Costa Rica

Costa Rica PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Costa Rica to companies willing to enter the Costa Rican market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Costa Rica.  However our solution allows you to start the operations in Costa Rica within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. .

Costa Rica fast facts

Population, million: 5
Land area: 51,100 km² 
Capital: San Jose
Local currency: Costa Rican colón (CRC)

Located between Nicaragua to the north, Panama to the south, the Pacific Ocean to the west, and the Caribbean Sea to the east, Costa Rica is a middle-income, developing economy, with a tradition of democracy. The life expectancy at birth here is one of the world’s highest–outstripping both the U.S. and the U.K., in fact. Thanks to its long history as a destination, tourist facilities are extensive. And because English is a second language for many Costa Ricans, the country feels visitor and international business-friendly.

Hiring, Negotiating and Doing Business in Costa Rica

Necessity of written employment contract

Employment contracts in Costa Rica must be in writing, signed by both the employer and employee. 

The written employment contract must contain the following information:

  • name, nationality, age, sex, and marital status of the employee
  • address 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 with remuneration decided and payment details
  • working hours and overtime agreements, etc.
  • workplace

Any other provisions in the contract including those relating to termination of services, notice period, etc. the date and place the contract is signed with an understanding that there were legal witnesses to the signing of the contract.

Different forms of engagement: employment, contracting, work with private entrepreneur

It is common in some industries in Costa Rica for relationships between companies and those who work for them to be labeled contractually as “independent contractor.” With this practice, some company owners think they can avoid payment of most labor-related obligations stipulated by Costa Rican law, such as vacations, termination pay, 13th-month bonus and notice upon termination.

However, local law and case law clearly indicate that, despite how the contract is labeled by the parties, what must be examined is how the actual relationship was carried out. A determination of the relationship’s nature and the applicable legal regulations will be made accordingly and in view of the evaluation of the factors described below.

Costa Rica Employment Contract

Types of employment agreements

  • Fixed Term Contracts (FTC) are permitted only to provide a service or perform a work which in its nature is of limited duration (articles 26 and 31 of Labour Code). The total duration of FTC cannot exceed 1 year. When the employee continues to render services, of the same nature, beyond the date of termination, the contract shall be considered of indefinite duration (article 27 LC).
  • When the employee continues to render services, of the same nature, beyond the date of termination, the contract shall be considered of indefinite duration (article 27 LC).

Costa Rica working hours

Normative hours per day: 8 

Normative hours per week: not more than 48 hours per week

Standard working hours: The working hours in the private sector usually include eight hours of work on a daily basis from Monday to Saturday and from 8 am to 5 pm.

Costa Rica views overtime as an exception and allow it in only very necessary situations. All overtime work has to be paid with an extra 50 percent of the regular hourly wages.

Vacation leave in Costa Rica

The Costa Rican Labor Code stipulates that an Employer must provide vacation time to their Employee once that Employee has worked at least 50 weeks.   Once that threshold is reached the Employee is entitled to 2 weeks paid vacation.

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.

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 allowing breaking the vacation into a maximum of two part.

Costa Rica Maternity Leave

The employer has to allow maternity leave for one month before the birth and for three months after the birth of the baby. The employer has to pay 50 percent of the salary for all the four months of leave.

The Social Security Administration pays the other 50 percent of the salary for the four months of maternity leave. An employer can get into serious legal trouble if proper benefits are not granted during maternal leave. There are several social organizations in Costa Rica, apart from the legal system, that take up the cause of employees on maternal leave.

Costa Rica Severance Laws

Notice periods

The notice period is based on the following:

If your employee has worked for:

  • More than 3 months but less than 6 months then notice is at least1 week
  • More than 6 months but less than 1 year then notice is at least 2 weeks
  • More than 1 year then notice is at least 1 month.

-Severance payments

Severance Pay (Cesantia). If an employee is terminated without cause by the employer or if the employee quits for cause, they are entitled to severance pay.  If the employee has worked with the employer for more than three (3) months but less than six (6) months then they are entitled to the equivalent of seven (7) days wages. If the employee has worked from six (6) months to one (1) year they are entitled to fourteen (14) days of wages. If the employee has worked for more than one year then the following schedule applies for each year worked up to a maximum of eight years:

 

No of Years Worked

Days of Severance Payment

1

19.5

2

20

3

20.5

4

21

5

21.5

6

2.15

7

22

8

22

9

22

10

21.5

11

21

12

20.5

13

20

Costa Rica Tax

Income taxation

Annual taxable income (CRC*)

Tax on excess (%)

Over

Not over

0

3,732,000

0

3,732,000

5,573,000

10

5,573,000

9,296,000

15

9,296,000

18,631,000

20

18,631,000

 

25

* Costa Rican colones

Employee’s Social contribution: 9.34% of gross salary

Health Insurance Benefits in Costa Rica

The labor law stipulates that an employer pay at least 50 percent of the salary for the first three days of an employee’s sick leave while the Social Security Administration (Caja Costarricense de Seguro Social or CCSS) pays the other 50 percent. The CCSS pays 60 percent of the salary from the fourth 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 CCSS compensates employees on sick leave only if the employee submits a medical certificate obtained from an accredited CCSS doctor.

Additional Benefits in Costa Rica

Employees in Costa Rica are entitled to a thirteenth month salary at Christmas time called aginaldo, which is based on one month of an employee’s salary. Christmas Bonus must be paid by the employer between December 1st and the 20th.

Costa Rica Holidays

  • January 1 (New Year Day)
  • April 11 (Juan Santamaria Day)
  • Easter (Holy Thursday and Good Friday)
  • May 1 (Labor Day)
  • July 25 (Nicoya Annexation of Guanacaste Day)
  • August 15 (Mothers Day)
  • September 15 (Independence Day)
  • December 25 (Christmas)

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.

 

FAQ Costa Rica

  • Costa Rica working hours

    Normative hours per day: 8  Normative hours per week: not more than 48 hours per week  

  • Costa Rica Holidays

    • January 1 (New Year Day)
    • April 11 (Juan Santamaria Day)
    • Easter (Holy Thursday and Good Friday)
    • May 1 (Labor Day)
    • July 25 (Nicoya Annexation of Guanacaste Day)
    • August 15 (Mothers Day)
    • September 15 (Independence Day)
    • December 25 (Christmas)
  • Is there the 13th salary in Costa Rica?

    Employees in Costa Rica are entitled to a thirteenth month salary at Christmas time called aginaldo, which is based on one month of an employee’s salary. Christmas Bonus must be paid by the employer between December 1st and the 20th.

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