Costa Rica Employment Law & Compliance Guide for Employers
Key employment laws in Costa Rica: what employers need to know
Employment in Costa Rica is governed by the Código de Trabajo [Labour Code] of 1943, with social security run by the Caja Costarricense de Seguro Social (CCSS). Foreign employers are most often surprised by the cost of social charges, 26.83% of salary on top of pay in 2026, and by cesantía [severance], which is owed on dismissal without cause after 3 months of service. This page summarises the core employer rules, with links to official sources.
Costa Rica employment rules at a glance
| Topic | What the rule is | Official source |
|---|---|---|
| Minimum wage | Set per occupation level by an annual executive decree. From 1 January 2026: unskilled CRC 373,092.30 a month, skilled CRC 419,755.80, university licentiate CRC 796,921.00, domestic work CRC 268,731.31. The general increase was 1.63%. | SCIJ – 2026 private-sector minimum wage decree (official legal database) |
| Standard working hours | Day work: max 8 hours a day and 48 hours a week (up to 10 hours a day in non-hazardous work if the week stays within 48). Night work: 6 hours a day, 36 a week. Mixed shifts: 7 hours a day, 42 a week. | Código de Trabajo (Labour Code), Arts. 136 and 138, MTSS |
| Overtime pay | Overtime is paid at 150% of the ordinary hourly rate (a 50% premium, set by Constitution Art. 58). Ordinary plus overtime hours may not exceed 12 a day. Work on a paid public holiday is paid at double rate. | Código de Trabajo (Labour Code), Arts. 139, 140 and 152, MTSS |
| Paid annual leave | At least 2 weeks of paid vacation for every 50 weeks of continuous work (Constitution Art. 59; Labour Code Art. 153). Employees who leave before completing 50 weeks are paid vacation in proportion to the time worked. | Constitution of Costa Rica, Art. 59 (Constitute Project) |
| Public holidays | 12 holidays in 2026. Paid holidays: 1 Jan, Holy Thursday, Good Friday, 11 Apr, 1 May, 25 Jul, 15 Aug, 15 Sep, 25 Dec. Holidays not paid unless worked: 2 Aug, 31 Aug, 1 Dec. | MTSS circular on 2026 public holidays |
| Sick leave | For a certified illness, the employer pays at least 50% of salary for days 1–3; from day 4 the CCSS pays a subsidy of 60% of average salary, for up to 52 weeks. Work injuries are covered by INS work-risk insurance instead. | Spanish Ministry of Labour, Actualidad Internacional Sociolaboral No. 238 – Costa Rica (CCSS sickness benefits) |
| Maternity and parental leave | 4 months of maternity leave at full pay (1 month before, 3 after birth), paid half by the CCSS and half by the employer. Adoption: 3 months. Fathers: 8 paid days, taken as 2 days a week in the first 4 weeks after birth. | Law 10211 of 2022 amending Labour Code Arts. 94–100 (Poder Judicial) |
| Probation period | The Labour Code has no formal probation clause, but notice and cesantía are owed only after 3 months of continuous work. The first 3 months therefore work as a trial period in practice. | Código de Trabajo (Labour Code), Arts. 28–29, MTSS |
| Notice period | Preaviso [notice] for ending an indefinite contract without just cause: 1 week after 3–6 months' service, 15 days after 6–12 months, 1 month after 1 year. Notice can be paid in lieu; one day off a week to job-hunt. | Código de Trabajo (Labour Code), Art. 28, MTSS |
| Severance pay | Cesantía on dismissal without just cause: 7 days' pay (3–6 months), 14 days (6–12 months), then 19.5 to 22 days per year on a sliding scale. Only the last 8 years count. | Código de Trabajo (Labour Code), Art. 29, MTSS |
| Employer social contributions | 26.83% of gross pay from 1 January 2026 (26.67% before), after the IVM pension share rose from 5.42% to 5.58%. Covers CCSS health and pension, family allowances, IMAS, INA, Banco Popular and worker-protection funds. No ceiling. INS work-risk insurance is extra. | EY tax alert: CCSS contribution increase from January 2026 (professional source) |
| Employee social contributions | 10.83% of gross pay from 1 January 2026 (10.67% before): CCSS health insurance, IVM pension (4.33%, up from 4.17%) and Banco Popular. Withheld by the employer, with no ceiling. The IVM rate is scheduled to rise again in 2029. | EY tax alert: CCSS contribution increase from January 2026 (professional source) |
| Income tax on salaries | Employers withhold monthly. 2026 bands (Decree 45333-H): 0% up to CRC 918,000; 10% to CRC 1,347,000; 15% to CRC 2,364,000; 20% to CRC 4,727,000; 25% above. Small tax credits apply per child and for a spouse. | EY tax alert: 2026 income tax bands, Decree 45333-H (professional source) |
| Mandatory bonuses and 13th-month pay | Aguinaldo [Christmas bonus]: one-twelfth of all ordinary and overtime pay earned from 1 December to 30 November, paid by 20 December. No deductions apply except court-ordered child support. Leavers receive it pro rata. | MTSS press release on the 2025 aguinaldo (CP 054-2025) |
| Work permits for foreign nationals | Foreign employees need a residence or special category with permission to work from the Dirección General de Migración y Extranjería (DGME), under Law 8764. Executives, managers and technical staff of companies have a dedicated category. | Dirección General de Migración y Extranjería (DGME) |
| Employment contract requirements | Written contract required (except listed verbal cases), in three copies: one per party and one filed with the MTSS within 15 days. Must state parties, duration, hours, pay and place of work. Fixed terms max 1 year (5 for specialised work). | Código de Trabajo (Labour Code), Arts. 23–27, MTSS |
Employer obligations in Costa Rica, topic by topic
Filter by primary service relevance
Does an employment contract in Costa Rica have to be in writing, and is there a probation period?
What are the legal working hours in Costa Rica, and how is overtime paid?
How does the minimum wage work in Costa Rica, and what pay is mandatory?
How much paid leave do employees get in Costa Rica?
What does an employer pay in social security and payroll tax in Costa Rica?
How much notice and severance does an employer owe when dismissing an employee in Costa Rica?
Can a company hire a foreign national in Costa Rica, and which permit is needed?
Is it risky to engage independent contractors instead of employees in Costa Rica?
Key employment laws in Costa Rica and official sources
- Código de Trabajo (Law No. 2 of 1943, as amended incl. Law 9343 Labour Procedure Reform) — Main labour law: contracts, working time, leave, notice, cesantía, just causes and labour procedure.
- Law 10211 of 2022 (maternity, adoption and paternity leave reform) — Amends Labour Code Arts. 94–100: 4 months’ maternity leave, 8 days’ paternity leave and dismissal protection.
- Ley Constitutiva de la Caja Costarricense de Seguro Social (Law No. 17 of 1943) — Creates the CCSS health and pension insurance schemes and employer registration and contribution duties.
- Ley de Protección al Trabajador (Law No. 7983 of 2000) — Sets the labour capitalisation fund and mandatory complementary pension funded by employer contributions.
- Ley del Impuesto sobre la Renta (Law No. 7092) — Taxes Costa Rican-source income and sets the salary tax scale employers withhold monthly.
- Ley General de Migración y Extranjería (Law No. 8764 of 2009) — Governs residence categories and permission to work for foreign nationals.
FAQs: hiring employees in Costa Rica
Can a foreign company hire employees in Costa Rica without a local entity?
Not directly as the legal employer. To run payroll, an employer must register with the CCSS, take out INS work-risk insurance and withhold income tax, which requires a local presence. Foreign companies without an entity usually hire through an Employer of Record, which employs the worker under a Costa Rican contract and handles payroll, aguinaldo and CCSS filings. Using contractors instead carries reclassification risk.
How much does an employee cost in Costa Rica on top of gross salary?
In 2026 the employer pays 26.83% of gross salary in CCSS and related charges, with no ceiling, plus an INS work-risk premium that depends on the activity. On top of that, budget for the aguinaldo (one-twelfth of annual pay), at least 2 weeks’ paid vacation, the employer’s half of maternity and paternity pay, and the cost of notice and cesantía if employment ends without just cause.
What is the minimum wage in Costa Rica in 2026?
Costa Rica has no single minimum wage. A decree in force since 1 January 2026 sets monthly minimums by occupation level: for example CRC 373,092.30 for unskilled work, CRC 419,755.80 for skilled work, CRC 796,921.00 for a university licentiate and CRC 268,731.31 for domestic work. Employers must pay at least the rate for the employee’s actual job and qualification.
How much notice and severance does an employer owe when dismissing an employee in Costa Rica?
After 3 months’ service, dismissal without just cause requires notice of 1 week (3–6 months), 15 days (6–12 months) or 1 month (over 1 year), which can be paid in lieu. Cesantía is 7 days’ pay (3–6 months), 14 days (6–12 months), then 19.5 to 22 days per year, counting only the last 8 years. Accrued vacation and aguinaldo are also due.
Can a company hire a foreign national in Costa Rica, and what permit is needed?
Yes. The worker needs a migratory status that allows paid work, granted by the Dirección General de Migración y Extranjería (DGME) under Law 8764. Companies commonly use the temporary residence category for executives, managers and technical staff. The employer usually needs to be registered and up to date with the CCSS, and work cannot start before permission is granted.
Is it risky to engage contractors instead of employees in Costa Rica?
Yes. If a person provides personal services under the company’s direction for pay, the Labour Code treats it as employment whatever the contract says. The CCSS audits misclassification and can claim contributions with surcharges and interest, and the worker can claim aguinaldo, vacation, notice and cesantía. Use contractors only for independent, project-based work.
Related NNRoad resources for Costa Rica: Employer of Record in Costa Rica · Payroll in Costa Rica · Hiring foreign employees in Costa Rica · Contractors and on-demand talent in Costa Rica · Costa Rica employer cost calculator
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Regulation Updates in Costa Rica
May 1 is a Mandatory Paid Holiday
What it is: The May 1 holiday is a Mandatory Paid Holiday for private sector payroll and compensation.
What it changes: The notice clarifies private employer obligations for holiday compensation and payroll for May 1, including additional payments when employees work on that day and the application of statutory working time rules.
Who is affected:
- Private sector employers
- Employees working on May 1
What employers should do:
- Ensure payroll includes appropriate holiday compensation for May 1 as mandated.
- Provide any additional payments for employees who work on May 1.
- Apply statutory working time rules to May 1 as specified.
Notes: Effective month: 2026-04.
Discover the latest employment and compliance updates in Costa Rica — helping you stay ahead in a changing regulatory landscape.