Expand your organization into Costa Rica with or without a Costa Rican entity
The small nation of Costa Rica has one of the strongest economies in Central America, partly thanks to the stable political environment, and its vibrant tourism and food export industries. Many companies look to gain a foothold in the region by expanding into Costa Rica, but it can be a long and complicated process. If you are planning an expansion into Costa Rica, the language barrier, unique regulatory framework, and cultural differences could all potentially lead to delays.
A popular way of bypassing the complex administrative procedures is to outsource to a global professional employer organization (PEO). At New Horizons, our tailored PEO, employer of record, and payroll services are designed specifically to help organizations of all kinds expand abroad faster and more efficiently, including into Costa Rica.
Our in-house recruitment team can also find, recruit, and onboard your local employees, and take care of any ongoing HR administration. Our team will provide everything you need to expand into Costa Rica more efficiently, potentially saving you thousands of Euros in expansion costs.
How can our Costa Rica PEO simplify your expansion?
New Horizons enables you to expand into Costa Rica faster, and without setting up a legal subsidiary.
Hiring in Costa Rica: Employment law overview
Employment contracts in Costa Rica
Employers in Costa Rica are legally required to provide written employment contracts to all employees. These contracts should always contain full details of the employment agreement, such as benefits, entitlements, salary/wage, and more. The contracts should also be written in the country’s official language of Spanish, and should reference the local currency of the Costa Rican colon.
Working hours in Costa Rica
The standard working week in Costa Rica is a maximum of 48 hours, spread across five or six days. However, there are slightly different rules in place for different types of work.
Overtime must be paid at a rate of 150% of normal pay.
Public holidays in Costa Rica
Vacation leave in Costa Rica
In general, employees in Costa Rica accrue one day of paid vacation leave for every month of work, and then receive a total allowance of 15 days after 50 weeks of work. They may be entitled to further days over time.
Sick leave in Costa Rica
Employees in Costa Rica are entitled to paid sick leave. For the first three days of absence, employers must cover at least 50% of normal pay, with social security paying the remaining half. Social security covers any following absence (beyond three days) at a rate of 60% of normal pay.
Parental leave in Costa Rica
Female employees in Costa Rica are entitled to four months of paid maternity leave, with one month before giving birth and three months after. During this time, employers must pay half of their normal salary and social security covers the remaining half.
Some male employees are entitled to a lower allowance. For example, public sector employees can generally take up to eight days of paid paternity leave.
Terminations and severance in Costa Rica
In general, employees in Costa Rica are entitled to 30 days of notice prior to termination, and must also be given one day per week (paid) to look for another job.
When employees are terminated without proper cause, they are entitled to a severance payment. This payment varies from between seven days and 22 days of pay, depending on their length of service with the employer.
Taxation in Costa Rica
Employees and employers in Costa Rica must both pay into the country’s social security system (known as the Caja). Employees must contribute around 9.5% of salary, while employers contribute around 34.5%.
The income tax rate in Costa Rica is set progressively, so employees pay more at higher income levels. The rates range from 0% to 25% of income.
Corporate tax in Costa Rica is 30% for most companies.
Health coverage in Costa Rica
Public health coverage is funded by social security contributions, so employers do not need to offer private medical insurance to their employees. However, some employers do choose to offer it as an employment benefit.
Costa Rica compensations & benefits
Compensation laws in Costa Rica
The minimum wage in Costa Rica varies depending on industry. For example, agricultural workers receive a different rate to those classed as skilled workers. For this reason, it is important that you understand how your employees are classified and what the specific minimum rates are for them.
Benefits management in Costa Rica
Setting up a benefits system for your employees in Costa Rica can be difficult to navigate, especially if you are unfamiliar with the country and its laws. If you want to tackle the setup independently, you can expect it to take several weeks and potentially cause delays to your expansion process.
New Horizons can help you simplify this stage of your Costa Rica expansion by offering tailored benefit management outsourcing. Our experts will advise you on the best course of action and take care of your benefit setup and management, helping you focus on the important job of your Costa Rican expansion.