Hire in Costa Rica

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Last updated at July 07, 2022
A beautiful view of Costa Rica

Currency

Costa Rican Colón (CRC)

Capital

San José

Time Zone

GMT-3

Key Country Facts

Introduction

Costa Rica is generally regarded as having the most stable and democratic government among all the countries of Central America. A unitary presidential constitutional republic, the country has a fair judicial system and an independent electoral body. It also has one of the highest literacy rates in the Western Hemisphere (approximately 98%) and a solid educational system from the primary grades through the university level. Education is free and compulsory for all citizens of Costa Rica.

Area

Costa Rica covers an area of 51,000 square kilometers and is bordered by Nicaragua to the north, Panama to the southeast, the Pacific Ocean to the west and the Caribbean Sea to the east. The country hosts a total of 1,290 kilometers of coastline. Costa Rica is also known for its strong commitment to the environment and for protecting its numerous national parks.

Climate

Costa Rica has a tropical climate all year, along with numerous microclimates depending on elevation, rainfall and geography. The seasons are defined by how much rain falls and is split into two seasons: the dry summer season and the rainy winter season.

Culture

European immigration and customs have shaped Costa Rican history and influenced its character. German, Italian and British immigration in the 19th century left an impression on education, science and culture in Costa Rica. In the 1980s, immigrants and refugees arrived from neighboring nations.. The country has also become a mecca for retirees from the United States.

Religion

Approximately 75% of Costa Ricans are Roman Catholics, which is the official religion. However, the constitution of 1949 established freedom of religion. Approximately 13% of the population is Protestant and there are small communities of Quakers, Jews and Mennonites.

Official Language

The primary language spoken in Costa Rica is Spanish, featuring characteristics distinct to the country. An English-based Creole language is spoken by Afro-Caribbean immigrants and about 10.7% of Costa Rica’s adult population speaks English while 0.7% speaks French. Around 0.3% of the population speaks Portuguese or German as a second language.

Costa Rica HR at a Glance

Employment Law

Although the main employment law of Costa Rica is Costa Rica’s Labor Code, there are numerous other statutes and regulations regulating the employment relationship. These include the Opportunity Act for Persons with Disabilities, Equal Opportunity for Women Law and the Worker Protection Act governing employee pensions. 

In Costa Rica, the Labor Court will nearly always resolve any issue in favor of the employee. 

The Costa Rica Government has signed the Dominican Republic– Central America Free Trade Agreement (CAFTA-DR), which is based upon a three-step approach to improve working conditions in the country. In fact, Costa Rica’s working conditions are on part with those in North America and Europe.

The three-step approach includes ensuring effective enforcement of Costa Rica labor laws and close cooperation with the International Labor Organization to improve existing labor laws. The third pillar is developing local capacity, expertise and infrastructure to improve employees’ rights. The CAFTA-DR is a groundbreaking treaty that includes targeted training programs in the areas of child labor, public awareness of worker rights and labor inspection systems.

Employment Contract

Both the employer and the employee must sign an employment contract in Costa Rica. The contract is required to include specific information:

  • name, nationality, age, sex and marital status of the employee
  • addresses of the contracting parties
  • number and details of identity cards
  • precise descriptions in cases where the employee has a temporary residence
  • duration and nature of the employment contract, agreed remuneration and payment details
  • working hours and overtime agreements
  • workplace location
  • any other provisions in the contract (e.g. termination of services, notice period, etc.)
  • date and place the contract was signed

Contract Terms

If a written employment agreement does not exist, an employee may still be allowed to contend that an agreement was implied. The law allows for oral contracts, which afford the same rights and obligations.

Contracts can be set for a limited time or an unlimited time. In the case of limited time contracts, there is a specific time span and the contract ends once the work has been performed.

Contracts also vary by the type of working day, of which there are two in Costa Rica:

  • Normal Working Days (Jornadas Ordinarias Normales): This is defined as daytime working hours of eight to 10 hours per day, with a maximum weekly total of 48 hours. Normal Working Days for night hours can be up to six hours per day but no more than 36 hours per week.
  • Special Working Days (Jornadas Especiales o de Excepcion): This is intended for individuals who work on Saturdays. This category of contract also applies to several fields of employment where employees are required to work extended days.

Pre-Employment Checks

If requested by the employer, the worker must produce results of a medical examination to show that he or she does not have any permanent disability or an occupational, contagious or incurable disease. Medical examinations must be justified by objective and reasonable reasons, either due to the nature of the job or for the protection of the health of the employee. It is prohibited in Costa Rica to check for HIV or pregnancy.

Probation Period

Employers are allowed to place new employees on probation. However, this cannot be for more than three months. Probationary periods may not be extended.

Working Hours

The typical work schedule in Costa Rica is eight hours a day and five days a week for professional employees. For laborers, the work schedule is generally eight hours a day for Monday through Friday plus a half day on Saturday.

Employees can work up to 10 hours a day so long as the work being performed is not hazardous. The employee must not work more than 48 hours per week.

Overtime

Employees are entitled to special rates of overtime pay for time worked over the standard allowable daily and weekly work hours. The overtime rate is contingent on a number of factors, including whether an employee receives payments on a weekly basis or a monthly basis. The rate will also be modified if it is worked on mandatory holidays.

Overtime cannot exceed four hours per day for a total of 12 working hours per day (including the overtime hours). Overtime is paid at an additional 50% of the regular salary.

Managerial positions or work that, by its nature, cannot be done during regularly scheduled hours (e.g. agents and employees who work on a commission basis) are exempt from the maximum hour limitations. However, they cannot be required to work more than 12 hours a day.

Bonus

Every employee is entitled to a Christmas bonus (aguinaldo). The bonus is equivalent to one month’s salary and is calculated based on the sum of the total wages paid to an employee for the past year divided by 12. The total wages includes overtime payments. The Christmas bonus must be paid within the first 20 days of December. 

If an employee has not completed a full year’s work, the Christmas Bonus must be calculated according to a similar formula that considers average monthly salary thus far. 

If a Christmas Bonus is not provided, the employee is considered to have been fired without cause. The employer will then be required to pay the statutory compensation and applicable severance.

Notice Period

The required notice period will depend upon the time an employee has been working at the company.

If an employee has worked for:

  • >3 months but <6 months: 1 week notice period
  • >6 months but <1 year : 2 weeks notice period
  • >1 year: 1 month notice period

Termination

Costa Rican law allows for either the employer or the employee to terminate the working relationship. The employer is required to grant workers’ requests for a certificate or letter of termination of the work contract. This is applicable regardless of the cause of the dissolution of the relationship (whether dismissal or resignation).

Employer’s rights to terminate a worker: 

  • Anytime during the probation period
  • Any violent or criminal act committed by the employee (or acts endangering workplace security and working conditions)
  • Divulging confidential information about the company
  • Unjustified absence from work for two consecutive days (or if there is an unjustified absence for three or more non-consecutive days within the same calendar month)

Employee’s rights to terminate an employment contract:

  • Unpaid salary
  • Immoral acts at the workplace (or physical and verbal attacks against the employee)
  • Damages to the tools of the worker committed by the employer, relatives or dependents
  • Contagious diseases on the part of the employer, relatives or dependents in the workplace
  • Working conditions pose dangers for the health or safety of the worker or their family 

Any of the parties in the labor contract can terminate it without just cause by making a prior notice (Preaviso) to the other party. After three months of employment with the employer, the employee is entitled to receive prior notice if the employment contract is to be terminated. 

An employee must also provide adequate notice or a deduction may be made from the settlement payment.

The employer must pay a ‘Preaviso’ compensation equivalent to one month’s salary if they do not want an employee to serve out the notice period. This must be prorated accordingly if employment is less than one year. This compensation is based on the average earnings of the employee for the last six months. If the employer allows the employee to serve out the notice period, then ‘Preaviso’ compensation is not required.. 

During the notice period, the employer has to give the to-be terminated employee one off day a week so he or she can search for another job.

Severance Pay

If an employee is fired without a just cause (or if the employee resigns for cause), the employer must pay ‘Cesantia’ compensation. This amount increases in accordance with the time served by the employee. 

The following outlines how severance pay is regulated:

  • >3 months but <6 months: 7 days wages. 
  • > 6 months but <1 year: 14 days wages
  • For >1 year, the below schedule applies:

Number of Years Worked

Days of Severance Pay

1

19.5

2

20

3

20.5

4

21

5

21.24

6

21.5

7

22

 

With just cause, the employer will also have to pay the Christmas Bonus (Aguinaldo) proportional to the number of months worked from the beginning of the year. Furthermore, they will have to release vacations and issue an advance notice to the employee prior to the termination of employment.

The Christmas Bonus is not affected by the payment of ‘Cesantia’ or the ‘Preaviso’ and has to be paid if services of an employee are terminated before December. The amount to be paid is calculated based upon the average of total pay earned from the previous December 1 through the day of termination.

Any unused vacation time must be paid as accumulated vacation pay (Vacaciones). The employee is entitled to, as part of their severance, one day for each month worked. For example, an employee who has worked for eight months and did not take any vacation days upon termination will be entitled to eight days’ wages as vacation severance.

Fixed Term Contracts

There are limitations to fixed-term contracts in Costa Rica. The duration cannot be more than one year and it is only permitted for temporary work. However, if special technical skills are required, the fixed-term contract can be extended to up to five years.

Employees who work beyond a fixed-term contract, or for over a year, are deemed to be working for an indefinite period of time.

Restrictive Covenants

Non-compete provisions are allowed in Costa Rica if they are reasonable and if the employee is paid during the period of restriction. The terms, geographical restrictions, payment and activities must be assessed on a case-by-case basis. If there is no agreement on payment amount, it will be assumed the compensation is at 50% of his or her salary for the period of non-compete.

Non-solicitation provisions are also permitted in Costa Rica.

Tax and Social Security

Personal Income Tax

Costa Rican law requires employees to pay taxes on the income they earn within Costa Rica. The income tax is graduated. Those with higher incomes will be placed into a higher tax bracket.

The employer acts as the withholding agent for its employees. The withholding rate ranges from 0% to 15% of gross wages. Tax is paid to the tax authorities (Ministry of Finance Unified Tax Registry) on a monthly basis.

The fiscal tax year ends on October 31. Taxes must be filed in Costa Rica by December 15.

Monthly Taxable Income (Colón) Tax Rate %
0 – 842,000 0
842,000 – 1,236,000 10
1,236,000 – 2,169,000 15
2,169,000 – 4,337,000 20
>4,337,000 25

Social Security

The Costa Rican social security system provides universal coverage for the healthcare and old-age needs of people living in the country. While all employees are required to contribute, the social security system also takes care of those unable to do so. It is designed to provide a steady income and financial support to employees, even after they retire. 

The relevant legislative authorities in Costa Rica for social security are:

  • Costa Rican Social Security Fund (Caja Costarricense del Seguro Social or CCSS)
  • National Insurance Institute (Instituto Nacional de Seguros)
  • Ministry of Finance (Ministerio de Hacienda).

Eligibility for social security in Costa is not conditional on a person’s country of origin. All citizens, residents and temporary permit holders are required to contribute. All employers must register each of their employees with the CCSS, which oversees the country’s  health system along with the Ministry of Health.

Social security contributions must be made from the 26th to the 6th of the next month.

  • Both the employer and employee are liable for social security contributions
  • Employers contribute 26% while the employee contributes 9%
  • Percentages are calculated based on on the employee’s gross salary

About 3% of the deduction is allocated to the pension fund of the employee. The Costa Rican health system covers medical treatment (illness and maternity) as well as obligatory pension (disability, old age and death). It is possible to hold a private insurance or health plan as well.

The Workers Protection Law states all workers must have an individual retirement account and an individual capitalization account with a public or private pension plan operator. These accounts are also funded by both employers and employees. The money accumulated on the pension account can be withdrawn in case of retirement, disability or death. 

The capitalization account can be accessed in case of unemployment. If an employee has his or her labor contract terminated without cause, the employer is obligated to continue the severance payments.

*The above rates serve as a broad guideline. Actual rates charged by GoGlobal will differ.

Deduction From Pay (If Applicable)

The following are taxes related to employment:

  • income tax on the worker’s salary 
  • the employer’s contribution to CCSS
  • the employee’s contribution to CSSS

Employees

Salary Payment

Salaries can be determined by the hour, day, biweekly or monthly as agreed upon between the employers and employees. The interval between payments cannot be more than a month.

Payslip

Employers in Costa Rica may provide employees with digital payslips. However, employees must reply via email confirming receipt of the payment.

Timesheets & Record Keeping

Payroll reports must be kept on record for five years.

Annual Leave

  • Workers are entitled to a minimum of two weeks paid vacation for each 50 weeks of continuous employment with the same employer. The wages to be paid to the employee during their vacation must be based on the average weekly wage earned during the previous fifty weeks of employment.
  • An employee is entitled to one day’s wages or earned leave, which shall be compensated if the services of an employee are terminated before the completion of a year’s work.
  • The Labor Code does not allow the employee to roll over vacation time and does not favor the separation of vacation time into different periods. Only under special circumstances will the law allow partitioning the vacation into a maximum of two periods.

Public Holidays

  • There are 11 public holidays, nine of which are paid holidays and two of which are not.
  • Employees who have to work on Sundays or on statutory holidays must be paid at a rate of double normal wages.

Sick Leave

  • An employer in Costa Rica is required to pay at least 50% of the salary for the first three days of an employee’s sick leave. The Social Security Administration (Caja Costarricense de Seguro Social or CCSS) pays the other 50%.
  • The CCSS pays 60% of the salary from the fourth day of the sick leave with no obligation on the part of the employer to pay salary during the remaining period of sick leave. However, the employee must submit a medical certificate obtained from an accredited CCSS doctor.

Maternity, Paternity, Parental Leave

  • The employer must allow maternity leave for one month prior to the birth and for three months following the birth of the child. The employer must pay 50% of the salary for all four months of leave while the CCSS pays the other 50%.
  • If an employer terminates the services of a pregnant woman, the employer will have to pay regular wages from the date of dismissal through the eighth month of pregnancy.
  • Private sector employees are not entitled to statutory paternity leave. Fathers employed in the public sector have the right to eight days’ paid paternity leave.
  • There is no provision to allow the sharing of parental leave between the father and the mother.

Nursing Care Leave

Breastfeeding License

Mothers are entitled to a nursing license with payment, including the right to leave work for one hour per day paid. This license is valid as long as the mother keeps nursing the child. The employee is required to provide a medical certification to her employer.

Compassionate / Bereavement Leave

An employee is entitled to bereavement leave of three days paid leave in the event of the death of an immediate family member.

Benefits to the Employee in Costa Rica

Statutory Benefits

Unemployment Insurance (Seguro de Desempleo): This insurance provides temporary income based on the average salary received over the last three months. However, not all unemployment causes are covered.

Adolescence Work Insurance (Seguro de Riesgos para Adolescentes): This insurance covers self-employed workers from age 15 through 18 years in cases of accidents and illness caused by work related activities.

Income Insurance (Protección Crediticia): There are two different credit insurances offered by INS. 

  • The Credit Card Protection Policy (Protección Crediticia Tarjeta de Crédito) takes over credit card payments for the duration of 12 months for the unemployed. This only covers legal residents of Costa Rica who are at least 18 years old and not of retirement age. The individual must be employed for six consecutive months prior to becoming unemployed. 
  • The Unemployment Protection Policy (Protección Crediticia por Desempleo) works in the same way as the Credit Card Protection Policy but covers mortgage payments.

Worker’s Compensation Insurance (Riesgos del Trabajo)

This is a system of insurance to protect workers from accidents incurred during working hours. It is administered by the National Institute of Insurance (Instituto Nacional de Seguros). Every employer is legally obliged to provide each employee with a Worker’s Compensation Insurance Policy.

Visas and Foreign Workers

General Information

Costa Rica does not currently limit the number or percentage of foreigners who can work in the country. The Constitution also provides no discrimination shall be made with regard to wages, advantages or working conditions between Costa Ricans and foreigners. However, employers have to provide Costa Rican workers preference for jobs. Work permits are only issued when the employer can demonstrate that the foreign employee has a skill they are unable to find in local employees. 

A Costa Rica work permit falls under the “Special Category” of immigration permits, along with a student permit. This means it will allow the holder to work and remain in the country under the conditions set by the Ministry of Labor and Social Security. The first condition to get a work visa is to have an employer who is willing to employ the foreigner. A Costa Rica work permit can take anywhere between three to right months to process. All documents must be translated into Spanish and be notarized.

The only two immigration statuses without restrictions are permanent residence or citizenship. Other residence options (‘rentista’ or ‘pensionado’) are considered temporary and these permits do not automatically allow the holder to work. To obtain permanent residence, one must have held temporary residence for at least three years before applying.

People who can work in Costa Rica without citizenship or permanent residence include:

  • Those with home-based businesses who work over the internet (e.g. freelance writer, graphic designer or a trader with the ability to prove that the income earned is coming from outside of Costa Rica). 
  • Business owners (assuming a temporary residence is held) may oversee business operations as a shareholder but may not perform daily job functions as an employee.

The Youth Mobility program is another option for living and working in Costa Rica. However, this is a very limited option as it is only available to Canadian citizens aged 18-35. This permit is valid for up to one year.

Public Holidays in 2022

S.No Occasion Date
1. New Year’s Day January 1st
2. Juan Santamaria Day April 11th
3. Maundy Thursday April 14th
4. Good Friday April 15th
5. Labour Day May 1st
6. Annexation of Guanacaste July 25th
7. Day of the Virgin of the Angels August 2nd
8. Mother’s Day August 15th
9. Independence Day September 15th (Observed September 19th)
10. Abolition of the Army December 1st (Observed December 5th)
11. Christmas Day December 25th

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