Employer of Record in Costa Rica

Velocity Global’s Employer of Record solution offers businesses a time-efficient, streamlined expansion into Costa Rica, without needing to first establish an entity. Velocity Global accelerates employee onboarding timelines and delivers a flexible global expansion solution.

We hire and onboard your supported employees in Costa Rica on your behalf. Whether you need to hire one supported employee or build a team from the ground up, our Employer of Record in Costa Rica allows you to retain complete employee oversight. You remain focused on your business, while we manage all payroll, compliance, and risk mitigation. We have the expertise to help you grow your team in Costa Rica.

Benefits of hiring in Costa Rica

• As one of Latin America’s highly favored investment locations, Costa Rica is widely recognized for its high-quality workforce, economic sustainability, democratic history, political stability, and dynamic business sector. Hiring talented individuals is easier with the help of an employer of record in Costa Rica.
• Expanded and specialized trade due to various commercial agreements and economic diversification in the tourism, manufacturing, and services sector has been the source of success for Costa Rica’s economy.
• Costa Rica compares favorably to its neighbors in areas of human development. The country has some of the best social indicators in the region for education and health.
• Eco-tourism is Costa Rica’s top business since Costa Rica is home to a handful of immaculate beaches, hot springs, volcanoes, mountains, rainforests, waterfalls and more. Costa Rica’s unmatched biodiversity is what makes it a major destination.

Challenges of hiring in Costa Rica

• Costa Rica has seen gradual economic development in this past century. Despite advancement, income inequality persists as a leading challenge, allowing wide variations in access to national services.
• Costa Rica’s transport infrastructure has long suffered from inadequate and ineffectual investment and maintenance, generating a low-quality transportation network.
• About a third of Costa Rica’s landmass is exposed to several natural hazards. More than three-quarters of its population and GDP are located where exposure to earthquakes, volcanic activity, floods, tropical storms, and hurricanes are prevalent.
• Representing nearly half of all Costa Rican exports and imports, the United States is Costa Rica’s most substantial trading partner. To an exceedingly large extent, Costa Rica is financially dependent on the United States, in terms of foreign direct investment, commerce, and banking.

Cultural nuances and must-knows of doing business in Costa Rica

• Costa Rica’s national motto is “pura vida,” which directly translates to the pure life: a slogan for a relaxed and peaceful lifestyle. This characteristic is thoroughly prevalent in Costa Rican business culture.
• Patience is required when interacting with public institutions, as high levels of bureaucracy can lead to many steps to complete official processes. Be thorough and diligent to evade complications and delays.
• When doing business in Costa Rica be prepared to take time in establishing relationships with colleagues before concluding negotiations or business dealings. Costa Ricans prefer forming interpersonal relationships before engaging in business.
• Costa Rica is a small country and operating in a specific business sector makes it feel smaller. Business reputation matters and it spreads quickly.
• Costa Rica has a moderately high proficiency level in English. However, the official language of the country is Spanish. Learning Spanish or a few phrases goes a long way in establishing a trusting relationship with colleagues and future business partners.
• Costa Ricans don’t consider punctuality as a dire need. Sometimes meetings can start or end later than scheduled.

Minimum wage and salaries in Costa Rica

• Unlike most countries, Costa Rica does not have a legally mandated minimum pay rate for employees. Instead, the National Salary Council of the Ministry of Labor and Social Security publishes a revised minimum wage scale in Costa Rica for a comprehensive list of job titles and skill levels every six months. Additionally, pay rates are usually agreed upon with the employer through a collective bargaining agreement or employment contract.

Probation period in Costa Rica

• Articles 28 and 29 of the Costa Rican labor code states that there is a three-month initial term for employment contracts, where it’s possible to terminate the contract without any reason and without the employer needing to pay compensation for dismissal.

Bonus payment in Costa Rica

• A 13th month salary is prescribed by Costa Rican labor law, which is a Christmas bonus known as aguinaldo. The 13th month salary is equivalent to one month’s salary and it must be paid within the first 20 days of December.

Onboarding in Costa Rica

• In Costa Rica, a verbal employment contract is only permitted for agricultural or livestock work carried out in a field, as well as accidental and temporary work which does not exceed 90 days. In all other cases, an employment contract is required in writing.
• The employment contract is required to have the following information:
  • Names, nationality, age, sex, marital status, and country of permanent residence for the contracting parties
  • Identity document number
  • Employee’s residence
  • Fixed term or indefinite term contract
  • Working hours
  • Salary
  • Employer’s tools that will be provided, if applicable
  • Work location
  • Any other conditions to which the contracting parties agree
  • Place and date of the conclusion of the contract

Termination and notice period in Costa Rica

• After the first three months of an employment contract, both the employer and employee are obliged to give the other notice of termination or resignation.
• Notice periods from employees in Costa Rica vary according to the length of employment. The breakdown is as follows:
  • Less than three months of employment: no notice required
  • Three to six months of employment: one week’s notice required
  • Six months to one year of employment: two weeks’ notice required
  • More than one year of employment: one month’s notice required
• During the notice period, employees are entitled to take one paid day off per week.
• Employers can waive the notice period given by employees, without being required to compensate them.
• When an employee is dismissed without just cause, they must be compensated with notice and severance.
• Notice periods from employers in Costa Rica vary according to the length of the employment relationship. The breakdown is as follows:
  • An employment relationship between three and six months: one week notice required
  • An employment relationship between six months and one year: 15 days notice required
  • An employment relationship of more than one year: one month’s notice required
• Severance payments in Costa Rica vary according to the length of employment. The breakdown is as follows:
  • Three to six months: seven days of pay
  • Six months to one year: 14 days of pay
  • One year: 19.5 days of pay
  • Two years: 20 days of pay
  • Three years: 20.5 days of pay
  • Four years: 21 days of pay
  • Five years: 21.24 days of pay
  • Six years: 21.5 days of pay
  • Seven to nine years: 22 days of pay
  • Ten years: 21.5 days of pay
  • Eleven years: 21 days of pay
  • Twelve years: 20.5 days of pay
  • Thirteen years and beyond: 20 days of pay

Annual leave in Costa Rica

• Article 153 of the Costa Rican labor code guarantees employees annual paid leave in a minimum amount of two weeks for every 50 weeks worked. Employees are entitled to one day of vacation for every month of work.

Parental and maternity leave in Costa Rica

• Pregnant employees in Costa Rica are entitled to four months of paid maternity leave, which is taken one month before and three months after birth. The leave is paid half by the employer and half by the Caja Costarricense de Seguro Social (CCSS), the Costa Rican Social Security Administration.
• As of April 2022, the Legislative Assembly of Costa Rica approved paternity leave, which the country did not possess prior. Paternity leave includes two days of paid leave per week for four weeks, starting from the date of birth. The leave is paid half by the employer and half by the CCSS.
• Additionally, as of April 2022, the Legislative Assembly of Costa Rica approved adoption leave to be extended to both parents, regardless of gender, for a three-month paid leave that can be divided between two parents.

Sick leave in Costa Rica

• In Costa Rica, for the first three days of sick leave, the employer and CCSS both pay 50% of the employee’s salary. From the fourth day onward, CCSS pays 60% of the employee’s salary, while the employer is no longer obliged to pay salary during the remaining sick leave. Employees must submit a medical certificate obtained from an accredited CCSS doctor in order to receive sick leave pay.

Regional and national holidays in Costa Rica

• Costa Rica has 11 public holidays in a calendar year, which are not included in the minimum paid leave entitlement and they are taken in addition to annual leave. The following are national holidays recognized by Costa Rica:
  • New Year’s Day (January 1)
  • Maundy Thursday (March or April, the specific day fluctuates each year)
  • Good Friday (March or April, the specific day fluctuates each year)
  • Juan Santamaria Day (April 11)
  • Labor Day (May 1)
  • Guanacaste Day (July 25)
  • Lady of the Angels Day (August 2)
  • Assumption Day (August 15)
  • Independence Day (September 15)
  • National Culture Day (October, the specific day fluctuates each year)
  • Christmas Day (December 25)

• Costa Rica’s government benefits programs are administered by the Caja Costarricense del Seguro Social (CCSS), the Costa Rican Social Security Administration. The CCSS was founded in 1941 and it’s responsible for providing social security services to Costa Rican society. The CCSS collects contributions from employers and employees to maintain the Costa Rican Social Security regime, which maintains old-age retirement pensions, pensions due to death, illness and injury benefits, disability benefits, involuntary unemployment benefits, and parental leave.

• Individuals are subject to Costa Rican income tax laws if their professional services are provided in Costa Rica. If the employment relationship is physically based and carried out in Costa Rica, the employees are subject to Costa Rican tax law.
• Costa Rica’s tax year runs from October 1 to September 30.

Tax thresholds in Costa Rica

• As of 2022, the Costa Rican income tax brackets are as follows:
  • CRC0 – CRC863,000: 0%
  • CRC863,000 – CRC1,267,000: 10%
  • CRC1,267,000 – CRC2,233,000: 15%
  • CRC2,233,000 – CRC4,445,000: 20%
  • Above CRC4,445,000: 25%
• The corporate income tax rate in Costa Rica is 30%.
• Social security payments due on employees’ monthly salaries are 10.5% and they are withheld by the employer.

Health insurance in Costa Rica

• Costa Rica’s healthcare system is frequently described as one of the best in the world. The country has been ranked by the World Health Organization and United Nations as having a top healthcare system. Costa Rica is one of a limited number of Latin American countries that offers universal coverage through its social security administration, the Caja Costarricense de Seguro Social (CCSS). Through CCSS, the country’s residents have full coverage for all medical procedures, doctor appointments, hospital visits, and prescription medications. The CCSS system is funded by monthly employment contributions, based on income levels, from all residents.

Pension in Costa Rica

• In order to receive an old-age pension in Costa Rica, employees are required to meet the qualifying conditions of being 65 years old and having made at least 300 months of social security contributions.
• The retirement age can be reduced with supplemental months of social security contributions. For an early-age pension, the qualifying conditions are different for women and men. They are the following:
  • For women, 59 years and 11 months old with at least 450 months of contributions
  • For men, 61 years and 11 months old with at least 462 months of contributions
• The old-age pension is 43% to 52.5% of an employee’s average indexed monthly earnings in the previous 240 months, plus 0.0833% of their average indexed monthly earnings for each month of contributions beyond 240 months.
• The minimum monthly old-age pension is CRC136,865 and the maximum monthly old-age pension is CRC1,612,851.

• Following payroll laws in Costa Rica is essential. Using an employer of record in Costa Rica ensures compliance with all local and national laws.

Tax due dates in Costa Rica

• In Costa Rica, the tax year runs from October 1 to September 30. The filing deadline for tax returns is February 15.

Payroll cycle in Costa Rica

• The payroll cycle in Costa Rica is generally monthly, where payments are made at the end of the month.

Average working hours in Costa Rica

• The employment contract specifies general working hours. However, by and large, Costa Rican daytime working hours are eight hours a day with no more than 48 hours per week. The Ministry of Labor allows an extension of working hours up to nine hours a day, given the work doesn’t affect an employee’s health.

Overtime in Costa Rica

• All work beyond 48 hours per week is seen as overtime. Overtime is paid with an extra 50% of an employee’s regular wage. Overtime on holidays is paid at double an employee’s regular wage.