Hire in Costa Rica

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Last updated at June 14, 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 of all the Central American countries. It is a unitary presidential constitutional republic, has a fair judicial system, and an independent electoral body. It has one of the highest literacy rates (~98%) in the Western Hemisphere and a solid educational system from the primary grades through the university level. Education is both free and mandatory for all its citizens.

Area

Costa Rica covers an area of 51,000 km2 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. It has a total of 1,290 km 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, but it has many 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) and the rainy (winter) season.

Culture

European immigration and customs have helped to mould Costa Rican history and influence its character. German, Italian, and British immigrants in the 19th century left an imprint on Costa Rican education, science, and culture. In the 1980s immigrants and refugees arrived from nearby countries, and it has also become a mecca for retirees from the United States.

Religion

~75% of Costa Ricans are Roman Catholics, which is the official religion. However, the constitution of 1949 provides for freedom of religion. ~13% are Protestant, and there are small communities of Quakers, Jewish and Mennonites.

Official Language

The primary language spoken in Costa Rica is Spanish, which features characteristics distinct to the country, a form of Central American Spanish. An English-based Creole language is spoken by the Afro-Carib immigrants and about 10.7% of Costa Rica’s adult population speak English, 0.7% French, and 0.3% speak 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 governing the employment relationship (e.g. Equal Opportunity Act for Persons with Disabilities, Law that Promotes Equal Opportunity for Women, Worker Protection Act governing employee pensions).

In Costa Rica, the Labor Court will always resolve any issue that is most favorable to the employee.

The Costa Rica Government has signed The Central American Free Trade Treaty (CAFTA) which is based upon a three-step approach to improve the working conditions in the country. In fact, Costa Rica working conditions are as good as those in America and Europe.

The three-step approach includes ensuring effective enforcement of the Costa Rica labor laws, close co-operation with the International Labor Organization to improve existing labor laws and their enforcement, and developing local capacity, expertise and infrastructure to improve employees’ rights. The CAFTA 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

Employment contracts in Costa Rica must be signed by both the employer and employee, and are 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 case 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
  • date and place the contract was signed

Contract Terms

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

Contracts can be for a limited or unlimited time. In the case of limited time contracts, there is a specific time span and/or 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)
    , defined as daytime working hours of 8 to 10 hours per day, with a maximum weekly total of 48 hours. Normal Working Days for night-time hours can be up to 6 hours per day but no more than 36 hours per week.
  • Special Working Days
    (Jornadas Especiales o de Excepcion)
    , for individuals who work on Saturdays. This type of contract also applies to several fields of employment where employees have extended working days.

Pre-Employment Checks

If requested by the employer, the worker must produce results of a medical examination to show that he/she does not have any permanent disability or any occupational, contagious or incurable disease.

Medical examinations must be justified by objective and reasonable reasons, either due to the nature of the job and/or for the protection of the health of the employee.

It is prohibited to check for HIV or pregnancy.

Probation Period

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

Working Hours

The typical work schedule in Costa Rica is 8 hours a day, 5 days a week for professional employees and for laborers it is generally 8 hours a day for Monday-Friday and ½ day on Saturday.

Employees may work up to 10 hours a day as long as the work is not dangerous and the employee does 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 rates depend upon a number of factors, including whether an employee is paid on a weekly basis or a monthly basis, and whether the time worked is on mandatory holidays.

Overtime cannot exceed 4 hours per day and 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 regular hours (e.g. agents and employees who work on commission) are excluded from the maximum hour limitations but cannot be required to work more than 12 hours a day.

Bonus

Every employee is entitled to a Christmas bonus, known as an 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 (including overtime payments) divided by 12. The Christmas bonus must be paid within the first 20 days of December.

If the employee has not completed a full year’s work, the Christmas Bonus has to be calculated according to a similar formula (average monthly salary that has been paid to an employee for any given year, i.e. total salary earned thus far divided by 12).

An employee is considered to have been fired without cause if a Christmas Bonus is denied and the employer will have to pay the legal compensation and severance applicable.

Notice Period

The notice period depends upon the time the employee has remained in employment.

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 both the employer and employee to terminate the working relationship. The employer is obligated to grant workers’ requests for a certificate or letter of termination of the work contract. This is applicable regardless of the cause of the cessation of the relationship (dismissal or resignation).

Employer’s rights to terminate a worker:

  • Anytime during the probation period
  • Any violent or criminal act committed, or acts endangering security and working conditions
  • Divulging confidential information of the company
  • Unjustified absence from work for two consecutive days, or 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/verbal attacks against the employee
  • Damages to the tools of the worker committed by the employer/relatives/dependents
  • Contagious diseases on the part of the employer/relatives/dependents in the place of work
  • Working conditions pose dangers for the health or safety of the worker or his 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 has the right to receive notice if the employment contract is to be terminated.

An employee must also give notice or a deduction may be made from his settlement payment.

The employer has to pay a Preaviso compensation equivalent to one month’s salary if he does not want an employee to serve out the notice period (or pro-rated accordingly if employment is less than 1 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 does not need to be paid.

During the notice period, the employer has to give the to-be terminated employee one off day a week so he can look for other employment.

Severance Pay

If an employee is fired without a just cause (or if employee resigns for cause), the employer has to pay Cesantia compensation, the amount of which increases in accordance with the time served.

If the employee has worked with the employer for:

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

 

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

 

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

Any unused vacation time must be paid as accumulated vacation pay (Vacaciones). The employee is entitled as part of their severance, one day for each month worked. For example, an employee who has worked for 8 months and did not take any vacation days upon termination are entitled to 8 days wages as vacation severance.

Fixed Term Contracts

There are limitations to fixed-term contracts. The duration cannot be more than 1 year 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 considered to be working for an indefinite period of time.

Restrictive Covenants

Non-compete provisions are allowed if they are reasonable, and 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 that the compensation be at 50% of his/her salary for the period of non-compete.

Non-solicitation provisions are also permitted.

Tax and Social Security

Personal Income Tax

Costa Rica law requires employees to pay taxes on income earned within Costa Rica. The income tax is graduated, so those who earn more are placed into a higher tax bracket.

The employer acts as a withholding agent for its employees. The withholding rate ranges from 0% to 15% of gross wages, and 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, and taxes must be filed 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 cover for the healthcare and old-age needs of people living in Costa Rica. 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 retirement.

The key legislative authorities in Costa Rica 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 does not depend on a person’s country of origin. It is mandatory for all citizens, residents and temporary permit holders. All employers are mandated to register every employee with the CCSS, which manages the health system along with the Ministry of Health.

Social security contributions must be paid from the 26th to the 6th of the following month.

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

About 3% of this deduction goes into the pension fund of the employee. The Costa Rican health system includes Medical Treatment (illness and maternity) and Obligatory Pension (disability, old age and death). It is possible to take a private insurance or health plan as well.

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

The capitalisation account can be accessed in case of unemployment. If an employee sees his/her labour contract terminated without cause, the employer is obligated to continue the severance payments.

*The above rates serve as a broad guideline. Actual rates charged 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

Wages can be paid by the hour, day, biweekly or monthly as agreed upon between the parties but the interval cannot be more than a month.

Payslip

It is legally acceptable in Costa Rica to provide employees with online payslips, however employees must reply via email confirming that the payment was received.

Timesheets & Record Keeping

Payroll reports must be kept 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 accumulate vacation time and does not favor the partition of the vacation time. Only under special circumstances will the law allow breaking the vacation into a maximum of two parts.

Public Holidays

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

Sick Leave

An employer in Costa Rica has to pay at least 50% of the salary for the first 3 days of an employee’s sick leave while the Social Security Administration (Caja Costarricense de Seguro Social or CCSS) pays the other 50%.

The CCSS pays 60% of the salary from the 4th 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 has to submit a medical certificate obtained from an accredited CCSS doctor.

Maternity, Paternity, Parental Leave

  • The employer has to allow maternity leave for 1 month before the birth and for 3 months after the birth of the baby. The employer has to pay 50% of the salary for all four months of leave and 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 to the eighth month of pregnancy to a pregnant woman who has been fired.
  • Private sector employees are not entitled to paternity leave, and fathers holding public sector jobs are entitled to eight days of 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 with salary payment. This license is valid as long as the mother keeps nursing the child, and she must provide a medical certification to her employer.

Compassionate / Bereavement Leave

An employee is entitled to bereavement leave of 3 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 15 till 18 years old of accidents and illness caused 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, and only covers legal residents of Costa Rica who are at least 18 years old and not of retirement age. The individual has to have been employed for six consecutive months prior to becoming unemployed.
  • The Unemployment Protection Policy (Protección Crediticia por Desempleo) works the same 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 the worker from accidents during working hours and is administered by the National Institute of Insurance (Instituto Nacional de Seguros). Every employer is under the legal obligation to provide a Worker’s Compensation Insurance Policy for their employee.

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 that 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 and a work permit is only issued when the employer is able to show that the foreign employee has a skill set that the employer is not able to find with local employees.

A Costa Rica work permit falls under the “Special Category” of immigration permits, along with a student permit. This means that it will allow the holder to work and remain in the country under the conditions set by the Ministry of Labour and Social Security. The first condition to get a work visa is to have an employer who is able to employ the foreigner. A Costa Rica work permit can take anywhere between 3 to 8 months to process. All documents must be translated into Spanish and be notarised.

Permanent residence or citizenship are the only two immigration statuses that carry no restrictions. Other residence options (rentista, 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:

  • Home-based businesses over the internet, e.g. freelance writer, web or graphic designer, trader with 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.

Another option for living and working in Costa Rica is through the Youth Mobility program. However, this is a very limited option as it is only available to Canadian citizens aged 18-35 and is valid for up to 1 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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