Hire in Costa Rica

Upon the employer’s request, the employee is obligated to provide the outcomes of a medical examination indicating the absence of any permanent disability or occupational, contagious, or incurable disease. Justification for medical examinations must be grounded in objective and reasonable reasons, either stemming from the job’s nature or for the protection of the employee’s health. Notably, in Costa Rica, it is strictly prohibited to conduct tests for HIV or pregnancy.

Employers have the authority to subject new employees to a probationary period, which is capped at three months. Extensions of probationary periods are not permissible.

In Costa Rica, the standard work schedule for professional employees is eight hours a day, five days a week. For laborers, the usual work schedule consists of eight hours a day from Monday to Friday, with a half-day on Saturday.

Employees are permitted to work up to 10 hours a day, provided the tasks involved are not hazardous. However, the total weekly working hours for an employee must not exceed 48 hours.

Employees are eligible for special rates of overtime compensation for hours worked beyond the standard daily and weekly limits. The overtime pay rate is influenced by factors such as the frequency of employee payments, whether weekly or monthly, and adjustments may be made if the overtime is worked on mandatory holidays.

Overtime is capped at four hours per day, contributing to a maximum of 12 working hours per day, inclusive of the overtime hours. The additional compensation for overtime is set at 50% of the regular salary.

Certain positions, such as managerial roles or work inherently unsuitable for regular hours (e.g., commission-based roles), are exempt from the maximum hourly limitations. However, they are not compelled to work beyond 12 hours a day.

Each employee is entitled to receive a Christmas bonus, known as “aguinaldo,” equivalent to one month’s salary. This bonus is calculated by summing up the total wages paid to an employee over the past year, including overtime payments, and then dividing the total by 12. The Christmas bonus must be disbursed within the initial 20 days of December.

For employees who have not completed a full year of work, the Christmas bonus is calculated using a similar formula, considering the average monthly salary up to that point.

Failure to provide the Christmas bonus is considered equivalent to terminating the employee without cause. In such cases, the employer is obligated to fulfill statutory compensation and applicable severance payments.

• If employed for over 3 months but less than 6 months: 1 week notice period.
• If employed for over 6 months but less than 1 year: 2 weeks notice period.
• If employed for 1 year or more: 1 month notice period.

Costa Rican law permits either the employer or the employee to terminate the employment relationship. In the event of termination, the employer is obligated to provide workers with a certificate or letter confirming the end of the work contract. This requirement applies irrespective of the reason for the termination, whether it be dismissal or resignation.

Employer’s rights to terminate a worker: 

Termination may occur under the following circumstances:

• At any point during the probationary period.
• Commission of violent or criminal acts by the employee, or actions that jeopardize workplace security and working conditions.
• Disclosure of confidential company information.
• Unjustified absence from work for two consecutive days or three or more non-consecutive days within the same calendar month.

Employee’s rights to terminate an employment contract:

Grounds for termination include:

• Unsettled salary payments.
• Engagement in immoral acts at the workplace or subjecting the employee to physical and verbal attacks.
• Deliberate damage to the worker’s tools by the employer, their relatives, or dependents.
• Presence of contagious diseases among the employer, relatives, or dependents in the workplace.
• Working conditions that pose hazards to the health or safety of the worker or their family.

Either party involved in the labor contract can terminate it without just cause by providing prior notice (Preaviso) to the other party. After completing three months of employment with the employer, the employee is entitled to receive prior notice if the employment contract is to be terminated.

Similarly, the employee must also give sufficient notice, or a deduction may be applied to the settlement payment.

If the employer opts not to have the employee serve the notice period, they must pay a ‘Preaviso’ compensation equal to one month’s salary. This compensation is prorated for employment periods of less than one year and is calculated based on the average earnings of the employee over the last six months. However, if the employer permits the employee to complete the notice period, ‘Preaviso’ compensation is not required.

Throughout the notice period, the employer must provide the soon-to-be terminated employee with one day off per week to facilitate the search for another job.

If an employee is terminated without valid justification or resigns with just cause, the employer is obligated to provide ‘Cesantia’ compensation. The compensation amount escalates based on the duration of the employee’s service.

The severance pay is governed by the following regulations:

• If the employment lasted for more than 3 months but less than 6 months, the compensation is equivalent to 7 days’ wages.
• For employment periods exceeding 6 months but less than 1 year, the compensation amounts to 14 days’ wages.
• If the employment duration is over 1 year, the following schedule is applicable:

In cases of justifiable termination, the employer is required to provide the Christmas Bonus (Aguinaldo) in proportion to the months worked since the beginning of the year. Additionally, the employer must grant vacation benefits and issue an advance notice to the employee before the termination of employment.

The Christmas Bonus remains unaffected by the payment of ‘Cesantia’ or ‘Preaviso’ and must be disbursed if an employee’s services are concluded before December. The payment is calculated based on the average total earnings from the preceding December 1 to the date of termination.

Accrued but unused vacation time is to be compensated as accumulated vacation pay (Vacaciones). As part of the severance package, the employee is entitled to one day of vacation pay for each month worked. For instance, an employee who worked for eight months without taking any vacation days upon termination is entitled to eight days’ wages as vacation severance.

Fixed-term contracts in Costa Rica have certain restrictions. The duration of such contracts cannot exceed one year and is strictly reserved for temporary work. Nevertheless, in cases where special technical skills are essential, the fixed-term contract may be extended for up to five years.

If employees continue working beyond the stipulated duration of a fixed-term contract or surpass one year, they are considered to be employed for an indefinite period.

In Costa Rica, non-compete provisions are permissible as long as they are reasonable and the employee receives compensation during the restricted period. The specifics, including terms, geographical constraints, payment details, and restricted activities, need to be evaluated individually. In cases where the payment amount is not explicitly agreed upon, it will be assumed that the compensation is equivalent to 50% of the employee’s salary for the non-compete duration.

Additionally, non-solicitation provisions are also allowed in Costa Rica.

Costa Rican employers have the option to furnish employees with digital payslips. Nevertheless, employees are required to respond via email to acknowledge the receipt of the payment.

Records of payroll reports must be maintained for a period of five years.

• An employee is eligible for two weeks of vacation, totaling twelve days, along with a minimum of two rest days for every fifty consecutive weeks of service with the same employer. This entitlement remains consistent regardless of the weekly working hours, be it eight hours, six hours, half-time, one hour, one day, or several days a week.
• In the event of termination before completing a year’s work, an employee is entitled to either one day’s wages or earned leave, which will be compensated.
• The Labor Code prohibits the carryover of vacation time and discourages the division of vacation periods. Only under specific circumstances does the law permit the splitting of vacation time into a maximum of two periods.

• There are a total of 12 public holidays in Costa Rica.
• For employees required to work on Sundays or statutory holidays, compensation must be provided at a rate twice the normal wages.

• In Costa Rica, an employer must cover a minimum of 50% of the salary for the initial three days of an employee’s sick leave, while the Social Security Administration (Caja Costarricense de Seguro Social or CCSS) is responsible for the remaining 50%.
• Starting from the fourth day of sick leave, the CCSS covers 60% of the salary, and the employer is not obliged to provide salary for the subsequent sick leave duration. However, the employee is required to present a medical certificate obtained from an accredited CCSS doctor.

• The employer is required to grant maternity leave, commencing one month prior to the childbirth and extending for three months following the birth of the child. Throughout the four months of leave, the employer must cover 50% of the salary, while the remaining 50% is covered by the CCSS.
• In the event of an employer terminating the services of a pregnant woman, regular wages must be paid from the date of dismissal through the eighth month of pregnancy.
• Male employees are eligible for eight days of paternity leave, distributed as two days per week over the four weeks following the birth of the child. During this paternity leave, 50% of the salary is paid by the employer, and the other 50% is covered by the CCSS.

Breastfeeding License

Mothers have the right to a nursing license with compensation, allowing them to take one paid hour off work each day. This license remains valid as long as the mother continues nursing the child, and the employee must furnish her employer with a medical certification.

In the unfortunate event of the death of an immediate family member, an employee is granted three days of paid bereavement leave.