Employer of Record Guide in 

Costa Rica

Vacation Leave

Entitlement:

• 2 weeks (14 calendar days) of paid vacation after completing 50 weeks of continuous service
• Increases to 3 weeks after 5 years of service with the same employer

Accrual and Usage:

• Vacation time accrues throughout the year
• Must be taken within the year following entitlement
• Cannot be accumulated beyond one year without employer agreement

Vacation Pay:

• Regular salary plus an additional vacation bonus equal to the vacation pay
• Total payment: 2× the regular vacation period salary

Sick Leave

Paid Sick Leave:

• Covered by CCSS (Social Security) after a 3-day waiting period
• Employer pays first 3 days, then CCSS covers 60% of salary
• Maximum coverage period varies by condition

Medical Certification:

• Doctor's certificate required for absences over 1 day
• Must be from CCSS-approved healthcare providers
• Employer may request verification for frequent short absences

Maternity Leave

Duration and Timing:

• 4 months total: 1 month before due date, 3 months after birth
• Can be extended with medical certification if needed

Compensation:

• Paid by CCSS at 100% of average salary
• Employer must maintain position and benefits during leave
• Job protection guaranteed upon return

Paternity Leave

• 1 week of paid paternity leave
• Must be taken within the first month after birth
• Paid by CCSS, not the employer

Bereavement Leave

• 3 days of paid leave for death of immediate family members (spouse, children, parents, siblings)
• 1 day for other close relatives
• Additional unpaid leave may be granted at employer discretion

Personal & Family Leave

Family Emergency Leave:

• Unpaid leave for family emergencies or serious illness of family members
• Duration negotiated between employer and employee
• Job protection typically applies for reasonable periods

Study Leave:

• Employees pursuing education may request flexible schedules or unpaid leave
• Not legally mandated but commonly granted

Summary

Termination Types

Termination With Just Cause:

• No notice or severance required
• Must involve serious misconduct, repeated violations, or criminal activity
• Requires proper documentation and due process
• Employee may challenge the cause determination

Termination Without Cause:

• Employer may terminate for business reasons
• Requires advance notice or payment in lieu
• Severance pay obligations apply
• Must not be discriminatory or retaliatory

Notice Period Requirements

Notice periods are based on length of service and must be provided in writing:

Payment in Lieu: Employers may pay salary equivalent to the notice period instead of providing working notice.

Severance Pay

Severance Calculation (Without Cause):

• 20 days of salary per year of service
• Minimum payment: 20 days for employees with less than one year
• Based on average salary of the last 6 months
• Includes proportional aguinaldo and vacation pay

Maximum Severance:

• Capped at 8 months of salary regardless of years of service
• Additional contractual severance may exceed this limit

Probationary Periods

• Maximum 90 days for most positions
• 30 days for domestic workers
• During probation, either party may terminate with 1 week notice
• No severance pay required during probationary period

Final Pay Requirements

Timeline:

• Final payment must be made within 7 business days of termination
• Includes all accrued salary, vacation pay, aguinaldo, and severance

Components:

• Outstanding salary through termination date
• Accrued vacation time and vacation bonus
• Proportional aguinaldo (13th month salary)
• Severance pay (if applicable)
• Any other contractual benefits

Required Documentation

Termination Process:

• Written termination notice stating reason and effective date
• Calculation of final payments
• Certificate of employment (certificado de trabajo)
• Return of company property documentation

Anti-Discrimination & Retaliation Laws

Termination is prohibited for:

• Pregnancy or maternity leave
• Union activities or membership
• Filing labour complaints
• Discrimination based on gender, age, religion, political beliefs, or sexual orientation
• Whistleblowing or reporting workplace violations

Violations can result in reinstatement orders and additional compensation.

National Public Holidays

Costa Rica observes 9 official public holidays when most businesses close:

Regional Observances

Some provinces and cantons observe additional local holidays:

• San José: Various patron saint days
• Cartago: Local religious observances
• Guanacaste: Additional cultural celebrations

Holiday Pay Rules

Eligibility:

• Employees must work the scheduled day before and after the holiday
• Full-time employees receive full day's pay
• Part-time employees receive proportional pay

Working on Holidays:

• Employees who work on public holidays receive double pay (2× regular rate)
• Alternative: Regular pay plus a compensatory day off
• Voluntary work on holidays requires employee agreement

Holiday Scheduling

When Holidays Fall on Weekends:

• If a holiday falls on Sunday, the following Monday becomes the official holiday
• Saturday holidays are typically observed on the actual date
• Government offices and banks follow official holiday schedules

Required Documentation

Employment Contract:

• Must be in Spanish (official language requirement)
• Include job title, duties, salary, working hours, benefits
• Specify probationary period, termination clauses, and dispute resolution
• Both parties must sign and retain copies

Government Forms:

• CCSS Registration: Social security enrollment
• Tax Declaration: Income tax withholding setup
• Work Permit: For foreign employees (if applicable)

Employee Information:

• Valid identification (cédula for citizens, DIMEX for residents)
• Banking information for salary deposits
• Emergency contact information
• Educational certificates (if relevant to position)

Language Requirements

• Official Language: Spanish is the official language of Costa Rica
• Contract Language: Employment contracts must be in Spanish
• Workplace Communication: While English is common in international companies, Spanish proficiency is generally expected
• Legal Documents: All official employment documents must be in Spanish

Background Checks & References

Permitted Checks:

• Criminal background check (certificado de antecedentes penales)
• Employment verification from previous employers
• Educational credential verification
• Professional license verification (for regulated professions)

Legal Requirements:

• Employee consent required for all background checks
• Must be relevant to the position
• Cannot discriminate based on protected characteristics

Data Protection & Privacy

Privacy Rights:

• Employees have rights over their personal data
• Employers must obtain consent for data collection and processing
• Data must be used only for employment purposes
• Secure storage and limited access required

Cross-Border Data:

• Special considerations for international companies
• Data transfer agreements may be required
• Compliance with both Costa Rican and international privacy laws

IP Assignment & Confidentiality

Intellectual Property:

• Work created during employment typically belongs to employer
• Must be explicitly stated in employment contract
• Inventions and creative works require specific clauses

Confidentiality Agreements:

• Common for positions with access to sensitive information
• Must be reasonable in scope and duration
• Cannot prevent employees from reporting legal violations

Work Authorization

Costa Rican Citizens:

• No work authorization required
• Must provide valid cédula (national ID)

Foreign Employees:

• Must have valid work permit or residency status
• Temporary work permits available for specific projects
• Permanent residency allows unrestricted employment

Onboarding Timeline

What the EOR Handles

Borderless AI manages:

• Spanish-language contract preparation
• CCSS and tax registration
• Payroll setup and compliance
• Work permit assistance (for eligible foreign workers)
• Local labour law compliance
• Monthly payroll processing and tax remittance

Worker Classification: Employee vs Contractor

Costa Rica has strict criteria for distinguishing employees from independent contractors. Misclassification can result in significant penalties and back payments.

Employee Characteristics:

• Works under employer supervision and control
• Uses employer-provided tools and equipment
• Has set working hours and location
• Receives regular salary and benefits
• Integrated into company operations

Independent Contractor Characteristics:

• Operates own business with multiple clients
• Provides own tools and equipment
• Controls how and when work is performed
• Invoices for services rendered
• Bears business risks and expenses

Legal Tests: Costa Rican courts examine the reality of the working relationship, not just the contract terms. Key factors include economic dependence, exclusivity, and level of control.

Unionization & Collective Bargaining

Union Rights:

• Employees have the constitutional right to form and join unions
• Minimum 12 employees required to form a workplace union
• Employers cannot interfere with union activities or discriminate against union members

Collective Agreements:

• Unions may negotiate collective bargaining agreements
• These agreements can override individual employment contracts
• Common in public sector and large private companies

Strike Rights:

• Legal strikes are protected under Costa Rican law
• Must follow specific procedures and notice requirements
• Employers cannot retaliate against striking workers

Cultural Norms & Workplace Expectations

Communication Style:

• Costa Ricans value politeness and indirect communication
• "Pura vida" philosophy emphasizes positive outlook and work-life balance
• Hierarchy is respected but not rigid
• Personal relationships are important in business

Work-Life Balance:

• Family time is highly valued
• Long lunch breaks (1-2 hours) are common
• Punctuality expectations may be more flexible than in North American contexts
• Religious and family obligations are generally accommodated

Professional Development:

• Education is highly valued in Costa Rican culture
• Employees often pursue continuing education
• Professional certifications and training are appreciated

Anti-Discrimination Laws

Protected Characteristics:

• Gender, age, race, religion, political beliefs
• Sexual orientation and gender identity
• Disability and health conditions
• Pregnancy and family status
• Union membership and activities

Employer Obligations:

• Provide equal opportunities in hiring, promotion, and compensation
• Accommodate disabilities where reasonable
• Prevent and address workplace harassment
• Maintain confidential complaint procedures

Remote Work Considerations

Legal Framework:

• Remote work (teletrabajo) is legally recognized
• Requires written agreement specifying terms and conditions
• Employer must provide necessary equipment or reimburse expenses
• Same labour protections apply as for office-based work

Practical Considerations:

• Internet infrastructure is generally good in urban areas
• Time zone alignment with North American companies is favourable
• Cultural adaptation may be needed for remote management styles
• Regular in-person meetings or team building may be expected

Cross-Border Remote Work:

• Costa Rican employees working for foreign companies must still comply with local labour laws
• Tax obligations apply regardless of where the employer is located
• Work permits may be required depending on the arrangement