How To Hire And Pay Employees In Costa Rica

Emerald Technology's guide to hiring employees in Costa Rica.

CURRENCY

San José is the official currency of Costa Rica. Its currency symbol is , CRC.

CAPITAL CITY

San José, is the capital, it is the largest city of Costa Rica, situated in the broad fertile Valle Central.

LANGUAGE

Spanish is the official language and has been since the Spanish colonisation in the 16th century.

POPULATION The current population of Costa Rica is 5.139 Million 2021 based on World bank numbers.
PAYROLL FREQUENCY

Salaries in Costa Rica are generally paid monthly. A 13th month salary payment (Aguinaldo) is mandatory. 

PUBLIC HOLIDAYS Costa Rica has 9 paid public holidays and 2 that are optional.

GROW YOUR TEAM IN COSTA RICA

NO ENTITY, NO PROBLEM

To start growing your team in Costa Rica, you must establish a local entity- including an account with a local bank, a local office and an address registered as a subsidiary. This allows you to manage payroll, tax, benefits and compliance for your employees, but can take several months. 

Emerald can hire and payroll your workers, quickly and compliantly with their ready to go entity. Make growing your team simple with Emerald as a global partner.

PROS AND CONS OF HIRING IN COSTA RICA

Costa Rica is extremely popular due to its highly skilled workforce, innovative technology and benefits it provides companies. The workforce has the highest literacy rate in Latin America due to the governments commitment to transforming the country’s talent. Costa Rica’s skilled workforce is described as Latin America’s home to the top human capital. Companies from the US and the UK tend to utilise the Costa Rican workforce to take advantage of the low labour costs compared to their home country.

Latin America is well known for low attrition, but Costa Rica has a great reputation of low attrition amongst developers. This allows companies to invest in a team for an uninterrupted workflow which is highly attractive to tech start-ups, where IP protection is a priority. Costa Rica is invested in growing its tech industries. San Jose is becoming popular for its fast growth in the IT sector, as well as developing its digital tech across the region.

However, due to the county’s workforce being so sought after, the number of skilled developers available is low. Although this encourages a competitive working environment for wages and labour costs are lower than some countries, for small start-ups, this might not be the most cost effective place.

Costa Rica’s labor laws are known for being employee-friendly, which can be difficult for employers.

WHY COSTA RICA IS GOOD FOR REMOTE WORKERS

Costa Rica is a favourite for tourists, so subsequentially is popular amongst the remote working community due to its affordable living costs, large expat communities, fast internet. All making it a great environment for digital nomads.

Costa Rica offers a short-term visa for remote workers. Which allows foreign nationals to reside- in and work remotely from Costa Rica without sponsorship for one year. This worker must be employed outside of Costa Rica and have a monthly salary of USD 3,000.

START GROWING YOUR REMOTE WORKFORCE NOW

WORKING TIME AND OVERTIME IN COSTA RICA

The maximum number of hours an employee may work in Costa Rica are 48 hours per week for daytime hours, and 36 hours for night work. If an employee works over 48 hours this is considered overtime and will be paid at an additional 50% of the hourly salary. Employees should not work more than 12 hours per day including overtime.

ANNUAL LEAVE AND PUBLIC HOLIDAYS

Full-time employees are entitled to one days holiday for each month worked, and two weeks after 50 weeks of employment. Employees are not permitted to carry over annual leave unless there is a written agreement.

There are 9 paid public holidays and a further 2 that are optional.

January 1st: New Year's Day 
April 11th: Battle of Rivas
April 14th: Maundy Thursday 

April 15th: Good Friday 
May 1st: Labor Day/ May Day 
July 25th: Dia de la Anexion del Partido de Nicoya 
August 2nd: Our Lady of Los Angeles Day 
August 15th: Assumption of Mary
September 4th: Dia de la Persona Negra y la Cultura Afrocostarricense
September 19th: Independence Day 
December 5th: Day of Abolition of the Army 
December 25th: Christmas Day 

PROBATION PERIOD IN COSTA RICA

Probation periods in Costa Rica are generally 3 months. However, this can vary depending on the industry and role of the employee.

RESIGNATION AND DISMISSAL IN COSTA RICA

The employee may terminate their employment by providing notice in writing. The required notice period will depend on the length of service. An employee who has worked 3 – 6 months will need to provide 1 weeks’ notice, 6 – 12 months will be 2 weeks’ notice, and over 12 months will be 1 months’ notice. Termination processes may vary depending on if any agreements were negotiated when the employee was initially employed. If an employee is terminated without just cause they will be entitled to a severance payment (Prestaciones Laborales) and advanced notice (Preaviso) must also be provided. The advanced notice period is 30 days, if the employee is not required to work the 30 days, then this must be paid in addition to any severance payment. The below table is a guide to severance payments depending on length of service. In addition to severance payments the employee will also be entitled to payment of any accumulated holiday pay and the pro-rated Christmas bonus.

Length of Employment Severance
3-6 months 7 days salary
6-12 months 14 days salary
1 year 19.5 days
2 years 20 days
3 years 21 days
4 years 21.24 days
5 years 21.5 days
6 years 22 days

If an employee is terminated with just cause this must be based on one of the grounds set out in Article 81 of the Costa Rican Labour Code. The employer holds the burden of proof, so the cause will need to be well justified. The employer will also need to personally deliver a dismissal letter to the employee clearly outlining the facts behind the dismissal. Employees dismissed with cause will not be entitled to notice or severance payments. They will only be entitled to payment of owed salary, accumulated holiday and the pro-rated Christmas bonus.

READY TO HIRE YOUR EMPLOYEES IN COSTA RICA?

CONTRACT OF EMPLOYMENT IN COSTA RICA

Non-compete provisions are permitted in Costa Rica if they are reasonable. The employee will need to be paid during any periods of restriction. The terms will need to be assessed on a case by case including activities, geographical restrictions, and payment. If no agreement is in place for payment, it is commonly 50% of the standard salary. Non-solicitation provisions are also permitted in Costa Rica.  

MATERNITY LEAVE IN COSTA RICA

Expectant mothers are entitled to 4 months maternity leave. This is taken 1 month before the expected due date and 3 months after the due date. The cost of maternity leave is split equally between the employer and the CCSS (Costa Rican Social Security Fund). Fathers working in the private sector are not entitled to paternity leave. Fathers working in the public sector are entitled to 8 days paid paternity leave.

SICKNESS LEAVE IN COSTA RICA

An employee is entitled to the first 3 days of sick leave at full pay. This is spilt between the employer and social security. After 3 days social security will pay 60% of the employees salary, the employer is not obliged to pay anything after the initial 3 days of sickness. The employee must ensure a medical certificate is submitted to the social security administration within 48 hours of the start of the sick leave to receive payment. Employees are also entitled to 3 days paid bereavement leave.

SOCIAL SECURITY

Social security contributions in Costa Rica are compulsory and are based on an employee’s earnings. The Costa Rican Social Security Fund (Caja Costarricense de Seguro Social) is in charge of most of the public health sector. Both the employer and employee have mandatory contributions. The contributions cover items such as maternity benefits, health protection, work accidents, unemployment, child benefits, disabilities, and old age.

HEALTHCARE AND INSURANCE

Costa Ricas healthcare system is run by the Costa Rican Social Security Fund (CCSS) (Caja Costarricense de Seguro Social). When registered with the CCSS, employees will have access to free services such as doctors’ appointments, inpatient care, outpatient, maternity services, surgery, medications, dental care, optical care, emergency services. Costa Ricas healthcare system is very highly regarded in Latin America, ranking amongst one of the highest in the Americas. Around 30% of Costa Ricas population have private health insurance, it is very common for foreign workers to opt for private insurance. It is a lot easier to access English speaking staff in private hospitals and the wait times are considerably shorter.

Employment of

FOREIGN NATIONALS IN COSTA RICA

Foreign nationals will need a visa to work in Costa Rica. The process of obtaining this can be long. The employer will firstly need to prove that the applicant has unique skills that can’t be provided by a Costa Rican.

Visas in Costa Rica

The workforce in Costa Rica is well educated, so its can be a challenge to prove there is not a suitable candidate available. Once this has been proven, the applicant will need to apply for a provisional visa that is needed to enter Costa Rica.

Not all countries require a visa to enter Costa Rica, these nationals will still need to register with the Costa Rican consulate in their home country. Once the applicant has arrived in Costa Rica the process for applying for a work permit must begin. Firstly, they must register their fingerprints with the Ministry of Public Security, Ministerio Seguridad Pública. The applicant will need to submit their application to the Immigration Department, the Dirección General de Migración y Extranjería where this will be reviewed. It is important to consider that all relevant documentation must be prepared before arrival in Costa Rica, all documents will need to be translated to Spanish and notarised.

Applicants will need to start the process of applying for the work permit with plenty of time ahead of any intended start date in their new job in Costa Rica. It can take between 3 – 8 months for a work permit to be processed.

Please see below documentation required, it is important to note this list is not exhaustive.

  • Completed application form
  • Birth certificate
  • Copies of every page of a valid passport, including blank pages
  • 2 x passport photos
  • A letter with reasons for the application, this should also include applicants details
  • Statement from the employer for job details
  • The employer's legal constitution and registration documents
  • Receipt of consular inscription 
  • Receipt of fingerprint registration issued by the Ministry of Public Security 
  • Proof of insurance
  • Proof of the applicants financial income 
  • A police clearance certificate from the applicants home country or country of residence
  • A certificate of the Costa Rican social security institution for the employing company
Salary Taxes

MINIMUM WAGE IN COSTA RICA

There is no set minimum wage in Costa Rica. Pay rates are generally agreed upon directly with the employer and is stated on the contract of employment or through a collective bargaining agreement. As a general guide pay rates per day should not fall below the following according to skill level of the employee. The below are in Costa Rican Colon CRC.

  • Unskilled worker - 10,875.11 CRC
  • Skilled worker - 12,043.60 CRC
  • Specialised worker - 14,205.12 CRC
  • General skilled worker- 367,058.74 CRC
  • General highly skilled worker - 4,12,202.85 CRC
  • Technical worker university graduate - 696,873.71 CRC

INCOME TAX

It is the employer’s responsibility to ensure taxes are paid from salaries before payments are made to employees. The general personal income tax rates are listed below as guidance.

Earnings per month Percentage of Tax
0 -863,000 CRC 0%
863,001 - 1,267,000 CRC 10%
1,267,001- - 2,223,000 CRC 15%
2,223,001 - 4,445,000 CRC 20%

4,445,001 +

25%

 

SALARY PAYMENTS IN COSTA RICA

Salaries in Costa Rica are generally paid on a monthly basis, manual employees must be paid every 15 days. A 13th month salary payment (Aguinaldo) is mandatory. This must be paid within the first 20 days of December.

SOCIAL SECURITY CONTRIBUTIONS IN COSTA RICA

Social security contributions are the responsibility of the employer to deduct from an employee’s salary before payment, and for the employer to ensure all employees are registered. Both the employer and employee are subject to contributions. Below is a guide on approximate contribution rates for employers and employers. However, these can vary. Employer contributions are generally 26.5% and employees 10.5% of salary.

  Employer Employee
Health/ Medical & Maternity 9.25% 5.5%
Family Assignations 5% N/A
Basic Pension Scheme 5.25% N/A
Banco Popular Employer Fee 0.25% N/A
INA 1.5% N/A
Complementary Pension Fund 2% N/A
Labor Capitalisation Fund 1.5% N/A
National Insurance Institute (NIS) 1% N/A
Social Aid  0.5% N/A
Contribution from Banco Popular Employer 0.25% N/A
Disability, Old Age & Death Benefits N/A 4%
Workmens Saving Banks N/A 1%

 

WORKER MISCLASSIFICATION IN COSTA RICA

Similar to other countries, Costa Rica has strict rules on classifying individual contractors and full-time employees differently. Misclassifying your workers can put your business at risk of fines.

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