Employment Laws in Costa Rica

Contractual Agreements in Costa Rica

Employment contracts are critical in defining proper terms and conditions between employers and employees. A clear understanding of the various kinds of employment contracts, data processing agreements, and the responsibilities and rights of both parties supports labor law compliance and enhances a good work relationship.

Types of employment contracts in Costa Rica

Costa Rica has numerous forms of employment contracts, some of which include:

• Indefinite Term Contracts: The most prevalent form of permanent employment with no fixed end date.
• Fixed-Term Contracts: Generally for short-term assignments or projects with a definite end date.
• Probationary Contracts: These are usually for assessing an employee's fitness for a position and are typically no longer than three months.
• Part-Time or Hourly Contracts: For workers who work below a full-time number of hours.
• Seasonal or Project-Based Contracts: Appropriate for short-term or seasonal labor, prevalent in sectors such as agriculture and tourism.

Obligations and rights for both parties in Costa Rica

There are duties and rights per employment laws in Costa Rica to maintain fair and respectful employer-employee relationships. Knowing these duties can assist you in remaining compliant and promoting a healthy work environment.

As an employer, you must:

• Provide a safe environment free from hazards that meets occupational health and safety standards.
• Pay employees correctly and promptly, according to minimum wage regulations and overtime pay rules.
• Contribute to the Costa Rican Social Security Fund (CCSS) for workers' healthcare and pensions.
• Grant statutory benefits such as paid days off, holidays, and dismissal as necessary.
• Ensure an equal and unbiased workplace, keeping employees from discrimination or harassment.

Further, you must extend the following rights and employee benefits in Costa Rica through the following means: 

• Establish job roles, duties, and performance expectations through employment contracts.
• Create workplace policies and apply disciplinary measures when necessary.
• Terminate contracts on lawful grounds, observe legal formalities, and pay adequate notice or severance.
• Apply confidentiality agreements and non-compete provisions where allowed.

Working Hours and Overtime in Costa Rica

Comprehending the following Costa Rica's working hours and overtime rules is essential to guarantee compliance and a just workplace:

Regular working hours in Costa Rica

In Costa Rica, hours of work are classified into:

• Day Shifts: You can assign workers up to 8 hours daily (5:00 to 15:00), extending up to 10 hours a day and 48 hours weekly.
• Night Shifts: For jobs involving night work (19:00 and 05:00), workers can work up to 6 hours a day and 36 hours a week.
• Mixed Shifts: If employees work day and night shifts, restrict their schedule to 7 hours a day and 42 hours a week.

Overtime regulations and compensation in Costa Rica

Costa Rica labor laws on overtime prescribe the following compensation for any time spent working more than the daily or weekly threshold over time:

• Workers can work up to 4 hours of overtime daily, but overall working hours must not exceed 12 hours.

Furthermore, the employment law in Costa Rica recommends overtime compensation as follows:

• You’re required to pay 150% of the regular hourly wage.
• Employees who work on public holidays must be compensated at double their regular hourly rate.

Minimum Wage and Compensation in Costa Rica

The minimum wage in Costa Rica allows employers to set a threshold above which they must compensate workers. Costa Rica's minimum wage requirements are differentiated based on occupations and skill levels to ensure equitable pay for different sectors. 

Factors affecting wage determination in Costa Rica

Typically, unskilled workers perform jobs that do not require special training or college-level training. For example, Parking attendants (not drivers) and school bus companions.

Whereas specialized workers have highly developed skills, specialized training, or advanced education qualifications, allowing them to specialize in performing intricate tasks within their profession. Examples are customs agents and sales agents.

Anywhere between this spectrum lies other workers. 

Moreover, the employer labor costs in Costa Rica are 53.66% (Inclusive of Accruals) on an annual salary of USD 60,000. You can use the cost calculator tool for a more accurate cost of employment in Costa Rica. 

Costa Rica’s minimum wage rate in 2025

You can set your compensation based on the minimum wage in Costa Rica per hour as follows:

• Unskilled Worker: CRC 12,236.95 per day
• Semi-Skilled Worker: CRC 13,306.79 per day
• Skilled Worker: CRC 13,713.20 per day
• Specialized Worker: CRC 15,983.95 per day

Further, the monthly minimum wage in Costa Rica is recommended as follows:

• Generic Unskilled Worker: CRC 367,108.56 per month
• General Semi-Skilled Worker: CRC 391,198.08 per month
• Generic Skilled Worker: CRC 413,023.56 per month
• General Highly Skilled Worker: CRC 471,604.51 per month
• Technical Worker - Diversified Education: CRC 432,819.26 per month
• Technical Worker - Superior Education: CRC 533,402.13 per month
• Technical Worker - Diploma of Higher Education: CRC 576,094.23 per month
• Technical Worker - Bachelor's University: CRC 653,427.21 per month
• Technical Worker - University Graduate: CRC 784,139.52 per month

Employee Benefits and Social Security in Costa Rica

You must provide various employee benefits and contribute to the social security system per the Costa Rican employment law. Key benefits include:

Statutory benefits in Costa Rica

• Costa Rican Social Security Fund (CCSS) regulates the country's social security schemes, which provide health insurance, pensions, and other social security benefits. The schemes are funded through employer, employee, and government contributions.
• You must pay a compulsory 13th-month salary in December, which is one month's wage.
• You must extend paid vacation leave per employment law in Costa Rica and obligatory paid public holidays in Costa Rica.
• You must also extend paid maternity leave and paternity leave per Costa Rica labor laws. 
• When you dismiss an employee for an unjust cause, you must pay severance pay according to their length of service.
• You have to provide advance notice or pay compensation instead of notice when you are dismissing an employee.
• You have to enroll your employees with the National Insurance Institute (INS) to insure them for occupational risks.

Additional perks and benefits in Costa Rica

In addition to benefits provided by Costa Rica employment law, you can provide additional benefits and perks to attract and retain employees. Among the most common include:

• Private Health Insurance
• Performance Bonuses
• Transportation Allowances
• Meal Vouchers or Subsidies
• Flexible Work Arrangements
• Professional Development
• Life and Disability Insurance
• Wellness Programs
• Childcare Support
• Extended Leave Options

Social security contributions and requirements in Costa Rica

The Costa Rican Social Security Fund (CCSS), administers the country’s social security programs, which include health insurance, pensions, and various social welfare benefits. The system is funded through employers, employees, and government contributions.

Vacations and Paid Time Off in Costa Rica

The employment laws in Costa Rica require you to provide your employees with various vacations, paid time off, and unpaid time off. Here is a detailed breakdown: 

Annual leave entitlement in Costa Rica

Granting fair and timely vacation leave not only makes you legally compliant but also contributes to workers' well-being and productivity. The annual leave right per Costa Rica employment laws consists of the following:

• Workers are given 2 weeks of paid vacation and 12 working days.
• You are required to pay the worker normal wages during the vacation time.
• The vacation should be taken within the next year after achieving the 50 weeks.
• Workers are not allowed to be paid instead of taking leave, except when the employment terminates before they have utilized their accrued vacation time.

Public holidays and special leaves in Costa Rica

Costa Rica has 12 national public holidays, which are paid in full if they occur on a normal working day. Workers who are asked to work on a public holiday should be paid double their normal wage. The principal public holidays in Costa Rica are:

• New Year's Day: January 1
• Juan Santamaria Day: April 11
• Maundy Thursday: Thursday or Friday of Holy Week 
• Good Friday: Friday of Holy Week
• Labor Day: May 1
• Annexation of Guanacaste: July 25
• Virgin of Los Angeles Day: August 2
• Mother’s Day: August 15 
• Day of the Black Person and Afro-descendent Culture: August 31
• Independence Day: September 15
• Abolition of National Army Day: December 1
• Christmas Day: December 25

Aside from public holidays, employment in Costa Rica also creates different forms of special leave, such as:

• Sick Leave: 1 day of paid leave to visit the doctor. A doctor may extend sick leave for certified employees.‍
• Maternity Leave: Pregnant women are entitled to 4 months of maternity leave — a month before delivery and three months post-delivery. The pay is divided equally between you and the CCSS.
• ‍Paternity Leave: Upon the birth of the child, fathers are also eligible for 2 days of paid leave a week for 4 weeks. You are entirely responsible for paying for this leave.

Termination and Severance in Costa Rica

You can terminate employment in Costa Rica following the statutory notice period and severance pay requirements. However, it's important to approach each case carefully and look at the individual circumstances.

Grounds for termination in Costa Rica

The following are the key reasons for dismissal:

• Dismissal with Just Cause: You can dismiss an employee without notice if there are justifiable reasons for termination. Some of these valid reasons include:
  
  • Misconduct or Dishonesty: Theft, dishonesty, or any other form of unethical conduct.
  • Insubordination: Refusal to obey lawful instructions or disrespect for supervisors.
  • Negligence: Persistent poor performance or inability to fulfill job duties.
  • Violation of Company Policies: Violating workplace rules or safety procedures.
  • Conflict of Interest: Engaging in activities that jeopardize your business interests.

• Termination without Just Cause: Firing an employee without a legitimate reason amounts to dismissal without just cause. In this situation, you are obligated to:
  
  • Give notice or payment in lieu according to the length of the employee's service.
  • Pay severance compensation based on the laws of Costa Rica.
  • Pay any due wages, accrued vacation pay, and proportional bonuses.

• Mutual Agreement: You and the employee can also agree to terminate the employment relationship. In such a case, ensure that the agreement is written and that both sides know their rights.

• Employee Resignation: Voluntary employees can resign by giving notice of the necessary period. In case of resignation, you will have to pay any outstanding benefits.

Notice period and severance pay in Costa Rica

The notice period is the time you must give an employee before dismissing them. During this time, the employee works and gets their regular pay.

The Costa Rican notice period varies according to the length of service of the employee, extending up to a maximum of 3 months:

During probation:

• 0-3 months: No notice required
• 3-6 months: 1 week
• 6 months - 1 year: 15 days
• 1 year+: 1 month

After probation:

• 3-6 months: 1 week of notice
• Less than 1 year: 15 days of notice
• Over 1 year: 1 month of notice

Furthermore, Costa Rican severance pay, or "Cesantía," is a payment you are required to give when firing an employee for any reason other than cause. It is an economic assistance that the employee receives while they look for another job.

Severance pay is computed based on the employee's length of service:

• Within 3 months: 7 days' salary
• Within 6 months: 14 days' salary
• After 1 year: 19.5 days salary for each extra year, to a maximum of 8 years

No severance is payable in cases of dismissal with just cause.

Discrimination and Equal Opportunity in Costa Rica

The constitution and labor laws in Costa Rica prohibit discrimination in the workplace. You must ensure a fair and equitable work environment. Discrimination against employees or job applicants based on certain attributes is unlawful and can lead to legal repercussions.

Prohibitions against workplace discrimination in Costa Rica

You are not allowed to discriminate based on:

• Gender
• Race or ethnicity
• Age
• Religion
• Nationality
• Sexual orientation
• Disability
• Marital status
• Political opinion
• Social or economic status
• Health condition

Furthermore, your obligations include:

• Make fair recruitment, hiring, promotions, and pay decisions.
• Give equal access to training, development, and career advancement opportunities.
• Have clear anti-discrimination policies and communicate them effectively.
• Have procedures for employees to report discrimination without fear of retaliation.

Alternatively, businesses can partner with an Employer-of-Record (EOR) solution to comply with anti-discrimination for employment in Costa Rica.

Health and Safety Regulations in Costa Rica

You are legally obligated to provide a safe and healthy work environment. The nation's labor laws, such as the Occupational Health Law (Ley de Riesgos del Trabajo) and the National Insurance Institute (INS) regulations, provide explicit guidelines for workplace safety.

To stay compliant, you need to:

• Make sure all workplaces are up to safety standards and reduce hazards.
• Periodically identify and assess possible risks.
• Offer adequate training in workplace safety, particularly in dangerous sectors.
• Have emergency plans in place, such as fire drill safety and first aid arrangements.
• Inform authorities and carry out investigations if there are accidents.

Moreover, global businesses can establish an Occupational Health Committee that oversees workplace safety, suggests improvements, and enforces compliance with the law.

Stay Compliant in Costa Rica with Skuad

When expanding globally, you must rely on expert solutions for everything from US companies hiring in Costa Rica, American employment in Costa Rica, and filing employer taxes in Costa Rica to labor law compliance. 

With Skuad as your reliable Employer of Record (EOR), you can employ and manage global talent in more than 160 countries without setting up a local entity. Skuad will do everything, from onboarding and payroll to benefit administration and compliance with local labor laws so that your organization is legally compliant everywhere you operate.

Whether you're adding to your global team or coming into the Costa Rican market, Skuad simplifies and streamlines. Book a demo today to understand our use cases to suit your global hiring requirements.

FAQs

What are the labor laws in Costa Rica?

Labor laws in Costa Rica dictate minimum wage requirements, working weeks (normally 48 hours weekly), overtime compensation, contributions to social security, and voluntary benefits such as paid vacations and termination pay. 

You must also respect laws regarding working conditions, freedom from discrimination, and equal opportunities. Partnering with EOR solutions like Skuad can simplify compliance with labor laws in Costa Rica.

Can US citizens legally work in Costa Rica?

US citizens can live and work in Costa Rica if they have a valid work permit. US citizens do not enjoy special entitlements to work in Costa Rica without a work permit. 

What are the types of employment contracts in Costa Rica?

Work contracts in Costa Rica are broadly classified into three primary categories: Indefinite Contracts, Fixed-Term Contracts, and Specific Task Contracts. 

Indefinite Contracts are most prevalent and ensure long-term job employment without an end date, giving workers more job security. Fixed-term contracts are utilized for short-term positions or tasks with a known time limit, commonly utilized in seasonal labor or temporary fill-ins. Specific Task Contracts are intended for well-defined projects or tasks that terminate upon the completion of work. 

What is the minimum wage in Costa Rica?

The minimum wage in Costa Rica for 2025 varies per skill level. For instance, the minimum wage for unskilled workers is CRC 12,236.95 per day, and for specialized workers, it is CRC 15,983.95 per day.

What is the notice period for Costa Rican employees?

The notice period applies before and after the probation period. Depending on the work tenure, it could vary between one week and one month.