Employer of Record in Costa Rica: how to hire compliantly without an entity.
Employ full-time employees in Costa Rica without setting up an entity. Locally compliant contracts, monthly payroll, statutory benefits, taxes. Below: what the law actually requires, in plain English.
- Country
- Costa Rica
- ISO code
- CR
- Region
- North America
- Phone code
- +506
- Employ Latam coverage
- Full EOR + contractor payments
Last updated July 2026
Overview
Costa Rica is one of the more stable hiring markets in Central America. It has a clear legal framework, a well-educated workforce, and a growing track record in tech, finance, and business services. Companies hiring here for the first time will find the rules predictable, but the administrative load is real.
Country at a glance
| Currency | Costa Rican colón (CRC); USD contracts are also permitted |
| Working week | 48 hours (Monday to Saturday, 8 hours/day) |
| Standard workday | 8 hours |
| Probation period | Up to 3 months |
| Notice period | None for under 3 months' tenure; scales to 1 month for over 1 year |
| 13th-month salary | Yes. Aguinaldo paid in three tranches: June 20, December 20, and a full month by December 20 |
| Payroll cycle | Monthly, typically by the 15th of the following month |
What makes Costa Rica distinct
A few things stand out compared to other LATAM markets:
- No severance fund. Unlike Brazil's FGTS, Costa Rica has no ongoing severance savings account. Severance is calculated and paid at termination: roughly one month's pay per year worked for without-cause dismissals.
- Aguinaldo structure. The 13th-month bonus is split across the year, not paid as a single December lump sum. Budget for it across three dates.
- CCSS contributions are significant. Employers contribute roughly 26.67% of gross salary to social security. Employees contribute around 10.67 to 11%. These cover healthcare, pensions, and maternity benefits.
- Telework is formalized. Law 10028, enacted in 2023, requires written remote work agreements covering equipment, connectivity costs, and working hours. Hiring a remote worker without one creates compliance exposure.
- Foreign hires need a work permit before they start. The MTSS and DGM process typically takes three to six months. There is no shortcut.
Who's hiring here
Costa Rica has built a real services economy around multilingual talent. Multinationals use it for shared services, customer support, software development, and finance operations. The GMT-6 time zone works well for US-based teams. San José and the greater metropolitan area hold most of the professional workforce, though remote roles are increasingly distributed.
How Employ Latam fits in
To hire in Costa Rica without your own entity, you need an employer of record. We employ the worker on your behalf, run payroll in CRC, handle CCSS contributions, and issue a locally compliant employment contract. You manage the day-to-day work. Onboarding goes live in 72 hours once paperwork is complete. Pricing starts from $349 per employee per month, depending on country and team size.
Employment contracts and worker types
Costa Rica's Labor Code sets the rules for how workers must be engaged. Getting the contract type right matters: misclassification can trigger back-payment of benefits, social security contributions, and severance.
Contract types at a glance
| Contract type | Typical use | Max duration | Probation allowed |
|---|---|---|---|
| Indefinite-term | Full-time, ongoing roles (the default) | No end date | Up to 3 months |
| Fixed-term | Seasonal work, projects, employee replacements | 1 year (up to 5 years for specialized technical roles) | Up to 3 months |
| Part-time | Reduced hours, any sector | Indefinite or fixed-term framework applies | Up to 3 months |
A fixed-term contract that runs beyond one year converts automatically to indefinite-term, unless the role qualifies for the specialized technical exception. That conversion triggers full indefinite-contract protections: notice periods, severance, and all statutory benefits.
Written contracts and language requirements
All employment contracts must be written in Spanish and filed with the Ministry of Labor in three copies within 15 days of the start date. The only exception is verbal contracts, which are limited to agriculture, livestock, domestic services, and temporary work lasting 90 days or fewer.
Every contract must include:
- Full details of both parties
- Job title and duties
- Work location
- Hours and schedule
- Salary (stated in Costa Rican colones or USD)
- Probation period, if applicable
- Contract duration (for fixed-term)
Independent contractors
Costa Rica does not have a formal "freelancer" or "gig worker" legal category outside the Labor Code. Companies sometimes engage workers as independent contractors (servicios profesionales) to avoid employer obligations. The risk is real: if the relationship looks like employment (set hours, exclusivity, direct supervision), courts and the CCSS will treat it as one. That means back-contributions, interest, and potential penalties.
If the role is ongoing, involves regular hours, and sits inside your operational structure, an employment contract is the right instrument.
Telework
Law 10028, in force since 2021 and actively applied since 2023, requires a written telework addendum for any remote arrangement. It specifies equipment responsibilities, connectivity costs, and the right to disconnect. If your hire works remotely from Costa Rica, this applies from day one.
How Employ Latam handles this
We issue a locally compliant employment contract in Spanish, file the required copies with the Ministry of Labor, and register the worker with the CCSS before their first day. Onboarding goes live in 72 hours. You manage the work; we handle the paperwork.
Pricing starts from $349 per employee per month, varying by country and team size.
Payroll, taxes, and the 13th-month salary
Costa Rica runs payroll monthly, with salaries due by the 15th of the following month. Payment goes out in Costa Rican colones (CRC) or USD via bank transfer. On top of the base salary, employers carry a significant statutory contribution load, so budget accordingly before making an offer.
Employer and employee contributions
| Contribution | Employer rate | Employee rate |
|---|---|---|
| CCSS sickness and maternity | 9.17% | 5.50% |
| CCSS pension (IVM) | 10.67% | 4.00% |
| CCSS other funds (family allowances, IMAS, INA, etc.) | ~6.83% | ~1.17% |
| Total CCSS | ~26.67% | ~10.67% |
| Income tax withholding | Employer withholds | 0–25% progressive |
All CCSS contributions are calculated on gross salary. There is no separate severance fund like Brazil's FGTS. Severance is paid directly at termination from operating funds.
The aguinaldo (13th-month salary)
Costa Rica splits the 13th-month bonus into three installments across the year, not one lump sum in December.
- June 20: covers earnings from April and May
- December 20 (first payment): covers earnings from October and November
- December 20 (Christmas aguinaldo): covers earnings from June through September
In practice, all three December obligations land on the same date, so December payroll requires careful cash planning. The aguinaldo is mandatory regardless of performance. It is calculated on total gross earnings for the covered period, not just base salary.
Income tax withholding
Employers withhold income tax at source using progressive rates set by the Ministry of Finance (Hacienda). The brackets run from 0% on the lowest monthly earnings up to 25% on the highest. Hacienda updates the brackets periodically, so payroll tables need to reflect the current thresholds.
What this means for total cost
A rough rule: budget 26–28% on top of gross salary to cover all statutory employer contributions. Add the aguinaldo (one full month's salary spread across the year) and you are looking at a total annual employer cost of roughly 34–36% above the agreed gross, depending on salary level and any supplemental benefits in the employment contract.
Employ Latam handles CCSS registration, monthly filings, aguinaldo calculations, and income tax withholding. Payroll runs in CRC or USD. Onboarding is live in 72 hours. Pricing starts from $349 per employee per month.
Mandatory benefits, vacation, and parental leave
Costa Rica's Labor Code sets a clear floor for employee benefits. As the employer of record, Employ Latam handles enrollment, contributions, and compliance so your hire is covered from day one.
Statutory leave entitlements
| Leave type | Entitlement | Paid by |
|---|---|---|
| Annual leave | 12 days after 1 year of service; increases by 1 day for every 3 additional years, up to 15 days | Employer |
| Sick leave | Days 1-3 unpaid; days 4-7 at 50% salary; day 8 onward at 100% (up to 12 months) | CCSS (social security) after qualification |
| Maternity leave | 4 months (1 month pre-birth, 3 months post-birth) | CCSS, after 3 months of contributions |
| Paternity leave | 1 week | Unpaid under Labor Code; collective agreements may vary |
| Public holidays | 13 paid days per year | Employer |
Work on a public holiday triggers double pay or compensatory time off.
Social security and payroll contributions
Every employee must be registered with the CCSS (Caja Costarricense de Seguro Social). This covers sickness, maternity, pensions, and disability. Contribution rates:
- Employer: approximately 26.67% of gross salary
- Employee: approximately 10.67 to 11% of gross salary, withheld at source
There is no separate severance fund in Costa Rica (no equivalent to Brazil's FGTS). Severance is paid directly at termination when applicable.
13th-month bonus (Aguinaldo)
The Aguinaldo is mandatory and equals one full month's salary. It is paid in three installments:
- June 20: covers April and May earnings
- December 20: covers October and November earnings, plus the full December salary
Missing these deadlines creates a legal liability, so payroll scheduling matters.
Other statutory requirements
- Overtime: the standard workweek is 48 hours. Overtime pays at 150% for daytime hours and 200% for night hours.
- Unused vacation: employees can carry over or receive a cash payout for accrued but unused vacation days.
- Remote work: Law 10028 (2023) requires a formal telework addendum if an employee works remotely. Employ Latam includes this in the employment contract where relevant.
Severance, termination, and notice periods
Costa Rica's Labor Code draws a clear line between termination with just cause and termination without cause. Getting this wrong is expensive.
Just-cause termination
Dismissal for cause (serious misconduct, repeated absences, fraud) requires documented proof. If the cause holds up, you owe no severance and no notice pay. If it doesn't hold up in a dispute, the termination is treated as without cause and full severance applies. Document everything before you act.
Without-cause termination
When you end an indefinite-term contract without cause, two obligations kick in immediately:
- Notice pay: equivalent to the notice period the employee was entitled to (up to one month's salary for employees with more than one year of tenure).
- Severance (cesantía): calculated at approximately one month's salary per year worked, prorated for partial years.
Both amounts are due at the time of termination. There is no ongoing severance fund like Brazil's FGTS. The obligation accumulates on paper and is settled at the moment of dismissal.
Fixed-term contracts
A fixed-term contract ends at the agreed date without severance, provided the term was genuinely justified. If the contract renews repeatedly or exceeds one year without justification, Costa Rican law treats it as indefinite. At that point, without-cause termination rules apply in full.
Notice and severance table
| Tenure | Notice period | Severance owed (without cause) |
|---|---|---|
| Less than 3 months | None | None |
| 3 to 6 months | 1 week | 7 days' salary |
| 6 months to 1 year | 2 weeks | 14 days' salary |
| 1 to 3 years | 1 month | ~19.5 days' salary per year worked |
| 3 to 5 years | 1 month | ~20 days' salary per year worked |
| 5+ years | 1 month | ~21 days' salary per year worked |
Notice can be worked out or paid in lieu. Severance is capped at eight years of accumulated pay under the Labor Code, though collective agreements may vary.
Probation period
Indefinite-term contracts can include a probation period of up to three months. During probation, either party can terminate without notice or severance. Once probation ends, full protections apply.
Disputes
Termination disputes go first to the Ministry of Labor (MTSS) for conciliation, then to labor courts if unresolved. Costa Rica's labor courts move relatively quickly by regional standards, but a contested dismissal can still take months. Clean documentation of the cause, the process, and the final settlement is your best protection.
Recent regulatory changes
Costa Rica's labor framework has been relatively stable over the past two years, but a few updates matter for employers hiring in the country right now.
The most significant shift came from Law 10028, the Telework Law, which came into force in 2023 and continues to shape how remote arrangements must be structured. Employers must document remote work in a written addendum or standalone contract, specify the employee's work location, and confirm who covers equipment and connectivity costs. Verbal or informal arrangements no longer satisfy the law.
Minimum wages also moved. The Ministry of Labor (MTSS) adjusts the national minimum wage table twice a year, in January and July. Both the January 2024 and July 2024 rounds delivered increases above recent inflation rates, which affects payroll budgets for roles benchmarked to the statutory floor.
No major overhaul to social security contribution rates (CCSS) or severance rules occurred in this window, but employers should monitor La Gaceta, the official gazette, for any 2025 updates on gig-economy classification and overtime cap proposals that are under discussion.
Regulatory timeline: past 24 months
| Date | Change | Impact on employers |
|---|---|---|
| January 2024 | MTSS minimum wage increase (approx. 3.9% across categories) | Payroll costs rise for roles at or near the statutory floor |
| July 2024 | Mid-year minimum wage adjustment (approx. 3.3%) | Second payroll adjustment required within the same calendar year |
| Ongoing (2023, enforced 2024) | Law 10028 telework contracts required in writing | Remote workers need a signed addendum specifying location, equipment, and costs |
| 2024 (under review) | Proposed reforms to gig and platform worker classification | No law passed yet; monitor MTSS gazette for updates |
Employ Latam tracks these changes and updates employment contracts accordingly. When a wage table shifts or a new regulation takes effect, your workers' contracts and payroll reflect it without you having to monitor La Gaceta yourself.
Frequently asked questions
- Do I need a local entity to hire in Costa Rica?
- No. You can hire in Costa Rica through an employer of record without registering a company there. The EOR acts as the legal employer, handles CCSS registration, payroll, and the employment contract, and keeps you compliant with the Labor Code. You retain full control over the work itself.
- What is the most common employment contract in Costa Rica?
- The indefinite-term contract is the default and the most widely used. It has no fixed end date, carries full statutory protections from day one (subject to a probation period of up to three months), and is required for any role that is ongoing in nature. Fixed-term contracts are valid but must be justified by a genuine temporary need; otherwise, a court or the Ministry of Labor can reclassify them.
- What is the total employer cost on top of gross salary in Costa Rica?
- Employers contribute approximately 26.67% of gross salary to CCSS, covering sickness, maternity, pension, and related social funds. Add the mandatory aguinaldo (equivalent to one month's salary paid across three installments per year) and total employer costs typically run 34–36% above gross salary. There is no separate severance fund; any severance owed on termination is paid directly at that time.
- How long is paid maternity leave in Costa Rica?
- Maternity leave in Costa Rica is 4 months total, split into 1 month before the expected birth date and 3 months after. The CCSS pays the benefit directly, provided the employee has made at least 3 months of contributions before the leave starts. The employer does not fund the leave payments, but must keep the position open for the employee's return.
- How much severance is owed for terminating an employee without cause in Costa Rica?
- Severance (cesantía) is calculated at roughly one month's salary per year worked, with the exact daily rate scaling from about 19.5 days per year for shorter tenures up to 21 days per year for employees with five or more years of service. The total is prorated for partial years and capped at eight years of accumulated pay. Notice pay of up to one month's salary is also owed on top of severance, and both amounts must be paid at the time of termination.
- What are the most recent labor law changes in Costa Rica that affect remote hires?
- The Telework Law (Law 10028) is the most operationally significant change for companies hiring remotely in Costa Rica. It requires a written contract or addendum that spells out the work location, hours, and which party covers equipment and internet costs. Beyond that, the main ongoing changes are the twice-yearly minimum wage adjustments from MTSS, which affect any role benchmarked to the statutory floor and require payroll to be updated in January and July each year.
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