Costa Rica Labor Law Guide for Hiring Employees and Contractors
Costa Rica’s economy is recognized for its stability and growth, with a GDP of approximately $71.4 billion USD in 2023. The country’s economy is driven by various sectors, including tourism, agriculture, and technology. Ecotourism plays a significant role, drawing visitors from around the globe, while agricultural products such as bananas, pineapples, and coffee remain crucial exports. Additionally, Costa Rica is becoming a hub for technology and services, with many multinational companies establishing operations in the country.
The official currency of Costa Rica is the Costa Rican Colón (CRC).
Minimum Wage
CRC 403,461 per month
Overtime Wage
1.5x of regular pay
Meal Breaks
1 hour
Rest Breaks
15 minutes
Working hours
8 hours per day, 48 hours per week
Salary Payment Cycle
Weekly, bi-weekly, or monthly
Payroll Taxes
Social Security
Paid Vacation
2 weeks after 50 weeks of work
Overtime Hours
More than 48 hours per week
Night Shift Hours
1.35x of regular pay
Holidays
11
No Work Days
Sunday
Hiring employees in Costa Rica requires businesses to establish a legal presence in the country. This typically involves registering a local company, which can cost around CRC 500,000 to CRC 1,000,000 depending on the type of entity and legal fees. The process to incorporate a business usually takes 4 to 6 weeks.
Employers must sign a written employment contract with each employee. This contract should clearly outline the terms of employment, including job responsibilities, salary, working hours, leave entitlements, and termination procedures. The contract must comply with Costa Rican labor laws, which protect both employees and contractors, though contractors are generally governed by civil contracts rather than employment contracts. Employees and contractors are treated differently under the law, with employees entitled to more protections and benefits.
Costa Rica has a national minimum wage law, with the minimum wage varying by job classification. As of 2024, the minimum wage for generic skilled workers is CRC 403,461 per month. The rates are reviewed annually and are set by the National Wage Council.
Exceptions to the minimum wage include specific types of contracts, such as apprenticeship contracts, which may have lower rates. The minimum wage applies uniformly across the country, with no regional variations. Employers are also required to pay employees a “13th-month” bonus, equivalent to one month’s salary, typically paid in December.
The standard working hours in Costa Rica are 8 hours per day and 48 hours per week. Overtime is permitted but must be compensated at 150% of the regular hourly rate. Night shifts, defined as work between 6 p.m. and 6 a.m., are paid at 135% of the regular hourly rate.
The minimum legal working age in Costa Rica is 15 years, with strict regulations against child labor. Workers aged 15 to 18 are subject to reduced working hours and cannot work in hazardous conditions.
Employers in Costa Rica are required to make several payroll deductions:
Social Security (Caja Costarricense de Seguro Social – CCSS): Employers contribute 26.33% of the employee’s salary to social security, which covers healthcare, pensions, and other social benefits.
Income Tax Withholding: Employers must withhold income tax based on the employee’s salary.
The current income tax regime in Costa Rica is progressive, with the following tax rates:
Income Level (CRC per month) | Tax Rate |
Up to 842,000 | Exempt |
842,001 to 1,236,000 | 10% |
1,236,001 to 2,106,000 | 15% |
2,106,001 to 4,210,000 | 20% |
Above 4,210,000 | 25% |
Costa Rican labor laws mandate various types of leave:
Paid Vacation: Employees are entitled to 2 weeks of paid vacation after completing 50 weeks of continuous work.
Maternity Leave: 4 months of paid maternity leave, which includes 1 month before and 3 months after childbirth.
Paternity Leave: Although not mandated by law, some companies may offer a few days of paternity leave.
Sick Leave: Paid sick leave is covered by the CCSS, with the employer paying the first 3 days and the CCSS covering the rest.
The following table lists the mandated holidays in Costa Rica:
Holiday | Date |
New Year’s Day | January 1 |
Juan Santamaría Day | April 11 |
Maundy Thursday | Varies |
Good Friday | Varies |
Labor Day | May 1 |
Annexation of Guanacaste Day | July 25 |
Virgin of Los Angeles Day | August 2 |
Mother’s Day | August 15 |
Independence Day | September 15 |
Cultures Day | October 12 |
Christmas Day | December 25 |
Employers in Costa Rica are required to provide several benefits to their employees:
Social Security: Covers healthcare, pensions, and other social services.
13th-Month Bonus: A mandatory annual bonus equivalent to one month’s salary.
Severance Pay (Cesantía): Employees who are terminated without just cause are entitled to severance pay based on their years of service.
Healthcare: Provided through the CCSS, funded by employer and employee contributions.
Costa Rica does not follow At-Will Employment laws. Termination must be justified under the country’s labor laws, and employers must follow a specific procedure. This includes providing a written notice and offering severance pay if the termination is without just cause.
Notice Period: Employers must provide at least 1 month of notice for employees who have worked for more than 3 years. For employees with less than 3 years of service, the notice period is proportional to their length of service.
Termination Benefits: If an employee is terminated without just cause, they are entitled to severance pay (Cesantía) based on their length of service.
Legal Challenges: Employees can challenge their termination in labor courts. If the court rules in favor of the employee, they may be awarded additional compensation or reinstatement.
Employers can legally terminate employees for just cause, which includes poor performance, misconduct, or redundancy. However, the reasons must be clearly documented, and the employer must adhere to the legal termination process.
This guide provides a comprehensive overview of the labor laws in Costa Rica, helping businesses navigate the complexities of hiring and managing employees in the country.