Employer of Record Costa Rica

If Costa Rica has been on your mind lately for expanding your venture, then you are plumb at the right place. Here, we shall walk you through the requirements, procedures, regulations, pros, cons, etc., of expanding a business in the country. Costa Rica is basically a small, amicable nation famous for its mountains, beaches, and wildlife. Nonetheless, very few people know that it is one of the ideal places for companies seeking to expand themselves in Central American countries. The country is known for its stable and long-standing democracy and highly educated workforce. Costa Rica has gained a plausible rank, that is, 62nd, in HDI (human development index) 2020 globally and fifth in the whole of Latin America. Furthermore, the United States has always been Costa Rica’s biggest trading partner and largest foreign direct investor. The proximity of the country to the US offers major market opportunities to businesses, especially in the sectors like hotel & restaurant equipment, building products, cosmetics, renewable energy, and franchising

While branching out your business in Costa Rica can bring immense rewards, you might face complications as well, such as cultural barriers, compliance risks, language, managing international employees, and so on.

However, collaborating with an efficient Employer of Record Costa Rica agency can support you in the expansion of your business in the country by taking care of all compliances and legalities and providing end-to-end recruitment services to utilize strategic resources for hiring and bringing skilled professionals on board.

Table of Contents

Hiring in Costa Rica

Once you have instituted a branch of your business in Costa Rica, you need to discover the choicest talents to work for you. The process of hiring in the country entails a selection process and certain general steps. In order to protect the citizens from unnecessary dismissals and fraud, the Costa Rican administration has stringent regulations. The set of laws to guard employees against discrimination based on disability, religion, health, gender, color, race, nationality, political opinion, and age also exists in Costa Rica. It also makes sure that workers are receiving salaries and employment benefits by enforcing certain strict laws in the country.

While taking care of the rights of employees, the rules and regulations also ensure not to impose unreasonable rules on employers as well. Costa Rica offers access to an immense pool of professional and bilingual employees to employers who can make selections by aligning them with their requirements at lower rates.

In order to interact with the job candidates, employers need to understand the local culture. You can choose to get the onboarding process done efficiently through the best Costa Rica Employer of Record. By handling the pool of applicants, assessing the info about them, and managing onboarding procedures. Once the evaluation is completed, it is all down to the employer to offer a certain position to the employee. Thus, the hiring and onboarding process becomes time-saving, effective, and easy, as experts of Costa Rica Employer of Record handle the matters.

Employment Compliance

As per the Labor Code of the country, domestic workers are protected under the specific provision. It allows a 30-day probationary period where either party involved in employment can terminate the relationship without severance pay. After the probationary period is completed, termination can only be practiced while adhering to the clauses mentioned below. They are also entitled to certain employment benefits, Christmas bonuses, vacations, and so on. Here are other employment laws and regulations you need to be aware of as an employer.

Working hours

• In Costa Rica, there are Normal Working Days (Jornadas Ordinarias Normales) and Special Working Days (Jornadas Especialed o de Excepcion). The maximum number of working hours per day depends on the type of working day.
• The maximum number of hours per week in the country is 48. Usual daytime working hours are between 5:00 AM and 7:00 PM, while nighttime jobs take place between 7:00 PM and 5:00 AM
• It is not allowed for night-time workers to work for more than 36 hours a week
• For those who work a mixed shift of day and night, the maximum working time limit per week is 42 hours.

Compensation

• In case an employee is not provided the mandatory Christmas bonus, the employer needs to pay the applicable severance and statutory compensation.
• Costa Rican compensation law encompasses different areas like working hours, salary, and overtime rules and amounts.
• The total number of working hours in a week in Costa Rica is 48, and the overtime pay must be 150% of the regular salary of the worker.

Probation Period

• Costa Rican Labor Code doesn’t pose any compulsory trial period for employees. In the majority of cases, the probation period overlaps with the starting period of the 3-month term of the contract. In such scenarios, the employer is entitled to end the contract without explanation or providing compensation for dismissal to the employee.
• In case a probationary period has been decided upon, it must be practically established to evaluate the performance of the employee.

Bonuses

• Employees in Costa Rica are entitled to get an extra month of wages which is a year-end Christmas bonus paid by the employer without any conditions.
• This bonus needs to be paid between December 1st and the 20th by the employer.
• In addition to overtime pay, which is 150% of the regular wage of the worker, the employer must provide 2 bonuses to the worker each year- Aguinaldo bonus (paid in 2 installments- in June & December) and a Christmas bonus.
• Both bonuses ought to be equal to the monthly salary of the employee.

Termination and Severance

• In case of termination, employees who have worked with the company for over a year or more in Costa Rica have the right to get a 30-day notice period. If the employee has been working with the employer for 6 months to 1 year, the notice period is two weeks, while if he/ she has worked for 3 to 6 months, the notice period is set for one week.
• In case the employer doesn’t want to offer notice to the employee, compensation for the pre-notice period for the employer to cease the job instantly needs to be given.
• Severance pay to the employee must be paid if termination is done without proper cause or explanation. The period of severance may be between 7 to 22 days. This duration in which the employee is entitled to severance pay is called “Prestaciones Laborales”.
• The termination of an employee is valid only when done on the grounds mentioned in Article 81 of the Costa Rican Labor Code.

Employee Entitlements

Several aspects need to be familiarized to adhere to the employment laws in Costa Rica. It is vital for organizations planning to start an office and HR department. In general, written contracts of employment are not required. However, state and local employment laws may require particular information to be in writing. The employer of record Costa Rica makes sure that employment contracts are drafted in accordance with local laws and employee benefits.

Maternity leaves

• Pregnant employees are entitled to take up to 4 months of paid maternity leaves, as per Article 95 of the Costa Rican Labor Code. This permission for leave starts one month before the expected date of childbirth and lasts three months after that. These three months of maternity leave are also regarded as the minimum breastfeeding license, which can be stretched further under medical recommendations.
• The law states that 50% of the regular wages will be paid by the employer while the remaining 50% is reimbursed by Social Security.

Sick Leave

• Costa Rican labor law entitles employees to take sick leaves.
• Employers in Costa Rica need to pay at least half of the employee’s salary for the first three days of the sick leave of an employee.
• The other half (50%) of the salary is paid by the Social Security Administration. After three days of sick leave, an employer is not liable to pay any wages, but Social Security pays 60% of the regular wages.

Paternity Leaves

• Costa Rican labor law entitles fathers to paid time off for eight days. The paternity leave is mandatory for fathers who are employed in the public sector.
• No discrimination can be practiced regarding the birth of a child or the circumstances in which the child is born.

Vacation

• The Costa Rican Labour Code entitles employees to a day of vacation per month and 14 days of paid vacation after 50 weeks of work.
• The employer pays the employees for the vacation period according to the average earnings throughout the previous 50 workweeks.
• The laws do not allow employees to accumulate vacation time. This prevents the employees from not breaking the vacation period and taking it up in one go.
• There are nine public holidays in Costa Rica for which employees are provided paid days off, such as New Year’s Day, Juan Santamaria Day, Labour Day, Mother’s Day, Christmas Day, and so on.

Pension

• Any insured employee who has reached the age of 65 years is entitled to a pension as long as they have contributed to the insurance with a minimum of 300 installments.
• If the insured worker has turned 65 years old but doesn’t fulfill the above requirement of 300 installments, he/ she must have contributed at least 180 installments. Then, they have the right to get a proportional amount of pension as mentioned in Article 24 of the Regulations for the Insurance of Disability, Aging, and Death.

Health Benefits

• Reisgos del Trabajo, the Compensation Insurance Policy of the Worker in Costa Rica, is managed by the National Insurance Institute overseen by the Costa Rican government. The insurance policy provides coverage for work-related illnesses or accidents of the worker
• As per the legal regulations, it is upon every employer to provide a worker’s Compensation Insurance Policy for the employee. In case the employee gets injured, and there’s no insurance, the employer shall be liable to pay for all the medical expenses.

Other Benefits

• Employees in Costa Rica are entitled to several employment benefits such as room, salaries, and board.
• Employees are also protected against discrimination of every kind through strict Costa Rican labor laws.
• If an employer sees it as convenient, the employee is entitled to be allowed a half day off during any day of the working week.

Payroll and Tax in Costa Rica

• In Costa Rica, it is the responsibility of both employee and employer to make contributions to social security. The employer needs to contribute 26.5% of the salary of the employee, whereas the employee’s contribution is 10.5%.
• The corporate tax in Costa Rica is 30%.
• The personal income tax, which is 15%, is imposed on pensions, interests, dividends, and labor in Costa Rica.

The Fair Labor Standards Act or FLSA enforces employers to follow the guidelines while setting up the payroll. There are many states which choose to establish more robust laws for their own benefit and employers must follow them. The FLSA also demands employers have the information related to their staff’s working hours and compensation on record which may be asked for later. Considering Infotree Global as your employer of record USA helps you in streamlining the process.

Employment Laws in Costa Rica

In addition to the main employment law, i.e., Costa Rican Labor Code, there are several other regulations and statutes active in Costa Rica to protect and empower employees and employers. Some of these regulations are the Equal Opportunity for Women Law, Opportunity Act for Persons with Disabilities, and the Worker Protection act.

• While establishing an employment contract in the country, both parties need to sign the document, which includes information like name, age, sex, nationality, number of identity cards, nature & duration of the contract, overtime agreement, working hours, and workplace location, and so on.
• In case an employer asks, the job candidate/ employee must show the results of a medical test to show that he/ she doesn’t suffer from any incurable, occupational, or contagious disease or disability.
• Costa Rican employment laws prohibit checking the employee for pregnancy or HIV.
• Employees cannot work overtime beyond 4 hours per day.

Visa and Work Permits in Costa Rica

Hiring and onboarding vary in Costa Rica depending on whether you are doing it locally or internationally.

• In the country, work visas are of two types, permanent residence visas for employees and workers who have been living in Costa Rica for a minimum of three years on the permit and temporary residence permits that are meant for investors who wish to establish a business in the country.
• Temporary residence permit holders can hire a local workforce to work for them. However, they aren’t allowed to work.
• If a business owner doesn’t have any prior authorization to hire internationally, he/ she can recruit permanent residence holders and locals only.
• The Costa Rican administration authorizes work permits for individuals who fit into “special categories,” such as domestic workers, temporary workers, technical guests, athletes and artists, transfrontier workers, transferees, etc.

Benefits of Employer of Record Costa Rica

One takes stock in the decision to expand a business in a particular country, anticipating growth. However, a lack of local expertise or speed may slacken the process or even dampen your spirits while expanding the business in Costa Rica. That’s why you should resort to an efficient Costa Rica Employer of Record, which is also known as an international PEO. These third-party institutions support enterprises to hire and onboard workers in the country while complying with the laws and without the risk and cost of establishing a local entity.

Here are the top benefits of hiring an Employer of Record in Costa Rica:

• EOR services allow business owners to look forward to discovering and hiring fresh and skilled talent abroad and setting themselves on their projects and important affairs right away, without struggling to cut the red tape.
• EOR firms are well-acquainted with the business & labor legislations of the country and thus, will ensure that all the processes are carried out while complying with the laws. In case a breach happens, EOR is held liable and not the business owner.
• Business expansion is no easy task. It takes immense paperwork and compliance with regulations. By delegating this job of running payroll, monitoring paperwork, administering benefits, and terminating employee contracts to reliable EOR agencies, businesses can save a lot of time.
• Costa Rica Employer of Record helps businesses by helping them save up on onboarding HR, financial, and legal consulting companies, as they are experts and do it all efficiently while adhering to the laws.
• EOR will be held responsible in case of any inadvertent tax documentation negligence or non-compliance with Costa Rican labor laws, and business owners do not have to fret at all

Why Infotree Global Solutions?

Infotree Global understands your passion for going global in these times. However, there are certain barriers that can hold you back or slow the process of expanding your business in another country, such as language, culture, different laws and regulations, and so on. Infotree Global helps you do it the easier way. You hire their services, and they track and handle all of your paperwork, compliance with laws, insurance needs, tax laws, employee hiring, and onboarding more efficiently. With experts at your service, you no longer need to worry about infringing any laws, recruiting the best talent, or terminating employment contracts. You can take your focus back to your business affairs, clinch more profitable deals, and see your business growing.

Using Infotree Global is the fastest way to deploy local and foreign employees in Costa Rica. Contact Us for a demo.