Costa Rica

Overview

Costa Rica, an upper middle-income economy, has a long history of democratic stability and high level of foreign direct investment per capita. A global pioneer in pursuing sustainable environmental policies, Costa Rica in 2016, generated 98.1% of electricity from green sources such as geothermal plants, solar panels, hydro generating stations, and biomass plants. Along with traditional exports including coffee, sugar, beef, and bananas, Costa Rica also exports a wide range of specialized agricultural products and industrial equipment. Political stability coupled with steady growth has helped Costa Rica emerge as one of the promising economies in Latin America and the Caribbean region.

Currency: Costa Rican Colón

Principal language: Spanish

Government: Democratic Republic

Capital City: San José

Major Cities: Puerto Limón, San Francisco, Alajuela, Liberia

Employment Contracts

Employment contracts should be in writing, and its copies must be provided to employees and the Ministry of Labor and Social Security’s Employment Bureau. Verbal contracts are permitted for domestic service, livestock or agricultural work, and temporary work for a maximum of 90 days.

Written employment contracts must specify:

  • Names, nationality, age, sex, marital status, and address of the contracting parties
  • Duration of the contract or a statement that the contract is for an indefinite period
  • Workers’ identity card number
  • Salary, method of calculation, and time/place of payment
  • Work hours
  • Place and date of the contract
  • Place of employment
  • Parties' signatures

Employment contracts must have employees’ rights that are not lesser than mentioned in the Labor Code. The information must be in Spanish.

Work/Time Regulations

A work schedule of 48 hours in a week is established under the Labor Code, which means it should not exceed 8 hours per day or 6 days in a week. The Labor Code permits the workday to be as long as 10 hours if the daytime work is not hazardous. However, the weekly work schedule should not exceed 48 hours. Night work i.e., work done between 7 p.m. and 5 a.m. should not exceed 36 hours in a week or 6 hours per day. Mixed shifts that include both daytime and nighttime are considered night work if more than 3 hours’ of work is done after 7 p.m. Usually, mixed shifts don’t exceed 7 hours a day or 8 hours a day for harmless work, and 42 hours in a week.

Leave

Holidays
9 paid public holidays are observed in Costa Rica:

  • Jan. 1: New Year's Day
  • April 11: Juan Santamaria Day
  • Maundy Thursday
  • Good Friday
  • May 1: Labor Day
  • July 25: Anexion del Partido de Nicoya
  • Aug. 15: Mother's Day and Assumption
  • Sept. 15: Independence Day
  • Dec. 25: Christmas

Additionally, August 2 (Day of Our Lady of the Angles) and October 12 (Cultural Day) are holidays for which pay is not compulsory.

Annual Leave
Employees can take at least 2 weeks’ of annual leave after 50 weeks’ of employment with the same employer. The annual leave is accrued at the rate of 1 day for each month. Employers can schedule employees’ vacation at their convenience within 15 weeks of being earned by the employees. Employees can take the entire annual leave at once. If the nature of work does not permit long absence and both employers and employees agree, annual leave can be split into a maximum of two segments. Unused annual leave is carried over to the next year only if the employee’s work prevents taking the vacation in the year earned.

Maternity Leave
Maternity leave provides coverage for 1 month before the expected date of delivery and 3 months after it. Employees receive full pay, half covered by the Social Security Fund and the rest by the employer. Employees are required to give a doctor’s certificate confirming pregnancy to their employers within 5 weeks to the expected date of delivery.

Paternity Leave
Though the Labor Code doesn’t address paternity leave for private sector employees, following a court decision in August 2013, public employees can take 8 days’ of paternity leave, whether they are married or not.

Sick Leave
Employees who have contributed to social security until the month before the month in which they fell ill can take paid sick leave for a maximum of 365 days. Employers pay 50% of employees’ salary, and the remainder is paid by the Social Security Fund for the first 3 days of sick leave. After the initial 3 days, the benefit is paid at the rate of 60% of employees’ salary during the 3 months’ before the illness.

Adoption Leave
Employees who adopt a child are entitled to 3 months’ of paid leave starting from the date of child birth. To take adoption leave, employees need to submit a certificate from the National Foundation for Children or a family court confirming the adoption, to the employer.

Benefits

Social security benefits such as old-age pension, survivors’ pension, sick leave, health insurance, and disability pension are funded through the contributions of employees, employers, and the government. Employers contribute 23.75% of employees’ salary toward social security while employees contribute 11%.

Old-age pensions are also supplemented by individual retirement accounts. Employers contribute 3.25% of payroll while employees contribute 1% of their wages plus 0.19% as an administrative fee.

Survivors (child, partner or spouse, dependent siblings, and dependent siblings) of a deceased employee are entitled to survivors’ pension if the decedent:

  • Made a minimum of 12 contributions to the social security system in the last 24 months, or
  • Made at least a total of 180 contributions

Workers' Compensation
Employees who suffer an illness or injury due to work are entitled to 75% of their salaries for initial 45 days of temporary disability and receive 100% of the minimum wage in addition to 75% of the difference between their wages and the minimum wage. Temporary disability benefits are not paid for more than 2 years. In the case of permanent disability, the benefit amount is based on the assessed degree of disability. Employees with permanent total disability (67% degree of disability) are entitled to 100% of the minimum wage in addition to 67% of the difference between their wages and the minimum wage and a lifetime annuity paid monthly.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into Costa Rica and hire their employees without having to establish a branch office or subsidiary in Costa Rica.

  • Your candidate is hired via our Costa Rica PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
  • Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Costa Rica laws.
  • Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
  • With no contractor risks, pass on the compliance burden to Global PEO Services.

Spin Off/M&A Support

  • Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 100+ Countries

  • Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
  • We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and managements. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcounts.

Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Lean more about our end-to-end international expansion services.