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Postcard Series: Employing a Worker in Costa Rica

Capital GES created this series to help businesses that are considering expansion and hiring global staff.

In this postcard series, members of our sales and business development team provide helpful tips on international employment. In our latest post, Felipe Souto, Business Development Specialist provides information on employment law in Costa Rica.

Costa Rica Overview

Over the last decade, Costa Rica has grown economically. In fact, Costa Rica is considered the second most prosperous country in Latin America. For companies looking to invest in Central America, Costa Rica is an excellent choice. In addition to maintaining a strong economy, Costa Rica’s low unemployment rate, openness to foreign investment, and high levels of education make the country an attractive investment destination. For investors, Costa Rica offers plenty of expansion opportunities in many sectors such as agriculture, tourism, high-valued services, and medical devices.

However, expanding a business into Costa Rica can be challenging. So, it is best to seek the right advice before expanding your business and employing workers. Below, Felipe discusses the most common questions asked by clients regarding employment in Costa Rica.

1. Contracts

Can I trial a worker using a fixed-term employment contract, as I am not sure whether it will work out in the long term?

Yes, fixed-term contracts are allowed, but there must be a reason that justifies the transitory nature of the contract. In Costa Rica, fixed-term contracts cannot exceed 12 months (if services do not require technical preparation) and 60 months (if services require technical preparation). It’s important to note that if the fixed-term contract, after being extended, surpasses the extension period, the fixed-term contract will be automatically converted into an open-ended contract.  To ensure your worker stays fully compliant in Costa Rica, it is best to discuss your contract options with a local partner.

2. Termination Rules and Costs

What do I need to know about termination and severance pay in Costa Rica?

Notice Period

In Costa Rica, the notice period by the employer depends on the length of employment. For workers who have worked for more than a year, a one-month period notice is required. For workers who have worked from six months to a year, they need to give a 15-day notice and for workers who have worked for less than six months, they need to give one-week notice.

Severance Pay

Terminations must be subject to a justifiable reason in Costa Rica. If not, the employer must provide severance pay to the worker. Severance pay is based on the days of service worked.

Employees who have worked less than a year will receive the equivalent of 14 days’ salary. People who have worked more than a year are entitled to receive the equivalent 19-22 days. salary. For those who work less than six months in their role, their severance pay is the equivalent of seven days salary. As well as severance pay, the employer must also pay out the accrued 13th salary and holiday pay.

As seen above, terminations and severance pay can be complex in Costa Rica. So, before you decide to terminate an employment relationship, it’s best to discuss the options with a local partner.

3. Statutory Benefits

What are the statutory employee benefits in Costa Rica?

Statutory paid holiday

In Costa Rica, employees are entitled to two weeks of paid holiday leave for every 50 weeks of continuous employment. In addition, employees are also entitled to a paid holiday on Costa Rica’s 11 public holidays.

Parental Leave

Maternity

Female workers must receive four months of paid maternity leave in Costa Rica. This leave starts a month before the baby is born and three months after birth. Maternity leave is paid by the Employer at a 50% rate of the female worker’s regular salary with the remaining 50% covered by Social Security.

In Costa Rica, female workers may not be dismissed during pregnancy and during maternity leave (minimum one year after birth).

Paternity

Although not statutory, fathers are commonly offered two business days paid leave, which shall be taken immediately after childbirth.

Sick Pay

In Costa Rica,sick pay due to non-work-related illness or injury is paid by the employer at a 50% rate. From the fourth day onward, Social Security covers sick pay at a 60% rate.Social Security in Costa Rica covers sick leave pay if illness or injury is work-related, under specific percentages and rules.

Christmas Bonus (Aguinaldo/13th month salary)

Employees in Costa Rica are entitled to additional payment or Christmas Bonus per year. This payment is the equivalent of one month’s salary and is paid in December.

How Capital GES Can Help You Expand in Costa Rica

If you are a business that is looking to expand internationally and want to employ workers in Costa Rica, Capital GES can help. To establish what services you require, contact Felipe fsouto@capital-ges.com  or phone +55 31 3194 8150.

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