Costa Rica possesses a skilled workforce across various sectors, including technology, tourism, customer service, and remote work. By utilizing an Employer of Record (EOR) in Costa Rica, foreign employers gain access to this talent pool.

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An EOR in Costa Rica acts as the official employer for these professionals, handling payroll, benefits, taxes, and administrative tasks. This setup eliminates the need for foreign employers to establish a legal entity in Costa Rica, making HR operations for foreign employers hiring in Costa Rica simpler and saving time and resources.

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Opting for a Costa Rica EOR/PEO is advantageous owing to two reasons: 1) Cost of setting up an entity 2) Intricate labor laws in the country. 

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Costa Rica’s labor laws have a few unique features that employers from many countries may not be familiar with. One such example is the 13th month pay , where the employer pays one month’s worth pay at the end of the year. Moreover, with the impact of collective bargaining agreements (CBAs) taken into account, partnering with a Costa Rica EOR is a strategic choice. 

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A Costa Rica EOR would be well-versed in CBAs, ensuring adherence and reducing legal liabilities for employers. Moreover, with an EOR, you can also avoid setting up an entity to hire and pay local talent which can cost you anywhere between $9000 to $19000 depending on the entity you want to set up. Partnering with an EOR helps you expand and employ faster in the country at lesser costs.

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The cost of Costa Rica EOR/PEO services can vary based on factors like workforce size, required services, and project complexity. The pricing structure usually involves a fixed monthly fee per employee or a percentage of their salary. Additional charges may apply for extra services or customization.

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At Gloroots, we offer a fixed fee for our EOR solution. You incur no additional costs. This helps you plan your salary budgets properly when you hire from Costa Rica.

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Key Metrics For Foreign Employer

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Source: The Global Talent Competitiveness Index 2023

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Through the Gloroots’ Recrew platform, you can discover amazing talent in Argentina.

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"Employee misclassification" refers to improper classification of a worker by employers. This occurs when an employer improperly classifies a worker as an independent contractor or exempts them from certain employment rules and perks, even if the worker is rightfully eligible for benefits, proper work hours, and other employee rights, 

Engaging a PEO/EOR in Costa Rica removes risks tied to employee misclassification and ensures labor law compliance, accurate worker classification, precise payroll handling, and access to full benefits. This empowers companies to focus on core functions while entrusting skilled experts with employment-related responsibilities.

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Costa Rica's Labor Code ("Código de Trabajo") is the primary piece of legislation governing labor relations. Established in 1943, it has been amended various times to adapt to modern conditions.

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Employment Contract

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In Costa Rica, labor contract must be in writing as per the Labor Code's articles 23 and 24. Verbal employment contracts are valid only for employees in the agricultural or livestock sector. Temporary workers (employed for 90 days) excluding those working in industries, can be employed with an employment contract.

The employment contract must include:

1. Full names, nationality, age, gender, marital status, and address of both parties

2. Identification document numbers

3. Clear worker residence details

4. Contract duration or "indefinite period" declaration

5. Working hours

6. Payment details: salary, wage, or commission, along with payment form, timing, and location

7. Description of provided materials, tools, and equipment, if any, along with their availability

8. Work location(s)

9. Any additional agreements

10. Contract signing date and place

Fixed-term employment contracts are allowed according to articles 26 and 27 of the Labor Code. These contracts can't exceed one year initially, including extensions. However, for tasks requiring specific technical training, they can extend up to five years.

If a fixed-term contract ends and the work's cause and nature persist but isn't renewed, it's considered indefinite for the worker's benefit, requiring compensation payment.

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Work hours

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An employee's weekly working hours are capped at 48 hours. For night workers (from 7 p.m. to 5 a.m.), the maximum weekly hours are limited to 36.

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Overtime

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Public Holidays

The country observes 13  public holidays employees can take as paid days off.

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Minimum Wage

The minimum wage for 2023 ranges from CRC 11,738.83 per day for unskilled workers to CRC 15,333.31 per day for specialized employees.

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Annual Leave

In Costa Rica, the amount of paid time off you get depends on how long you've worked there. Usually, if you've worked for 50 weeks without a break, you get 14 days of paid leave. If you've worked for less time, you get one day of leave for each month you've worked.

There is provision in the law to carry forward unused leave days to the next year. However, employers are free to offer this provision and must specify this in the contract.

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Maternity Leave and Paternity Leave

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Expecting employees are eligible for a four-month paid maternity leave. Employees can commence leave a month prior to the due date and continue for three months after childbirth. The payments made during an employee’s maternity leave are split equally between the employer and the Costa Rican Social Security Fund (CCSS) for the entire four-month period.

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While fathers employed in the private sector do not receive paid time off upon becoming fathers, those in the public sector are entitled to eight days of paid paternity leave upon the birth of their child.

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Sick Pay

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In Costa Rica, employees are granted complete paid sick leave for the initial three days of illness. During this period, the employer covers 50.00% of the employee’s regular salary, while the remaining 50.00% is covered by social security. Starting from the fourth day of illness, the social security provides 60.00% of the usual daily wage, and the employer is relieved of the obligation to provide any payment to the employee.

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To avail of these benefits, the employee is required to submit a medical certificate to the social security administration within 48 hours of the commencement of the sick leave.

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Income tax

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Other Taxes and Social Security contribution

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Employer Payroll Contributions

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Employee Payroll Contributions

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Termination Process

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The process of ending employment differs depending on the employment agreement or collective arrangement in effect, and it is influenced by the contract type and the reason for termination.

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For individual employment contracts, termination can occur through:

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1. Legal provisions

2. Agreement between both parties

3. Either party acts in accordance with the terms and conditions specified by law.

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Employers have the authority to terminate employment contracts due to reasons linked to the employee (such as insufficient job performance or disciplinary actions) or reasons unrelated to the employee (like job elimination).

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In cases where the employer requests a termination letter, they are obliged to provide one, regardless of the reason for the termination.

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Notice Period

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Severance Pay

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In Costa Rica, the amount of severance pay an employee receives is determined by their length of service, as indicated below:

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3 to 6 months: 7 days

6 months to 1 year: 14 days

1 year: 19.5 days

2 years: 20 days

3 years: 20.5 days

4 years: 21 days

5 years: 21.24 days

6 years: 21.5 days

7 – 9 years: 22 days

10 years: 21.5 days

11 years: 21 days

12 years: 20.5 days

13 years and beyond 20 days

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Probation Periods

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The length of the probationary period in Costa Rica relies on the specific job role and is specified in the employment contract. Generally, however, probation periods typically span three months.

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When hiring globally, ensuring compliance comes with its own set of battles. Employers must ensure all hiring and onboarding activities adhere to employment laws, payroll procedures, DE&I compliance, GDPR and similar data protection, etc. If you think it is hard to set up local entities and start hiring, keeping up with a dynamic compliance landscape is far harder. 

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Gloroots helps you minimize all these efforts by providing a single window to manage all these tasks. Our in-house experts fully shield you from cross-border employment and payroll compliance risks. We do this by helping you with generating employment contracts, on-time payments, compliant benefits, while you focus only on screening talent. 

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Our promise is a stress-free global employment experience for both you and your employee.

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Contact our experts today to kickstart your global hiring campaign.

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Expanding your team means strategically hiring the right people for the right positions.The complex employment regulations in the country highlight the difficulty of following labor laws.

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Gloroots provides a comprehensive global Employer of Record (EoR) service, allowing you to delegate payroll, taxes, benefits, and compliance complexities to Gloroots. This frees you to concentrate on what truly counts: supporting your employees and driving your company's expansion.

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