An Employer of Record (EOR) in Costa Rica is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
An employer of record in Costa Rica assist you with the following
- Draft local employment contracts
- Register employees with the social security agencies
- Withholding taxes
- Provide Benefits
- Comply with the local labor laws
- End to End Payroll
- Work Permit
- Hiring and Payments
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Costa Rica to help you with your global staffing needs.
On this page: Facts About Costa Rica | Employment Contracts | Employment Laws | Social Security | Personal Income Tax | Employee Benefits | Work Permit | Leave Entitlement in Costa Rica
Facts about Costa Rica
Costa Rica offers a Digital Nomad Visa that allows remote workers to stay for one year, extendable by another year, with significant tax advantages. Those earning income from outside Costa Rica are fully exempt from local income tax, as they are not employed by a Costa Rican entity. Additionally, digital nomads can import essential work equipment without paying import duties, making Costa Rica a tax-efficient and attractive destination for remote professionals.
Foreign nationals can apply for Costa Rica’s Stay (Estancia) sub-category for Remote Workers and Service Providers if they earn at least $3,000 per month from clients or employers located outside Costa Rica—or $4,000 if applying with dependents—verified through bank statements or certified income proof. Applicants must submit a completed application form (online via Tramite Ya or in person), a valid passport copy, proof of a $100 government fee payment, and comply with any visa requirements based on nationality. The income documentation must cover the previous 12 months and may require consular legalization or apostille, depending on its origin.
Costa Rica’s tech hub is expanding rapidly, driven by a highly skilled workforce of over 45,000 professionals with strong educational backgrounds in computer science, engineering, and IT. High literacy rates and a national focus on education have created a talent pool that quickly adapts to new programming languages and technologies. Proficiency in key languages like Java, C++, Python, and JavaScript positions Costa Rican developers to support both local innovation and global tech operations, making the country an attractive destination for multinational companies.
Employment Contracts in Costa Rica
Under Costa Rican labor law, employment contracts are governed by the Labor Code (Código de Trabajo). Most employment relationships must be documented in writing and follow specific procedures to be valid and compliant.
Written Contract Requirement
According to Article 23 of the Labor Code, when a written employment agreement is required, it must be created in three original copies:
- One for the employee
- One for the employer
- One to be submitted to the Employment Office of the Ministry of Labor and Social Security
The employer is responsible for submitting this third copy—either directly or through the relevant local authority—within 15 days of the contract being signed, updated, or renewed.
Contract Types
There are two main categories of employment agreements in Costa Rica:
- Individual Employment Contracts: These define the terms between one employee and one employer.
- Collective Labor Agreements: Typically negotiated between employers and labor unions, setting terms that apply to a group of workers.
All contracts must be written in Spanish and include essential details such as job role, salary, work hours, place of work, and duration of employment.
Common Contract Formats
- Open-ended (Indefinite) Contracts:
The default and most common type. These agreements have no fixed end date and continue unless legally terminated. - Fixed-term Contracts:
Used for roles that have a clear end date or are tied to a specific, time-limited need. A valid justification is required to use this format. - Project-based Contracts (Work or Service):
These remain valid until a particular job or task is completed. Once the task ends, so does the contract.
Employment Laws in Costa Rica
Costa Rica has a well-defined labor framework designed to protect workers’ rights while ensuring compliance for employers. The Labor Code (Código de Trabajo) governs key aspects of the employment relationship, including wages, working conditions, termination rules, and social security obligations.
Minimum Wages
Costa Rica sets minimum monthly wages based on skill level and education. For 2024, wages range from CRC 367,108.56 for unskilled workers to CRC 784,139.52 for university graduates. Higher educational qualifications and technical expertise correspond to higher minimum wage tiers, which employers—including EORs—must comply with when hiring locally.
|
Role Type |
Minimum Monthly Wage (CRC) |
|
Unskilled workers |
367,108.56 |
|
Semi-skilled workers |
391,198.08 |
|
Skilled workers |
413,023.56 |
|
Highly skilled workers |
471,604.51 |
|
Technicians – Diversified Education |
432,819.26 |
|
Technicians – Higher Education Diploma |
576,094.23 |
|
Technicians – Bachelor's Degree |
653,427.21 |
|
University Graduates |
784,139.52 |
Working Hours in Costa Rica
Costa Rica's Labor Code sets clear limits on standard working hours. Article 138 states that:
- Daytime shifts may not exceed 8 hours per day.
- Night shifts are limited to 6 hours per day.
- The maximum weekly limit for any regular schedule is 48 hours.
However, for roles that are not hazardous or unhealthy, the law allows some flexibility:
- Day shifts may be extended up to 10 hours per day.
- Mixed shifts (partly day and night) may go up to 8 hours per day, as long as the weekly total does not exceed 48 hours.
Employers and employees may also mutually agree on rest and meal breaks, provided the arrangement is fair and appropriate for the type of work being performed.
Overtime Rules in Costa Rica
Work done beyond the established daily or contractual limits is considered overtime. As set out in Article 139, this includes:
- Hours that exceed the maximum daily or weekly limits
- Hours worked beyond what is agreed in the employment contract
Overtime must be compensated at 50% above the regular wage, whether calculated from the minimum wage or the employee’s higher agreed salary.
Importantly, if an employee works extra hours to correct mistakes they made during regular hours, those hours do not count as overtime.
To ensure transparency, Article 144 requires that overtime pay be recorded separately from regular wages in official payroll records, helping employers remain compliant with labor regulations.
Probation Period
Costa Rica’s Labor Code does not explicitly regulate a general probationary period for fixed-term or indefinite employment contracts. However, Article 102 addresses domestic workers specifically, stating that the first three months of employment are considered a trial period, during which either the employer or employee may end the contract without prior notice or liability.
Although there is no broad legal provision for probation across all sectors, legal practice in Costa Rica commonly interprets Articles 28 and 29 to mean that a trial period of up to three months can apply to other employment relationships as well. These articles outline the conditions under which notice and severance pay are required—starting after three months of continuous service.
As a result, it is widely accepted that either party may terminate the employment relationship within the first three months without incurring severance or notice obligations, effectively establishing this period as a de facto probationary period under Costa Rican labor practice.
Termination Notice for Open-Ended Contracts
As outlined in Article 28 of Costa Rica’s Labor Code, either the employer or the employee may terminate an open-ended employment contract without just cause, provided they give prior notice based on the employee’s length of service:
- After 3 to 6 months of continuous work: 1 week’s notice
- After 6 months to 1 year: 15 days’ notice
- After more than 1 year: 1 month’s notice
If the contract is verbal, the worker may give notice verbally in front of two witnesses. Alternatively, either party can waive the notice period by paying the other an amount equal to the wages for the applicable notice duration.
During the notice period, the employer is also required to provide one day off per week for the employee to seek new employment opportunities.
Severance Pay Rules in Costa Rica
According to Article 29 of the Labor Code, if an open-ended employment contract is terminated without just cause or for reasons beyond the employee’s control, the employer must pay severance compensation based on the employee’s duration of service:
Based on Continuous Employment:
- 3 to 6 months: 7 days’ salary
- More than 6 months to 1 year: 14 days’ salary
- More than 1 year: based on the following annual scale:
|
Year of Service |
Days of Salary per Year |
|
Year 1 |
19.5 days |
|
Year 2 |
20 days |
|
Year 3 |
20.5 days |
|
Year 4 |
21 days |
|
Year 5 |
21.24 days |
|
Year 6 |
21.5 days |
|
Years 7–9 |
22 days |
|
Year 10 |
21.5 days |
|
Year 11 |
21 days |
|
Year 12 |
20.5 days |
|
Year 13 and onward |
20 days |
Important limits and conditions:
- Severance cannot exceed 8 years of compensation.
- Payment is still required even if the employee starts another job immediately.
13th Month Salary
It is mandatory to pay a 13th month salary as per the Colombian labor laws. The 13th month salary in Costa Rica is called aguinaldo. It is to be paid before 20th of December.
Work Permits in Costa Rica for EOR Employees
When hiring foreign employees in Costa Rica through an Employer of Record (EOR), the EOR handles the legal process of getting a work permit. There are two common types of permits used in this situation.
The Temporary Residence Permit with Work Authorization is the most widely used. It allows a foreign professional to live and work in Costa Rica for 1–2 years, with the option to renew. The EOR applies for this permit and acts as the employee’s legal sponsor. It is commonly used for skilled workers like developers, marketers, or support staff who are hired to work for companies in Costa Rica through the EOR.
The Special Category Permit for Transferred Staff is used when a foreign employee from a multinational company is temporarily moved to Costa Rica. In some cases, an EOR can help apply for this if the company has operations in the country. This permit is usually granted for one year and is meant for employees with specific knowledge or important roles, such as managers or technical experts.
Both permits allow companies to hire foreign talent in Costa Rica while staying fully compliant with local laws through the EOR.
Personal Income Tax
In Costa Rica, income tax applies only to income earned within the country. This means both residents and non-residents are taxed only on their Costa Rican-source income, not on income earned abroad.
Who Pays Tax?
- Residents and citizens: Pay income tax on all income earned inside Costa Rica.
- Non-residents: Are subject only to withholding tax (WHT) on income from Costa Rican sources. The rate depends on the type of income.
Tax Rates for Self-Employed Individuals (2025)
Self-employed workers pay income tax based on their annual taxable income, with progressive rates—the more you earn, the higher the percentage you pay on the excess.
Here’s how the 2025 tax brackets work (amounts in Costa Rican colones - CRC):
- Up to CRC 4,094,000: 0% (no tax)
- From CRC 4,094,001 to 6,115,000: 10% on the amount over CRC 4,094,000
- From CRC 6,115,001 to 10,200,000: 15% on the amount over CRC 6,115,000
- From CRC 10,200,001 to 20,442,000: 20% on the amount over CRC 10,200,000
- Over CRC 20,442,000: 25% on the amount over CRC 20,442,000
These rates apply to net income after allowable business expenses and deductions.
Employee Benefits
Costa Rica offers a solid benefits framework that includes both mandatory protections and optional perks, helping employers comply with local laws while staying competitive in the talent market.
1. Mandatory Employee Benefits
These are required under Costa Rican law:
- Public Health Coverage (CCSS): Employees gain access to 29 public hospitals and the national social security system.
- Workplace Accident Insurance (INS): Employers must cover work-related injuries and illnesses under the National Insurance Institute.
- Pensions (CCSS IVM + ROP): Employers contribute to state pension funds, ensuring retirement and disability payments.
- Paid Leave: Statutory leave includes annual vacation, sick days, maternity and paternity leave.
- Holiday & Weekend Premiums: Work performed on public holidays or weekends must be compensated with time off or double pay.
2. Supplemental Employee Benefits
More employers are offering optional extras to attract and retain talent:
- Private Medical Insurance: The top voluntary benefit. This covers private clinics, hospitals, dental care, mental health support, and telemedicine—ideal for those seeking alternatives to public healthcare. Premiums are taxed at 2% and require a minimum participation of five employees.
- Group Life Insurance / Death-in-Service: Provides a lump-sum payout—often 1x to 3x salary—to an employee's family in the event of their death, frequently with added funeral emergencies and critical illness coverage. Premiums incur a 2% tax and are paid through a trust for quick payout.
- Dental Insurance: Gaining popularity, especially at the managerial level, with plans starting around US $7/month. These are typically taxed as a benefit in kind and added to employee benefit offerings.
3. Market & Insurance Trends (2025)
- Premium Distribution: As of April 2025, 33% of total insurance spending was on non-life coverage, 36% on personal insurance, and 31% on compulsory insurance such as workers’ compensation. asinta.com
- Employee Benefit Spend: In 2023, employers paid approximately US $67 million for employee (group) medical insurance and US $112 million for life insurance.
- Steady Market Growth: The insurance sector grew around 6% by April 2023, and the colón appreciated by 7% in 2022, enhancing the appeal of dollar-denominated packages.
Leave Entitlement in Costa Rica
Costa Rican labor laws provide employees with a range of protected leave entitlements. Employees are entitled to two weeks of paid annual leave for every 50 weeks worked, in addition to 13 public holidays, nine of which are paid. If employees work on a public holiday, they must be paid double their normal wage.
For sick leave, employers cover 50% of wages for the first three days, while the national social security system (CCSS) covers the remaining 50% and 60% from the fourth day onward, provided the employee submits a valid medical certificate.
Maternity leave grants four months of paid time off—one month before and three months after childbirth—with the cost shared equally between the employer and CCSS. Employees who adopt a child are also entitled to three months of paid leave, which can be taken by one or both adoptive parents. Paternity leave includes eight paid days, to be taken within the first month of a child's birth. If the mother passes away, the father may receive up to three months of additional leave.
Breastfeeding mothers are entitled to daily breaks or reduced working hours to nurse their babies, and in-office employees must be given a safe space for breastfeeding or pumping. Employees are also allowed paid time off to vote during elections.
These leave benefits are mandatory and enforced by law, ensuring employees receive sufficient time for rest, recovery, family care, and civic duties.
Working with an Employer of Record (EOR) in Costa Rica is a smart solution for companies looking to hire local employees without setting up a legal entity. The EOR takes care of all employment-related responsibilities, including payroll, income tax, social security contributions to the CCSS, occupational risk insurance, work permits, employment contracts, and compliance with Costa Rican labor laws. Costa Rica’s employment system includes mandatory benefits such as public healthcare, pension contributions, and paid statutory leave, along with access to private insurance and supplementary perks. The EOR ensures full legal compliance while reducing the administrative burden for foreign employers. With its growing economy, skilled workforce, and business-friendly regulations, Costa Rica offers an attractive environment for global companies expanding into Latin America through a trusted EOR partner.
Social Security Contributions in Costa Rica
Costa Rica has a strong social security system to ensure workers receive healthcare, retirement income, and job protection. These benefits are funded by mandatory contributions from both employers and employees. The system is mainly managed by the Caja Costarricense de Seguro Social (CCSS) and supported by other national programs focused on welfare, training, and savings.
1. Social Security Fund – CCSS
The CCSS (commonly known as Caja) is the foundation of Costa Rica’s welfare model. It includes two major components:
Contribution Type
Employer
Employee
Total
Sickness & Maternity (SEM)
9.25%
5.50%
14.75%
Disability, Old Age & Death (IVM)
5.42%
4.17%
9.59%
Total to CCSS
14.67%
9.67%
24.34%
2. Other Mandatory Employer Contributions
Beyond CCSS, employers in Costa Rica must contribute to national programs that promote family support, social welfare, and vocational training:
Institution
Employer Contribution
FODESAF
5.00%
IMAS
0.50%
INA
1.50%
Total
7.00%
3. Worker Protection Law (LPT)
The Ley de Protección al Trabajador (LPT) requires contributions that build personal savings and provide safety in case of unemployment or work-related injuries. These are shared by both parties:
Fund
Employer
Employee
FCL
1.50%
—
FPC
2.00%
—
Banco Popular
0.25%
1.00%
INS (avg.)
~1.00%
—
Total LPT
4.75%
1.00%
Total Contribution Summary (2025)
In total, employers contribute 26.42% of an employee’s salary, while employees contribute 10.67%, making the combined contribution rate 37.09%.
This system ensures that workers in Costa Rica enjoy access to universal healthcare, a secure pension, family support services, job training, and protection in case of dismissal or work-related accidents—all funded through a shared responsibility model.
Contribution Type
Employer
Employee
Total
CCSS (Health + Pension)
14.67%
9.67%
24.34%
Other Social Programs
7.00%
—
7.00%
Worker Protection Law (LPT)
4.75%
1.00%
5.75%
Total
26.42%
10.67%
37.09%