows. You can continue hiring new team members in Costa Rica through the EOR and have local employment obligations handled by experts.

Why use an Employer of Record in Costa Rica

Using an EOR in Costa Rica makes expanding your team simple and efficient. You avoid the time and expense of establishing a legal entity in the country. This allows you to enter the market and hire talent quickly.

Here are some other key benefits:

• Faster Market Entry. Hire employees in days, not months.
• Compliance Assurance. EORs are experts in local labor laws and regulations. They handle the compliance risks and help you navigate Costa Rica’s employment landscape, including social security contributions to the Costa Rican Social Security Fund (CCSS). You can find more information on their official site: https://www.ccss.sa.cr/.
• Simplified Payroll. The EOR manages all aspects of payroll, including withholdings and tax filings.
• Competitive Benefits. Offer attractive and compliant benefits packages to your employees.

Costa Rica is often seen as a low-cost nearshore or regional destination, but employers on the ground quickly discover that the strongest talent is neither inexpensive nor easy to attract. The country has a mature multinational ecosystem, and this means highly experienced professionals.

Candidates in Costa Rica typically have between 5 and 15 years of work experience in key sectors such as medical technology, global business operations, and shared service centers. Attracting this level of talent requires employers to understand the most effective compensation structures and the benefits that appeal to top candidates.

Well-qualified candidates often compare compensation, career growth, and remote work policies before making a final decision. If employment contracts do not clearly and accurately reflect these key elements, hiring can be delayed.

Costa Rica’s employment framework is well-developed, predictable and employee-protective rather than overly restrictive. The environment feels easier to navigate than in some other Latin American countries, making Costa Rica a popular choice for foreign employers.

Employment contracts & must-have clauses

When you hire an employee in Costa Rica, a written contract is the best way to go. While verbal agreements are recognized, a written document provides clarity for both you and your employee. There are two main types of employment contracts:

• Indefinite-term contracts: These are the most common and are used for permanent positions without a set end date.
• Fixed-term contracts: You can use these for specific projects or temporary work. They have a defined start and end date and are typically limited to one year.

Your employment contracts must include specific information to be compliant. Here are the essential clauses to include:

• Full names and details of both the employer and employee.
• A clear description of the employee's role and responsibilities.
• The start date of employment.
• The duration of the contract.
• Workplace location.
• Working hours.
• Salary and how it will be paid.
• Signatures of both parties.

Probation periods

In Costa Rica, you can include a probationary period in your employment contracts. This gives you time to assess a new employee's suitability for the role.

The standard probation period is three months. During this time, either you or the employee can end the employment relationship without needing to provide a reason or severance pay. It is important to note that probation periods are not a legal requirement but a common practice. If you choose not to have a probation period, the employee has full labor protections from their first day.

Working hours & overtime

The standard workweek in Costa Rica depends on the shift:

Shift Type	Daily Hours	Weekly Hours
Day Shift	Up to 8 hours	Up to 48 hours
Night Shift	Up to 6 hours	Up to 36 hours
Mixed Shift	Up to 7 hours	Up to 42 hours

Any work done beyond these hours is considered overtime. You must pay employees 1.5 times their regular hourly rate for overtime work. Overtime is limited to four hours per day.

Public & regional holidays

Your employees in Costa Rica are entitled to paid time off for public holidays. Here is a list of the national holidays for 2026:

Date	Holiday
January 1	New Year's Day
April 2	Maundy Thursday
April 3	Good Friday
April 11	Juan Santamaría Day
May 1	Labor Day
July 25	Annexation of Guanacaste Day
August 2	Our Lady of the Angels
August 15	Mother's Day
September 15	Independence Day
December 1	Army Abolition Day
December 25	Christmas Day

Hiring contractors in Costa Rica

Most established Costa Rican businesses have a traditional view of employment and prefer to hire workers on permanent contracts. This is because the labor law is well developed, and worker misclassification is taken seriously.

However, since the Costa Rican government has invested heavily in knowledge-based industries, demand for contractors is growing, especially in the technology and shared services sectors. Employers who opt for contractors should understand the misclassification risks:

• Fines from the Ministry of Labor.
• Back payments for social security contributions, with penalties.
• Responsibility for retroactive payment of employee benefits like vacation pay and bonuses.

Many companies prefer to partner with an Employer of Record to avoid misclassification risks. They hire technology, marketing, consulting, administrative, technical and engineering professionals through the EOR, who ensures adherence to local labor regulations.

The labor costs in Costa Rica are lower than in the US, Canada or Western Europe, but higher than in some other Latin American countries. Unlike some outsourcing destinations, where wages are influenced by geography, Costa Rica’s salaries are shaped by skill level. In practice, two candidates with similar qualifications may have very different salary expectations. For benchmarking, local HR experts provide valuable insight into compensation trends.

The most common mistake for first-time employers in Costa Rica is budgeting only for gross salary. The country requires employer contributions to social security and other statutory programs, and employees are entitled to mandatory benefits. The true cost of employment is therefore higher than an employee’s monthly wage.

Payroll cycles & wage structure

In Costa Rica, you typically pay employees monthly. You must ensure payments are made by the last working day of the month. A key feature of Costa Rican compensation is the "Aguinaldo," a mandatory 13th-month salary. You must pay this bonus to employees by December 20th each year.

Overtime & minimums

The standard workweek in Costa Rica is 48 hours. Any work beyond this is overtime. You must pay employees 150% of their regular wage for overtime hours. Work performed on public holidays is paid at double the regular rate.

The government sets minimum wages, which vary by skill level and profession. These rates are updated periodically to reflect the cost of living, so it's important to stay current with the latest requirements.

Employer taxes and contributions

As an employer, you are responsible for several contributions to social security and other funds. These are calculated as a percentage of the employee's gross salary.

Contribution	Percentage
Healthcare & Maternity (SEM)	9.25%
Basic Pension Scheme (IBM)	5.42%
Banco Popular Employer Fee	0.25%
Family Allowances	5.00%
Social Aid (IMAS)	0.50%
Training Fund (INA)	1.50%
Contribution from Banco Popular	0.25%
Labor Capitalization Fund	1.50%
Complementary Pension Fund	2.00%
National Insurance Institute (INS)	1.00%
Total	26.67%

Employee taxes and deductions

Employees also contribute to social security from their gross salary. You must withhold these amounts and remit them to the appropriate authorities.

Contribution	Percentage
Healthcare & Maternity (SEM)	5.50%
Basic Pension Scheme (IBM)	4.17%
Banco Popular Contribution	0.50%
Total	10.17%

In Costa Rica, you'll find a strong system of employee benefits and leave entitlements. The labor laws ensure that employees have a good work-life balance and are protected. This includes paid time off for vacations, illness, and family needs. They are also entitled to a number of public holidays each year. Beyond the basics, many employers offer extra benefits to attract and keep the best talent.

Statutory leave

Costa Rican law provides several types of paid leave.

• Annual Leave After 50 weeks of continuous work, you get two full weeks of paid vacation. If you have worked for less than 50 weeks, you get one day of paid leave for each month you have worked.
• Sick Leave If you get sick, you are entitled to paid time off. For the first three days of your illness, your employer and the social security system each pay 50% of your salary. From the fourth day on, social security pays 60% of your salary.
• Maternity Leave Pregnant employees get four months of paid maternity leave. This is usually one month before the birth and three months after. Your employer and social security split the cost of your full salary during this time.
• Paternity Leave Fathers are entitled to eight paid days of paternity leave. This is taken as two days per week for the first four weeks after the child's birth. The cost is shared between the employer and social security.
• Adoption Leave A new law gives adoptive parents three months of paid leave, which can be shared between them.

Public holidays & regional holidays

Costa Rica has a number of public holidays throughout the year.

Date	Holiday
January 1	New Year's Day
April 11	Juan Santamaría Day
April 17	Maundy Thursday
April 18	Good Friday
May 1	Labour Day
July 25	Guanacaste Day
August 2	Lady of the Angels Day
August 15	Assumption Day and Mother's Day
September 15	Independence Day
December 1	Army Abolition Day
December 25	Christmas Day

Typical supplemental benefits

Many companies in Costa Rica offer more than just the legally required benefits.

Statutory Benefits	Non-Statutory Benefits
Health insurance (via social security)	Supplemental health insurance
Accident insurance	Group life assurance
Pension contributions	Group dental insurance
Paid annual leave	Meal vouchers
Paid sick leave	Transportation stipends
Paid maternity and paternity leave	Tuition reimbursement
13th-month salary (Aguinaldo)	Work-from-home allowances
Public holidays	Holiday bonuses

How an EOR can help with setting up benefits

Setting up employee benefits in a new country can be complex. An Employer of Record (EOR) simplifies this process for you.

An EOR already has a legal entity in Costa Rica. This means you don't have to set one up yourself. They handle all the administrative tasks related to hiring and paying your employees. This includes managing payroll, taxes, and social security contributions.

An EOR ensures you comply with all local labor laws. They understand the mandatory benefits and can help you create a competitive benefits package. This helps you attract and retain top talent in the Costa Rican market. By handling the legal and administrative burdens, an EOR lets you focus on your business goals.

In Costa Rica, terminations are regulated by the Labor Code. According to the Code, an employee may be terminated provided that a process is followed and the necessary steps are taken to provide a notice period and severance pay (if applicable). The Código de Trabajo (Article 81) details the legal grounds for dismissing an employee and should be consulted before proceeding with a dismissal.

Notice periods

When you terminate an employee without just cause, you need to provide advance notice. The length of this notice depends on how long the employee has worked for your company. You can also pay the employee their regular salary instead of having them work during the notice period.

Here are the required notice periods:

Length of Service	Notice Period
3 to 6 months	1 week
6 months to 1 year	2 weeks
More than 1 year	1 month

For employees who have worked less than three months, no notice period is required.

Severance pay

In Costa Rica, severance pay, known as "cesantía," is required when you terminate an employee without just cause. This payment recognizes the employee's service to your company. The amount is based on the employee's average salary over the last six months, or their most recent monthly salary if it was higher.

The amount of severance pay also depends on the employee's length of service:

• 3 to 6 months of service: 7 days of pay.
• 6 to 12 months of service: 14 days of pay.
• 1 to 2 years of service: Varies from 19.5 to 20 days of pay per year worked.
• 7 to 9 years of service: 22 days of pay for each year of service.

In addition to severance, final payments must include unused vacation time and a proportional part of the Christmas bonus, called "aguinaldo."

How Rivermate handles compliant exits

At Rivermate, we ensure that every termination process in Costa Rica is handled correctly and legally. We guide you through the necessary steps to avoid any legal issues.

Our process includes:

• Clear documentation: We help you prepare a detailed written termination letter. This letter clearly states the reasons for termination and the effective date.
• Final payment calculation: We calculate all final payments, including outstanding salary, unused vacation, the proportional Christmas bonus, and any required severance pay.
• Legal compliance: We make sure you follow all the rules in Costa Rica's Labor Code, whether the termination is with or without just cause.
• Step-by-step guidance: We walk you through the entire process, from the initial decision to the final payment, to ensure a respectful and compliant offboarding experience.

Hiring foreign nationals in Costa Rica is permitted; however, local employees enjoy significant protections that obligate employers to justify not selecting a qualified local candidate. A temporary residence permit with work authorisation must be obtained before an employee can start working.

Costa Rica’s digital nomad program allows certain workers to extend their tourist visa from 90 days to a full year and enjoy tax benefits while working in the country.

Employment visas & sponsorship realities

An Employer of Record (EOR) can sponsor work permits for foreign employees, but there are some practical things to keep in mind.

What an EOR can sponsor:

• Temporary Work Visas: This is the most common route for sponsoring full-time foreign talent. An EOR with a registered legal entity in Costa Rica can sponsor this visa.
• "Special Category" Permits: Work permits in Costa Rica often fall under a "Special Category" which includes professional and technical workers.

What an EOR cannot sponsor:

• Independent Contractors: An EOR cannot sponsor visas for independent contractors or freelancers. These individuals must use other routes, like the Digital Nomad Visa or Rentista Visa.
• Circumventing Local Labor Laws: The Costa Rican government protects its local workforce. A key step in the sponsorship process is a labor market test, where the employer must prove that a qualified Costa Rican could not be found for the job.

Practical Routes for Employment:

Visa Type	Best For	Key Requirements
Temporary Work Visa	Full-time employees of a Costa Rican company	Sponsorship from a locally registered employer (like an EOR).
Digital Nomad Visa	Remote workers for a foreign company	Proof of stable monthly income and health insurance.
Rentista Visa	Freelancers and self-employed individuals	Proof of steady income.
Investor Visa	Entrepreneurs investing in the local economy	A minimum investment in Costa Rica.

Business travel compliance

For short-term business trips, you may not need a full work permit, but you must comply with Costa Rica's entry requirements.

Short-Term Visits:

• Many nationalities, including U.S. citizens, can enter Costa Rica without a visa for business or tourism for up to 90 or 120 days.
• You will need a valid passport and a return or outbound ticket.

Permitted Activities on a Business Visit:

• Attending meetings and conferences
• Market research
• Negotiating contracts

You cannot perform work that would otherwise be done by a Costa Rican employee. If your activities go beyond these limited business functions, you will need to secure the proper work authorization.