Costa Rica Employer Compliance Hub: Employment Regulations & Payroll & Tax
Key Law Terms Overview in Costa Rica
Costa Rica Labor Code (Código de Trabajo, Law No. 2)
Title I – General Provisions
Scope: Covers employment relationships between employers and employees in Costa Rica.
Article 1 (translated): “The Labor Code applies to all persons engaged in work for remuneration under the direction or authority of an employer.”
Article 2 (translated): “Employers are responsible for ensuring that employment conditions comply with the provisions of this Code and other applicable laws.”
Article 3 (translated): “Any contractual clause that reduces the rights established in favor of the worker is null and unenforceable.”
Title II – Individual Employment Contracts
Article 12 (translated): “An employment contract is established when a person undertakes to perform services for an employer in return for remuneration.”
Article 13 (translated): “Contracts may be verbal or written, except for cases where the law requires written form.”
Article 14 (translated): “Temporary or seasonal contracts may be agreed upon for a period not exceeding ninety (90) days, with specific conditions defined by law.”
Title III – Work Hours, Rest & Leave
Article 148 (translated): “Regular working hours shall not exceed eight (8) hours per day and forty-eight (48) hours per week.”
Article 151 (translated): “Overtime work shall be compensated at one hundred fifty percent (150%) of the regular hourly wage, except where special agreements apply.”
Article 162 (translated): “Employees are entitled to one full rest day per week, and daily breaks as prescribed by regulations.”
Article 154 (translated): “After fifty (50) weeks of continuous service, employees are entitled to two weeks of paid vacation.”
Title IV – Wages & Benefits
Article 116 (translated): “Employers must pay wages on time, in full, and in legal currency, without unlawful deductions.”
Article 123 (translated): “All employees are entitled to a Christmas bonus (Aguinaldo) equal to one twelfth (1/12) of annual earnings, payable no later than December 20 each year.”
Article 120 (translated): “Minimum wages are established by the National Wage Council and must be respected by all employers.”
Title V – Maternity, Paternity & Special Leave
Article 161 (translated): “Female employees are entitled to twelve (12) weeks of paid maternity leave, with at least six (6) weeks following delivery.”
Article 164 (translated): “Paternity leave is granted for the birth of a child, in accordance with statutory provisions.”
Article 166 (translated): “Employees are entitled to sick leave, subject to the requirements of the Costa Rican Social Security Fund (CCSS).”
Title VI – Termination & Severance
Article 80 (translated): “Termination must follow legal cause and require notice periods as prescribed by the Labor Code.”
Article 81 (translated): “Unjustified termination obliges the employer to pay severance corresponding to years of service, accrued vacation, and proportional Aguinaldo.”
Article 82 (translated): “Employers must provide written notice specifying the reason for termination to the employee.”
Title VII – Collective Labor Rights
Article 375 (translated): “Workers have the right to organize, join, and participate in unions.”
Article 380 (translated): “Employers must engage in good faith collective bargaining with recognized unions.”
Article 385 (translated): “Strikes are lawful under the conditions established by law; retaliation against participating employees is prohibited.”
Title VIII – Discrimination & Equal Treatment
Article 27 (translated): “Discrimination in employment based on sex, age, race, religion, political opinion, disability, or union membership is prohibited.”
Article 28 (translated): “Employees who suffer discrimination are entitled to legal remedies and compensation as provided by the Labor Code.”
Title IX – Labor Dispute Resolution & Jurisdiction
Article 424 (translated): “Labor disputes shall be submitted to the specialized labor courts, which have exclusive jurisdiction over employment conflicts.”
Article 426 (translated): “The dispute resolution process includes conciliation, mediation, arbitration, and judicial proceedings according to legal procedure.”
Title X – Occupational Safety & Health
Article 39 (translated): “Employers must maintain a workplace free from risks that could endanger the health and safety of employees.”
Article 40 (translated): “Protective equipment and appropriate measures must be provided to prevent accidents and occupational diseases.”
Article 41 (translated): “Workplace accidents must be reported to the Costa Rican Social Security Fund (CCSS) in accordance with the law.”
Title XI – Employment of Foreign Workers
Article 12 bis (translated): “Foreign workers may only be employed after obtaining the corresponding work permit or authorization from immigration authorities.”
Article 12 ter (translated): “Foreign employees enjoy the same labor rights and protections as Costa Rican nationals.”
Official Spanish Source
Código de Trabajo (Law No. 2) – PDF (Spanish): https://www.mtss.go.cr/elministerio/marco-legal/documentos/codigo_trabajo_cr.pdf
Disclaimer: This content is provided for general informational purposes only and does not constitute legal advice.
Costa Rica Social Security Law – CCSS (Law No. 17 of 1941)
Title I – General Provisions
Scope: Establishes CCSS and its functions.
Article 1 (translated): “The Costa Rican Social Security Fund (CCSS) is a public autonomous institution responsible for providing health, pension, disability, and family allowance services to all insured persons.”
Article 2 (translated): “CCSS operates under the supervision of the Ministry of Health and the Ministry of Labor, and is financed through mandatory contributions from employers, employees, and the State.”
Article 3 (translated): “The administration of CCSS shall be guided by principles of universality, solidarity, and equity.”
Article 4 (translated): “CCSS may issue regulations, resolutions, and instructions necessary for the proper functioning of social security programs.”
Focus: Legal foundation of CCSS; defines funding, supervision, and principles.
Title II – Mandatory Coverage
Article 5 (translated): “All employees and employers are obligated to participate in the social security system; contributions are compulsory and enforceable by law.”
Article 6 (translated): “Coverage includes: medical care, maternity, pensions (IVM), disability, work injury insurance, and family allowances.”
Article 7 (translated): “Registration with the CCSS is mandatory for all employees from the start of employment.”
Article 8 (translated): “The State shall ensure the necessary resources to guarantee coverage for all insured persons.”
Article 9 (translated): “Exemptions from contributions, if any, must be expressly authorized by law.”
Focus: Defines who is covered, benefits included, and obligation to register.
Title III – Contributions
Article 12 (translated): “Employer contributions are calculated as a percentage of gross salary, covering healthcare, pensions, disability, family allowances, and training funds.”
Article 13 (translated): “Employee contributions are withheld by the employer from gross salary and remitted together with the employer’s share monthly.”
Article 14 (translated): “Contribution rates and bases are set by CCSS regulations and periodically updated.”
Article 15 (translated): “Minimum contributory base applies to part-time or low-income employees to ensure minimum coverage.”
Article 16 (translated): “Payments must be made monthly; failure to comply incurs fines, interest, and legal action.”
Article 17 (translated): “Certain categories of workers (e.g., domestic, agricultural) may have special contribution rules established by CCSS.”
Focus: Specifies calculation, payment, and reporting rules, plus special cases.
Title IV – Registration and Reporting
Article 20 (translated): “Employers must register all employees with CCSS within the first month of employment.”
Article 21 (translated): “Monthly contribution reports and payments must be submitted by the employer to the CCSS by the established deadline.”
Article 22 (translated): “Employers are responsible for the accuracy of reported wages and contributions; failure may incur fines and interest.”
Article 23 (translated): “Any changes in employment, such as termination or suspension, must be reported promptly to CCSS.”
Article 24 (translated): “CCSS may audit employer records to ensure compliance with registration and contribution requirements.”
Focus: Detailed compliance and reporting obligations.
Title V – Benefits
Article 30 (translated): “Health services include preventive, curative, and maternity care provided by CCSS facilities.”
Article 31 (translated): “Pensions are granted for old age, disability, or survivor benefits, based on accumulated contributions.”
Article 32 (translated): “Family allowances are provided for eligible children and dependents of insured workers.”
Article 33 (translated): “Work injury and occupational disease coverage is mandatory for all employees.”
Article 34 (translated): “Employees are entitled to temporary disability benefits during periods of medical incapacity, subject to CCSS evaluation.”
Focus: Core social insurance benefits and access criteria.
Title VI – Enforcement and Penalties
Article 50 (translated): “Non-compliance by employers in registration, reporting, or contribution payments results in administrative sanctions, fines, and interest charges.”
Article 51 (translated): “Workers affected by employer non-compliance are entitled to retroactive coverage and benefits.”
Article 52 (translated): “CCSS may impose progressive fines depending on duration and severity of non-compliance.”
Article 53 (translated): “Employer appeals against CCSS penalties must follow procedural rules established in CCSS regulations.”
Focus: Ensures employer accountability and employee protection.
Official Spanish source: CCSS – Ley Constitutiva de la Caja Costarricense de Seguro Social
Disclaimer: This content is provided for general informational purposes only and does not constitute legal advice.
Costa Rica Income Tax Law – Salary Tax Chapter (Law No. 7092)
Title II – Income Tax on Employment Income
Article 27 – Taxable Income
“For individual taxpayers residing in the country, a monthly tax shall be applied, calculated, and collected on income that arises from dependent personal services, including salaries, extra wages, bonuses, commissions, gratuities, overtime pay, royalties, and the Christmas bonus (aguinaldo), when these exceed the amount established in this law.”
Focus: Defines which employment-related income is subject to salary tax.
Article 32 – Income from More Than One Employer
“If a taxpayer receives income from more than one employer in a single tax period, the taxpayer must notify one or more of the employers so that only one tax-free allowance is applied. If no notification is made, the Tax Administration will determine the applicable tax.”
Focus: Ensures correct withholding for multiple employment incomes.
Article 33 – Progressive Tax Scale
“The employer must withhold the tax and apply it to the total monthly income received by the worker. The tax is applied according to the progressive tariff scale:
· Income up to a threshold is exempt.
· 10% on income above the first threshold.
· 15% on income above the second threshold.
· 20% on income above the third threshold.
· 25% on income above the highest threshold.”
Focus: Provides the progressive brackets used for salary withholding.
Title V – Withholding and Payment Procedures
Article 34 – Tax Withholding
“This tax shall be withheld in the manner established in this law. Having performed the withholding, the obligated withholding agent is the solely responsible taxpayer before the Tax Administration for the withheld tax.”
Focus: Employer is legally responsible for withholding and remitting.
Article 35 – Payment of Withheld Tax
“Withholding agents must deposit the amounts withheld with the Central Bank of Costa Rica or authorized tax collection offices within the first fifteen calendar days of the month following the remuneration payment.”
Focus: Sets the deadline for remitting withheld tax.
Article 36 – Certification of Withholdings
“Each fiscal period, the employer must provide employees a statement showing the total remuneration paid and the taxes withheld and paid. Additional documentation may be required by tax regulations.”
Focus: Employers must provide annual withholding certificates.
Title VI – Sanctions
Article 37 – Failure to Withhold
“Withholding agents who fail to withhold the tax will be jointly liable for its payment, will not be permitted to deduct as business expenses the amounts related to those taxes, and are subject to other tax penalties.”
Focus: Penalties ensure employer compliance.
Article 38 – Interest for Late Payment
“The withholding agent is subject to payment of interest on late payments as provided in the Tax Norms and Procedures Code.”
Focus: Employers may incur interest charges for late remittance.
Practical Employer Obligations
Withhold salary tax monthly based on progressive brackets.
Remit withheld amounts within 15 days after salary payment.
Provide annual withholding certificates to employees.
Ensure correct withholding when employees have income from multiple employers.
Failure to withhold/remit may result in joint liability, penalties, and interest.
Official full text – Ley del Impuesto sobre la Renta No. 7092
Disclaimer: This content is provided for general informational purposes only and does not constitute legal advice.
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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. Manual verification recommended.
Discover the latest employment and compliance updates in Costa Rica — helping you stay ahead in a changing regulatory landscape.