Costa Rica is a country in Central America bordered by Nicaragua, the Caribbean Sea, Panama, and the Pacific Ocean. It has a long-standing democracy with a highly educated workforce and has been rated as one of the world’s top 15 happiest countries for several years. Many companies based in other countries operate in Costa Rica's Free Trade Zones (FTZ) where they are able to benefit from tax incentives.
Costa Rica does not have a national minimum wage, so wages must be agreed upon through collective bargaining agreements or employment contracts. For the most part, the minimum average is CRC 10,875.11 per day for “unskilled” employees to CRC 14,205.12 per day for “specialized” employees.
Standard work hours are 48 hours per week on Monday-Saturday (36 hours for nighttime workers), and any work done past that is considered overtime with a maximum of 4 hours per day. Overtime is paid at 150% of the salary, with work on holidays paid at 200%.
Pregnant employees are entitled to 4 months of paid maternity leave, which usually starts 1 month before the due date and is paid 50/50 by the employer and social security. There is no provision for paternity leave for the private sector in Costa Rica — public sector employees get 8 days of paid paternity leave.
Employees in Costa Rica are entitled to sick leave if they’ve made contributions to social security. In the first 3 days of sick leave the employee receives full wages paid 50/50 by the employer and social security, and from day 4 onwards the employee receives 60% of their wages from social security (the employer does not pay).
There are 9 public holidays in Costa Rica, and employees are able to take time off for their religious holidays (such as Yom Kippur, Eid-el-Fitr, etc). If an employee is required to work on a public holiday, the employer must provide another day off within 15 days.
Employees are also entitled to a minimum of 2 weeks of paid time off each year, after completing 1 year of service with their employer. Most employers offer more paid days off as an added benefit to their employees. Employees can also receive bereavement leave.
Employment contracts can be terminated with just cause, such as misconduct, negligence, fraud, redundancy, or other tangible reasons, as long as is notice provided in advance.
Notice periods in Costa Rica depend on the employee’s length of time at the company:
Severance pay for dismissals are based on the employee’s length of time at the company, and ranges from 7-14 days for less than 1 year, to 20-22 days for 1+ year.
A 13th month salary payment is mandated by law in Costa Rica is mandated by law. This “aguinaldo” is a bonus equal to one month’s pay that is due on December 20th each year.
★ 9.25% - Health & Maternity
★ 5.75% - Pension Fund
★ 0.5% - Banco Popular Employer Fees
★ 5% - Family Assignations
★ 0.5% - Social Aid
★ 1.5% - INA
★ 3% - Labor Capitalization Fund
★ 1% - National Insurance Institute
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Unlike full-time employees, contractors work on projects with multiple companies at a given time and are technically self-employed. Full-time employees are solely focused on their employer and usually receive benefits (such as health insurance, equity or stock options, and time off) as an additional form of compensation. While it can be cheaper to work with international contractors instead of paying benefits to a full-time employee, you run the risk of misclassification. It's recommended to work with an EOR for contractor onboarding and payments, so you can know that your international contractors are paid compliantly and on time.