How to hire employees in Costa Rica

Costa Rica, with its stable and diverse economy, is emerging as a compelling destination for global business expansion. Highlighted by a strong service sector driven by tourism, finance, and technology, alongside a significant agricultural base, it offers a unique blend of talent. Despite economic challenges, including a contraction in 2020 due to the pandemic, Costa Rica’s workforce remains skilled and cost-effective. This balance of economic stability and a versatile talent pool makes Costa Rica an attractive option for businesses looking to hire, particularly in innovative and technical fields, against a backdrop of favorable employment laws.

What you need to know before hiring employees in Costa Rica 

Job market in Costa Rica 

When considering how to hire employees in Costa Rica, it's essential to understand the current job market dynamics to navigate hiring and compensation effectively.

By the end of 2023, Costa Rica is facing economic fluctuations, with a forecasted growth deceleration to 2.3% in 2023 before a bounce-back to 3.7% in 2024 as the global economy rallies. This fluctuation impacts the labor market directly, with specific considerations for potential employers:

• According to Central Bank of Costa Rica, the Costa Rican job market witnessed a 9.02% month-on-month decrease in active job postings by January 2024, reflecting the broader economic uncertainties.
• Despite a slight increase in new job postings by 4.8% in January 2024, there's been a significant downturn over the preceding months, with new jobs decreasing by 16.14% from October 2023 to January 2024.
• The job closure rate outpaced new openings, with a 25.17% increase in closed jobs, indicating a tightening job market.
• Employment rates showed a minor dip to 49.89% in the fourth quarter of 2023, underlining the challenges in the labor market amidst economic adjustments.

Costa Rica's approach to achieving net carbon neutrality by 2050 and its commitment to maintaining a 100% renewable energy share for electricity production highlight its innovative and forward-thinking workforce. Additionally, the ongoing structural reforms aimed at increasing growth, reducing income inequalities, and enhancing the business environment present a favorable scenario for future hiring.

Costa Rica Hiring Trends

• Costa Rica's job market is steadily rebounding to pre-pandemic levels, indicating resilience and growth potential in hiring trends.
• Communications, transport, agriculture, and construction sectors are expected to lead job creation, showcasing economic diversification and adaptation.
• A preference for candidates with university education and vocational training signals a shift towards a more skilled workforce.
• The demand for tech-savvy and bilingual individuals highlights evolving job requirements, particularly benefiting IT and communication sectors.
• Focus on STEM, AI, and healthcare roles aligns with strategic priorities on digital transformation and wellness, driving demand in these areas.
• Initiatives in electronic manufacturing, cybersecurity, and ecotourism reflect Costa Rica's commitment to technological advancements and sustainability.

How to hire employees from Costa Rica 

1. Set up an entity in the country

Establishing a legal entity in Costa Rica is a strategic move for companies targeting substantial growth or a persistent footprint in the country. This approach facilitates the direct oversight of employees and yields enduring cost advantages.

The procedure entails choosing a suitable business format, such as a Sociedad Anónima (S.A.) or Sociedad de Responsabilidad Limitada (S.R.L.), followed by registration with the National Registry and acquiring a unique tax identification number (cédula jurídica).

Nonetheless, navigating this pathway can be intricate and expensive, requiring comprehensive knowledge of Costa Rican employment regulations and adept handling of human resources and payroll. This underscores the necessity for meticulous planning or the assistance of specialists.

2. Hire independent contractors

Hiring contractors in Costa Rica involves forming agreements with either individuals or entities for designated tasks or projects. This method is especially valued for its flexibility, perfectly suited for short-term endeavors or distinct project requirements. However, precise classification of workers is imperative to circumvent legal issues and possible penalties under Costa Rican law. 

Moreover, it's essential to acknowledge that contractors may not display the same level of commitment or allegiance as direct, full-time employees, a critical consideration within this employment strategy.

3. Partner with an EOR in the country

Leveraging an Employer of Record (EOR) service, such as Gloroots, provides a simplified entry into Costa Rica's market without the complexities associated with establishing a legal entity. This method greatly reduces liabilities and offers a cost-effective solution. Working with an EOR ensures compliance with Costa Rican labor laws, tax obligations, and regulations, thereby significantly reducing legal risks and securing a compliant business framework.

Compliance risk while hiring in Costa Rica 

When hiring in Costa Rica, it's crucial to comply with local labor laws to avoid legal issues and protect your company's reputation. This includes adhering to minimum wage laws, ensuring proper compensation for overtime, and making mandatory social security contributions. Regular updates on labor laws, legal advice, and internal policy reviews are advisable.

Key Aspects of Costa Rican Labor Law

Employment Contract:

In Costa Rica, employment contracts are predominantly mandated to be in writing, particularly for non-agricultural and non-temporary roles exceeding 90 days, to ensure clarity and compliance with labor laws. These contracts need to include essential information such as both parties' personal details, employment duration, working hours, compensation details, workplace location(s), and any other mutually agreed terms. 

While fixed-term contracts are restricted to a maximum of one year, extendable up to five years for positions necessitating special skills, they default to indefinite terms if the work continues post-contract without renewal. The distinction between employees and independent contractors in Costa Rica hinges on subordination levels and the nature of service provision. 

Although the law does not specify probationary periods, the initial three months allow for employment termination without compensatory obligations. This legal structure underlines the importance of thorough documentation and adherence to labor regulations to safeguard both parties in the employment relationship.

Working Hours:

In Costa Rica, the typical work schedule consists of 8 hours daily, totaling 48 hours across the week. For those employed during night hours, from 7 p.m. to 5 a.m., the weekly maximum is set at 36 hours.

Overtime:

Working beyond 48 hours a week qualifies as overtime in Costa Rica, compensated at a rate of 150% of the standard salary. Holiday work is remunerated at twice the regular pay, and the daily limit for overtime is set at 4 hours.

Minimum Wage:

For 2023, the daily minimum wage in Costa Rica ranges from CRC 11,738.83 for nonspecialized workers to CRC 15,333.31 for those in specialized roles.

Payroll laws in Costa Rica 

In Costa Rica, the typical payroll frequency is on a monthly basis, with salaries disbursed once per month.

Employment benefits in Costa Rica 

Leave Policies in Costa Rica 

1. Paid Time Off:

In Costa Rica, the amount of paid annual leave an employee is eligible for varies based on their length of service. Typically, employees who have completed 50 weeks of uninterrupted employment are entitled to 14 days of paid leave annually. Those with less than 50 weeks of service are granted one day of leave for each month worked. The accumulation or rollover of leave is not permitted unless there is a mutual agreement between the employer and the employee, documented in writing.

2. Public Holidays:

The total number of public holidays in Costa Rica for the year 2024 is 11.

3. Sick Days:

In Costa Rica, workers receive their entire salary during the initial three days of illness, with the cost evenly split between the employer and social security, each covering 50% of the employee's standard pay. Starting from the fourth day of illness, social security takes on the responsibility of compensating 60% of the employee's regular daily wage, freeing the employer from further financial obligations for the duration of the sickness. To qualify for these benefits, employees are required to present a medical certificate to the social security administration no later than 48 hours after commencing their sick leave.

4. Maternity Leave:

Expectant employees in Costa Rica are granted four months of paid maternity leave, allocated as one month pre-delivery and three months post-delivery. The financial obligation for maternity leave pay is divided equally between the employer and the CCSS (Costa Rican Social Security Fund) throughout the entire four-month period.

5. Paternity Leave:

In Costa Rica, fathers working in the private sector do not receive paternity leave benefits, whereas those employed in the public sector are eligible for eight days of paid paternity leave.

Public Health Insurance 

Public health insurance in Costa Rica is administered by the Caja Costarricense de Seguro Social (CCSS), also known as the Costa Rican Social Security Fund. This comprehensive system provides a wide range of healthcare services to the country's residents, including both preventive care and medical treatment. 

Participation in the CCSS is mandatory for all employees and employers, with contributions based on income. The system also covers dependents, offering access to a network of hospitals and clinics throughout Costa Rica. Public health insurance ensures that all residents have access to essential healthcare services, making Costa Rica known for its high-quality, accessible, and affordable healthcare system.

Filing tax in Costa Rica 

Income Tax:

In Costa Rica, the income tax structure is progressive, starting from 0% for monthly incomes up to 929,000 CRC. The tax rate increases for higher income brackets, with rates ranging up to 25% for the highest earners. This system aims to ensure fairness by taxing individuals based on their capacity to pay. For a detailed overview of the specific rates and brackets, consult our guide.

Other Tax and Social Security Contributions:

In Costa Rica, employer payroll contributions total 26.67%, covering various areas like healthcare, pensions, and social aid. The most significant charge is for healthcare and maternity at 9.25%. Employees contribute 10.67%, with the largest portion going towards healthcare and maternity (5.50%). These contributions ensure workers are covered for health, retirement, and other social benefits. An optional 5.00% can be added for the Solidarity Association, not included in the total cost. For a detailed exploration of the specific rates and how they're applied, consult our comprehensive guide on payroll contributions in Costa Rica.

Business culture in Costa Rica 

Business culture in Costa Rica is characterized by its emphasis on personal relationships, respect, and courtesy, which are pivotal to establishing and maintaining successful professional connections. Here are some key aspects:

• Building trust through personal relationships is crucial in Costa Rican business culture, with a preference for face-to-face meetings to develop connections.
• The business environment is hierarchical, yet friendly; showing respect to senior figures and using formal titles is expected.
• The 'Pura Vida' lifestyle influences a relaxed attitude towards time and deadlines, valuing quality of life over work pressures.
• Communication tends to be indirect, prioritizing harmony and requiring sensitivity to non-verbal cues.
• Decision-making processes are slow, emphasizing consensus and careful review, requiring patience from business partners.
• Initial meetings focus on getting to know each other, with greetings involving warm handshakes, eye contact, and small talk.
• Business attire is formal but adapted to the tropical climate; lightweight suits for men and equivalent professional attire for women are common.

Top sectors to hire from in Costa Rica 

Services Sector:

Dominating the employment landscape with 65.68% of the workforce, this sector offers a vast pool of talent, especially in areas like tourism, finance, and technology services.

Industry Sector: 

Accounting for 17.19% of employment, the industry sector includes manufacturing, construction, and energy, showcasing a range of skilled professionals.

Agricultural Sector: 

Representing 17.14% of the workforce, agriculture remains a significant part of Costa Rica's economy, offering expertise in farming, forestry, and fishing.

Top cities to hire from Costa Rica 

San José:
The capital city is a central hub for business and finance, making it an excellent source for talent in technology, services, and administration.

Heredia: 
Known for its tech parks and universities, Heredia offers a pool of young, educated professionals, especially in IT and engineering.

Alajuela: 
With a strong industrial base, Alajuela is ideal for hiring in manufacturing, logistics, and the food processing sectors.

Cartago:
Boasting several educational institutions, Cartago is a good place to find talent in engineering, technology, and education.

Limón: 
As a key port city, Limón is great for sourcing experts in logistics, port management, and international trade.

Puntarenas: 
With its tourism and fishing industries, Puntarenas offers specialized talent in hospitality, marine biology, and environmental sciences.

Hire in Costa Rica  compliantly with Gloroots

Gloroots, as an Employer of Record (EOR) in Costa Rica , offers a streamlined solution for these challenges. Our EOR platform accelerates candidate onboarding, ensuring swift operational initiation while adhering to local and global compliance standards. Designed for companies of all sizes, it simplifies payroll management, benefits administration, and tax handling, thus bypassing the need for a local entity. This allows companies to focus on building a remote team in Costa Rica efficiently. For more information on how Gloroots can facilitate your Costa Rica hiring needs, please contact us.

Frequently Asked Questions 

1. How much does it cost to hire an employee in Costa Rica?

The cost of hiring an employee in Costa Rica includes the employee's gross salary, mandatory benefits, contributions to social security (CCSS), and taxes. Employers must also account for additional expenses such as recruitment, signing bonuses, and the onboarding process. These costs vary depending on the position's requirements, the employee's experience, and the job location within Costa Rica. Understanding these costs is vital for effective budgeting and financial management in the Costa Rican labor market.

2. Where can I hire employees from Costa Rica?

Talent in Costa Rica can be sourced from key urban areas such as San José, Heredia, Alajuela, and Cartago. These regions are particularly rich in professionals in sectors like technology, tourism, and services. Employers frequently use online job boards such as Elempleo.com, Computrabajo, and LinkedIn, participate in job fairs, and engage in university recruitment to find suitable candidates. These areas provide fertile ground for companies aiming to build a skilled and diverse workforce.

3. How to find talent in Costa Rica?

Finding skilled professionals in Costa Rica involves leveraging several platforms and strategies:

• LinkedIn: A global networking site that helps employers post job vacancies and search for candidates.
• Elempleo.com: A popular local job portal that lists a wide range of job opportunities.
• Computrabajo: Another widely used job board in Costa Rica offering access to numerous candidates.
• Job Fairs: Participating in local job fairs can connect employers directly with potential hires.
• University Recruitment: Collaborating with Costa Rican universities can help tap into a pool of fresh talent.
• Recruitment Agencies: For specialized positions, recruitment agencies can facilitate the search for qualified individuals.
• Employing an Employer of Record (EOR) service, such as Gloroots, can also streamline the hiring process, ensuring adherence to Costa Rican employment laws and regulations.

4. What is the minimum salary for employees in Costa Rica?

The minimum wage in Costa Rica varies by occupation and is set by the National Wages Council. As of 2021, the minimum wages range from approximately 309,143 CRC per month for unskilled workers to higher rates for specialized positions. Employers must comply with these minimum wage regulations to ensure lawful employment practices.