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Hiring in Costa Rica
When negotiating terms of an employment contract with an employee in Costa Rica, it may be useful to keep the following standards in mind.
Employment contracts in Costa Rica
It is legally required to put in place an employment contract in Costa Rica, in the local language, which details the terms and conditions of the employee’s employment, including term of the contract, job position and responsibilities, probationary period, working hours, compensation, benefits, and termination requirements. An offer letter and employment contract in Costa Rica should always state the salary and any compensation amounts in the official currency, colones (CRC), rather than another currency.
Working hours in Costa Rica
The weekly working hours in Costa Rica are limited to 48 hours. In addition, work may be performed in various shifts as follows:
- Day shift: From 5 a.m. and 7 p.m.; cannot exceed 8 hours per day or 48 hours per week
- Night shift: From 7 p.m. to 5 a.m.; cannot exceed 6 hours per day or 36 hours per week
- The mixed shift: Takes place during daytime and nighttime and it has a limit of 7 hours per day and 42 hours per week. Nighttime hours cannot exceed 3.5 hours per day.
Employees are entitled to a meal break of 1 hour per workday (or a 45-minute lunch break and two 15-minute breaks), that is not included in the work shift and is not considered as effective worked time. If the daily break is less than 1 hour, the employee must be paid for this time and it must be counted as part of the daily workday.
Employees are entitled to 1 or 2 days per week of rest. Overtime in normal working days is paid at time and a half, or the hourly wage plus an additional 50%. Employers may require no more than 4 hours of overtime in a day, for a total of 12 working hours per day.
Employees that are classified as in a position of trust (Art. 143 of Labor Code), such as managers, administrators, legal representatives, professionals without immediate supervision, sales position, and external positions are not subject to working hour limitations. However, they are not obliged to remain at work for more than 12 hours a day and will have the right, within that day, to a minimum break of 1 hour as well as 1 or 2 rest days per week.
Holidays in Costa Rica
Costa Rica celebrates 12 public holidays for which employees are given paid days off, including:
- New Year’s Day
- Maundy Thursday
- Good Friday
- Juan Santamaria Day
- Labour Day/May Day
- Annexation of Guanacaste Day
- Virgen de los Angeles Day
- Mother’s Day
- Day of black person and the Afro-Costa Rican
- Independence Day
- Abolition of Army Day
- Christmas Day
Vacation days in Costa Rica
The Costa Rica Labor Code provides vacation benefits that generally entitle employees to 1 day of vacation for every month of employment, and 2 weeks of vacation after 50 weeks of work.
However, there are certain requirements for vacation benefits, including that vacations may not include paid holidays or weekends, and paid vacations must be given to employees during the 15 weeks following the completion of the 50 weeks of work.
Employers can choose the time the vacations are taken and require that half be taken at 2 different times, but they must be granted within 15 weeks of the time when they were due.
Costa Rica sick leave
Employers must pay at least 50% of the employee’s salary for the first 3 days of the employee’s sick leave. From the fourth day of sick leave forward, Social Security pays 60% of the salary and the employer is not obligated to pay anything to the employee. The employee must submit a medical certificate to the Social Security Administration to receive payment.
Maternity/paternity leave in Costa Rica
Pregnant employees are given 1 month of paid maternity leave before the birth of the child, and 3 months after birth. Employers are required to pay 50% of the salary for all 4 months of leave, and Social Security pays the remaining half.
Pregnant employees’ jobs are protected and termination can result in the employer being required to pay regular wages from the date of the dismissal to the eighth month of pregnancy, at minimum. Courts may determine that higher compensation is owed.
Biological fathers are entitled to a paternity leave of 2 days per week for the first 4 weeks following the birth of the child.
Health insurance in Costa Rica
The health system includes Medical Treatment (illness and maternity) and Obligatory Pension (disability, old age and death).
It is possible to enroll in a private insurance or health plan in Costa Rica. Private insurance plans are also available through the government-owned insurance company (INS). Private plans include dental work, optometry, well-visits, and annual check-ups. And 80% of the costs are covered for prescription drugs, certain medical exams, sick visits, and hospitalization. Surgeon and esthetician costs are covered at full cost.
Costa Rica supplementary benefits
As best practice, many companies budget around 26% as benefits cost on top of the gross salary to allocate the total employer’s cost including benefits in Costa Rica.
Bonuses
Employees in Costa Rica are entitled to a 13-month salary (also referred to as Christmas bonus) called aguinaldo, which is based on 1 month of an employee’s salary and must be paid within the first 20 days of December each year. This bonus is additional to the annual salary.
Termination/severance in Costa Rica
Probationary periods are permitted in Costa Rica, and the maximum length is 3 months. Severance pay is not required for termination during the probationary period.
In Costa Rica, to terminate an employee for cause, the cause must be based on one of the grounds set forth in Article 81 of the Labor Code. The termination must be well substantiated and the employer is responsible for proving that the termination was for cause. Under a termination for cause the employer will only be liable for the payment of wages, proportional vacation time, and the aguinaldo.
Employees terminated without cause are entitled to severance pay, which must be paid within 30 days of the last day of employment.
The law requires prior notice (preaviso) based on length of service. For more than 3 months but less than 6 months of service, 7 days’ notice is required. For more than 6 months but less than 1 year of service, 15 days’ notice is required. For more than 1 year of service, 30 days prior notice is required to be given to the employee. If no prior notice is given, such period shall be paid in lieu to the employee. If the prior notice is worked by the employee, regular pay continues, but the employee has the right to 1 paid off day per week to look for another job.
If an employee is terminated without cause by the employer, or if the employee quits for cause, they are entitled to severance pay (cesantia). The amount is determined by the length of service:
- More than 3 months but less than 6 months – employees are entitled to the equivalent of 7 days’ wages.
- From 6 months to 1 year – employees are entitled to 14 days of wages.
- More than 1 year – the following schedule applies for each year worked:
| YEARS WORKED | DAYS PAID |
|---|---|
| 1 | 19.50 |
| 2 | 20.00 |
| 3 | 20.00 |
| 4 | 21.00 |
| 5 | 21.24 |
| 6 | 21.50 |
| 7 | 22.00 |
When an employee is terminated, any unused vacation time must be paid. The employee is entitled, as part of their severance, 1 day of vacation pay for each month worked. If the employee is terminated prior to December, the pro-rated aguinaldo bonus must be paid.
Paying taxes in Costa Rica
The Social Security System, known as the Caja, provides employees with free healthcare, sick leave, disability pensions, and retirement benefits. It is mandatory for all employers to register employees with the Caja. Total contributions amount to roughly 26.5% of the salary by employers, and 10.5% by employees.
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