Global PEO Services (GPS) helps companies hire employees in Costa Rica without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Costa Rica, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Costa Rica labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Costa Rica. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Costa Rica - Country 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.
Costa Rican Colón
Puerto Limón, San Francisco, Alajuela, Liberia
Employment Contracts in Costa Rica
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.
Working Hours in Costa Rica
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.
Employee Leave in Costa Rica
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.
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 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 provide a doctor’s certificate confirming pregnancy to their employers within 5 weeks to the expected date of delivery.
Though the Labor Code doesn’t address paternity leave for private sector employees, a court decision in August 2013 made public employees eligible for 8 days of paternity leave, regardless of whether they are married.
Employees who have contributed to social security until the month just before 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’ average salary earned during 3 months before getting ill.
Employees who adopt a child are entitled to 3 months’ 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.
Employee Benefits in Costa Rica
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, 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
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.