Costa Rica

Contract Types

In Costa Rica, employment contracts can be Fixed Term or Indefinite. Fixed Term contracts are generally used for specific projects or temporary work and must clearly define the duration and reason for the temporary nature of the contract. They can only be renewed once for the same position; otherwise, the contract becomes indefinite.

Indefinite contracts are the most common and have no predetermined end date. Employment relationships are governed by Costa Rica’s Labor Code and specific company policies, with some industries having Collective Bargaining Agreements (CBA).

Probation

The probation period is typically 3 months for new hires, though it may vary by industry or CBA. During this period, either party may terminate the contract without justification.

Working Hours

The standard working hours in Costa Rica are 8 hours per day, typically distributed over 6 days.

Overtime

Overtime is allowed in Costa Rica but should not exceed 4 hours per day or 12 hours per week. Overtime is paid at 150% of the regular hourly wage for any hours beyond the contracted working hours. Overtime worked on holidays is paid at 200%.

Other Financial

Costa Rica mandates a 13th-month salary (known as Aguinaldo) that must be paid by employers by 20^th December. This amount is equivalent to one-twelfth of the employee’s total earnings for the year.

Other

Non-compete clauses are not standard in Costa Rica, but if agreed upon, they must be reasonable in scope and duration and provide fair compensation.

Tax rates valid for 2025

Corporation Tax

30%     

Consumption Tax        

13%     

Employers’ Social Security    

26.67%

Employees’ Contributions      

10.67%

Income Tax Rates        

Up to 4,094,000 – 0%

4,094,000 to 6,115,000 – 10%

6,115,000 to 10,200,000 – 15%

10,200,000 to 20,442,000 – 20%

Over 20,442,000 – 25%

Notice

Termination notice is required based on length of service:

Up to 3 months: no notice

3 months to 6 months: 1 week’s notice

6 months to 1 year: 2 weeks’ notice

Over 1 year: 1 month’s notice, plus an additional day for every additional year worked

Whilst working their notice employees are entitled to 1 paid day per week of leave to look for work.

During Probation

No notice or justification is required during probation.

Dismissal

Employers must have just cause for dismissal under Costa Rican labor law. Grounds for termination must be clearly documented, and employees have the right to contest dismissals. If there is no just cause then severance should be paid. Employers will strive to avoid litigation in Costa Rica as court cases can be costly and take years to be heard.

Severance

Severance pay (known as Cesantía) is required for dismissals without just cause and is based on length of service.

3 to 6 months: Seven days of pay

6 months to one year: 14 days of pay

Thereafter severance is approximately 20 days per year of service.

Employees should also receive any salary due, compensation for accrued and unused holiday and the 13th month salary pro rated.

Annual Leave 2025

Paid Public Holidays: 10

New Year’s Day – 1st January

Day Given in Lieu: No

Battle of Rivas – 11th April

Day Given in Lieu: No

Maundy Thursday – 17th April              

Day Given in Lieu: NA

Good Friday – 18th April           

Day Given in Lieu: NA

Easter Monday – 21st April     

Day Given in Lieu: NA

May Day – 1st May       

Day Given in Lieu: No

Annexation of Guanacaste – 25th July             

Day Given in Lieu: NA

Mother’s Day – 15th August    

Day Given in Lieu: No

Independence Day – 15th September              

Day Given in Lieu: No

Christmas Day – 25th December        

Day Given in Lieu: No

Comment:

Each year the government decides whether a day in lieu will be offered.

Paid Legal Entitlement

Employees are entitled to 2 weeks (10 working days) of paid vacation per year after 50 weeks of work. Vacation days must be taken consecutively unless otherwise agreed.

Carryover Permitted

There is no requirement to allow carry over but it is usual to allow unused vacation days to be taken within the first 6 months of the next year.

Payment in Lieu Allowed

Employees can receive payment in lieu of vacation only upon termination of employment.

Sick Leave

Employees are entitled to paid sick leave, covered equally by the employer and social security for the first 3 days. Thereafter social security pays 60% of salary for up to 1 year.

Maternity Leave

Maternity leave is 4 months (1 month before and 3 months after childbirth) and is fully paid, with the salary split between the employer and CCSS.

Paternity Leave

There is no statutory paternity leave in Costa Rica, though some companies offer 5 days of paid leave.

Parental Leave

There is no statutory parental leave, but employees may negotiate unpaid time off.

Child Care Leave

Employees are entitled to unpaid leave to care for a sick child, depending on the CBA or company policy.

Bereavement Leave

Employees are entitled to 3 days’ paid leave in the event of the death of an immediate family member.

Medical Insurance

Costa Rica has a universal public healthcare system (CCSS), but private health insurance is commonly offered as an additional benefit by employers.

Pension

Many employers also offer private pension plans as an additional benefit.