How to hire and pay employees in Costa Rica

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Costa Rica

Before hiring

EMPLOYEES IN
Costa Rica

Before hiring employees in Costa Rica, there are a few important things you’ll need to know. Firstly, employees are entitled to one day of vacation for every month of work. After 50 weeks of continuous employment, they get 12 working days (two weeks) of paid vacation in a year. 

As an employer in Costa Rica, it’s also important to know that non-compete agreements must include compensation to the employee for the full duration of the agreement. 

We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform. 

Get an overview of what you need to know when hiring in Costa Rica below.

At a glance

CURRENCY

CRC

OFFICIAL LANGUAGE

SPANISH

PAYROLL FREQUENCY

MONTHLY, BI-MONTHLY, WEEKLY

PUBLIC HOLIDAYS

18

(based on region;
see here
)

EMPLOYER TAXES

26.5%

of gross salary

13th / 14th SALARY

Employees receive a 13th salary (aguinaldo), paid in December.

Good to know

  • Employees in Costa Rica get a 13th salary, which is a Christmas bonus, known as an aguinaldo. The bonus is equivalent to one month’s salary, and must be paid within the first 20 days of December.
  • Notice periods in Costa Rica range from one week to one month. During the notice period, the employee is entitled to take one paid day off per week to find a new position.
  • Only employees dismissed without just cause are entitled to severance pay. Employees fired with just cause are paid only their acquired vacation days and Christmas bonus portion earned that year.

Labor laws in

Costa Rica

Working hours and overtime

Employees in Costa Rica work 48 hours per week.

Any work over 48 hours in a week is considered overtime, and is paid at 150% regular wages. On holidays or weekly rest days, that amount is doubled. Overtime work cannot exceed four hours per day. 

Employment contracts

Probationary period

The probationary period in Costa Rica is three months.

Pensions

IP protection and non-compete agreements

In Costa Rica, non-compete agreements must include compensation to the employee for the duration of the agreement. 

Calculate costs to hire internationally

Benefits and leave in

Costa Rica

Vacation time

Employees are entitled to one day of vacation for every month of work. After 50 weeks of continuous employment, they get 12 working days (two weeks) of paid vacation in a year. 

Sick leave

In Costa Rica, for the first three days of sick leave, the employer and social security each pay 50% of the employee's salary.

From the fourth day on, social security pays the employee 60% of their salary, and the employer is no longer obligated to pay.

Parental leave

Employees are entitled to four months of paid maternity leave, which can be taken one month before and three months after childbirth. This is paid in half by the employer and half by the Costa Rican Social Security Fund.

There is no paternity leave.

Holidays

View a list of recognized public holidays in Costa Rica here.

Employer tax

In Costa Rica, an employer’s social contributions total 26.5% and include contributions for health and maternity, basic pension, Banco Popular employer fee, family assignations, social aid, INA, contributions from Banco Popular employer, labor capitalization fund, complementary pension fund, and the National Insurance Institute (INS). 

Individual tax

Employees in Costa Rica pay between 0% and 25% in taxes depending on their income bracket. Employees also pay social security contributions of 10.5%. 

Termination in

Costa Rica

Employees in Costa Rica dismissed without just cause are entitled to severance pay. The amount of this depends on their length of employment:

  • 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
  • 10 years: 21.5 days of pay
  • 11 years: 21 days of pay
  • 12 years: 20.5 days of pay
  • 13 years and over: 20 days of pay

Employees fired with just cause are paid only their acquired vacation days and Christmas bonus portion earned that year.

Notice period

Notice periods in Costa Rica depend on the length of employment. The breakdown is as follows:

  • Less than three months: No notice required
  • Three to six months: One week notice
  • Six months to one year: Two weeks notice
  • More than one year: One month notice

During the notice period, the employee is entitled to take one paid day off per week to find a new position.

Start hiring employees in

Costa Rica

Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast. 

We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities. 

With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.

Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.

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