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Hiring in Costa Rica
Background checks in Costa Rica
Hire employees in Costa Rica
Language used in Costa Rica
Corporate presence requirements and payroll setup in Costa Rica
Easily hire employees in Costa Rica with our EoR solution
Employer of record in Costa Rica
Hiring employees in Costa Rica typically requires setting up a local entity, registering with multiple government bodies, and ensuring compliance with the country’s labour, tax, and social security regulations. This process can be time-consuming and expensive — particularly if you only plan to hire a small team or need to move quickly.
An alternative is to engage workers as independent contractors, which offers flexibility and lower upfront costs. However, it also carries a significant risk of misclassification, which could lead to fines, back payment of taxes and benefits, and reputational damage. A simpler and more compliant option is to hire through an employer of record.
What is an employer of record (EoR)?
An employer of record (EoR) is a third-party organisation that legally employs workers on behalf of another business. The EoR handles key employer responsibilities — such as drafting compliant contracts, processing payroll, managing benefits, and paying taxes and social security contributions — while you maintain day-to-day control of your team’s work. Because there’s no need to set up your own local entity, this model is particularly attractive to companies expanding into Costa Rica for the first time.
Using an employer of record in Costa Rica
When you work with an employer of record in Costa Rica, the EoR hires your employees under Costa Rican law through its own local entity. They ensure employment contracts meet statutory requirements, administer payroll in compliance with tax and social security rules, and handle all necessary registrations. You direct and manage the employees’ daily activities, while the EoR manages the legal and administrative obligations of being their official employer. This allows you to onboard staff quickly without the delays and costs of establishing a corporate presence.
Hiring in Costa Rica with or without an EoR
Whether you decide to use an employer of record in Costa Rica or hire directly through your own entity, you’ll need a clear understanding of local employment laws, payroll regulations, and workplace norms. This knowledge will help you choose the right hiring route, avoid compliance risks, and give your employees a smooth experience from day one. In the following section, we will cover the key steps, requirements, and best practices for hiring in Costa Rica.
Hiring in Costa Rica
Thanks to its highly educated workforce, strategic location in Central America and government initiatives to encourage foreign investment, Costa Rica is a popular destination for international expansion. But employers hiring in Costa Rica need to be aware of various labour laws, rules, and customs to protect their business interests and attract and retain local talent. Read on for what you need to know about hiring in Costa Rica.
Labour laws in Costa Rica
The main source of employment law in Costa Rica is the Labour Code (Código de Trabajo), which sets out employee rights and employer obligations. Among other things, it includes provisions on working conditions, working hours, overtime, and mandatory rest periods. The Ministry of Labour and Social Security (Ministerio de Trabajo y Seguridad Social) is responsible for enforcing labour laws. In general, employment law in Costa Rica tends to favour the employee.
Social security and tax compliance in Costa Rica
Employers in Costa Rica must contribute approximately 30% of each employee’s salary to the country’s social security system, which pays for things like pensions and healthcare. Employees also contribute around 10% of their income, which employers are responsible for withholding and remitting on their behalf. In addition, employees must also pay income tax on their income from employment, which employers must also withhold and pay to the tax authorities.
Employment contracts in Costa Rica
Employers in Costa Rica must provide each worker with a written employment contract. Under Costa Rican employment law, this contract must include the main terms and conditions of employment, including salary, wages, benefits, entitlements, leave, and overtime policies. It should be completed in three copies: one each for the employer and the employee, and one to be sent to the Ministry of Labour and Social Security.
Working hours in Costa Rica
Costa Rican labour laws set strict limits on the number of hours an employee can work each day and week. There are also specific limits for night shifts and mixed shifts (those including both day and night hours). Overtime is permitted in Costa Rica but must be compensated at a higher rate set by the labour code.
Visas and work permits in Costa Rica
Employees who are not citizens of Costa Rica must have the relevant permit to work in the country. There are different visas for different situations, including seasonal or temporary jobs, internships, corporate relocations, and academic work. Employers hiring in Costa Rica should ensure that any non-Costa Rican nationals they hire have the relevant work permit before work begins.
Background checks in Costa Rica
Employers often run background checks on potential employees to verify information gathered during the hiring process and determine suitability for a role. However, different countries have different rules about background checks and how they must be conducted. Keep reading to learn what you need to know about employment background checks in Costa Rica.
Required background checks in Costa Rica
Employment background checks are not mandatory in Costa Rica, but employers can choose to perform them. Employers can request the necessary information for running a background check, including the potential employee’s date of birth and ID number.
Types of background checks in Costa Rica
The following types of background checks may be permissible in Costa Rica, depending on the circumstances:
- Criminal record checks: Conducting a criminal records check in Costa Rica involves contacting the Public Registry and the Judicial Investigative Police (OIJ) to obtain information on any criminal convictions or ongoing cases. Employers generally need a valid reason for conducting a criminal records check.
- Education verification: Employers in Costa Rica can verify a potential employee’s educational qualifications by contacting the relevant educational institutions. It’s common to verify the highest degree or qualification the candidate holds.
- Employment verification: Similarly, employers can contact a candidate’s former employers to verify the positions they held and the duration of their employment. They can also conduct reference checks to gain insights into the candidate’s work ethic and performance.
- Credit history: Employers often run credit reports on potential hires for jobs in security and finance. This involves accessing the candidate’s credit history and any bankruptcies or court cases to determine their level of financial responsibility.
- Driving records: If it’s relevant to the job in question, employers in Costa Rica can also run a check on a potential employee’s driving record. This allows them to verify that the candidate has a valid licence and no previous convictions.
Limitations on background checks in Costa Rica
Employers must obtain express and informed consent from candidates before carrying out any type of background check in Costa Rica. They must also prioritise data privacy and ensure that the data gathered during the process of running a background check is used only for the purpose for which it was intended. This ensures compliance with Costa Rica’s data protection laws.
Hire employees in Costa Rica
Before you hire employees in Costa Rica, it’s important to be sure that this is the right option for your business. For example, if you only need a worker’s services for a short period, it may make more sense to engage an independent contractor or even use a temporary work agency. Read on to learn about the different hiring options available in Costa Rica.
Different hiring options in Costa Rica
Here are the different options available if you want to engage workers in Costa Rica:
- Employee: All employees in Costa Rica must be provided with a written employment contract that clearly states their terms of employment. Employment can be on a permanent or temporary basis and can be full-time or part-time. It is illegal to treat part-time or fixed-term employees less favourably than other workers based on their status.
- Independent contractor: An independent contractor is a worker who works for an organisation but is not an employee. The relationship between an independent contractor and their employer is governed by civil law rather than employment law, and contractors typically don’t have the access to the same rights and protections as employees. Employers in Costa Rica must take care to avoid misclassifying employees as independent contractors, even unintentionally.
- Agency worker: Another way to hire employees in Costa Rica is to engage them through a temporary work agency. This method is suitable for meeting short-term needs, such as covering for another employee who is temporarily absent or meeting a short-term increase in demand. In a temporary assignment arrangement, the work agency is usually responsible for contractual and payment obligations, while the user company must ensure compliance with workplace laws and safety regulations.
Employee misclassification in Costa Rica
Misclassification of workers in Costa Rica could result in serious consequences, including fines, penalties, legal trouble, and reputational damage. Employers in Costa Rica must take care to properly classify each worker according to local labour laws. Whether someone is counted as an employee or an independent contractor does not just depend on their contract or agreement, but on factors such as:
- The level of direction and control the employer exerts over their work.
- Whether they are subject to disciplinary action for misconduct.
- The extent to which they are integrated into the employer’s company.
- Who provides the necessary work equipment and tools (worker or employer).
- Whether they have the right to work for other employers at the same time.
- Whether they have the right to deploy a substitute or subcontractor.
Language used in Costa Rica
The main language used in Costa Rica is Spanish, which is also the country’s official language. Costa Rica is also home to several indigenous languages, including Bribri, Cabécar, Maleku, and Guaymí. Other primary languages in Costa Rica include Mekatelyu or Patua, an English-based creole language spoken by Afro-Caribs living along the Atlantic coast. The most widely spoken foreign languages include English, Italian, Haitian, Créole, French, and Tagalog.
Language requirements for employment documents in Costa Rica
Employment contracts in Costa Rica are generally concluded in Spanish. However, a contract concluded in another language may be valid if the employer can demonstrate that the employee understands it. In practice, while English is often used in business and legal contexts, it’s a good idea to provide an official translation of any employment documents concluded in a language other than Spanish, and to specify which version will prevail in the case of any disputes.
English language in Costa Rica
English is widely spoken in Costa Rica, especially in cities and tourist areas. According to the EF English Proficiency Index, Costa Rica ranks at #41 of 116 countries worldwide and #5 of 21 countries in Latin America for English proficiency.
Corporate presence requirements and payroll setup in Costa Rica
It is technically possible for a foreign entity to engage workers in Costa Rica, but they must keep certain tax and labour law requirements in mind. For example, they must register with the Costa Rican social security and tax authorities to enable them to collect and pay taxes on behalf of employees. Read on to learn more about corporate presence requirements and payroll setup in Costa Rica.
Steps to hire employees in Costa Rica
Here are the steps that an employer must follow to engage workers in Costa Rica:
- Register your company in Costa Rica: The first step to running payroll in Costa Rica is to register your business with the Costa Rican Registry of Companies.
- Register with the tax and social security authorities: Employers then need to register with the social security authority, which can be done through an online form. This enables them to collect and remit taxes and social security contributions on behalf of employees.
- Draft and sign compliant employment contracts: Employment contracts in Costa Rica must clearly outline terms such as salary, benefits, working hours, probation, and termination clauses. Fixed-term or indefinite contracts are both common, but indefinite employment is the norm for permanent roles. Contracts must be signed in three copies: one each for the employer and the employee, and one to be sent to the Ministry of Labour and Social Security.
- Set up payroll with statutory withholdings and contributions: Employers in Costa Rica must operate payroll on a monthly cycle, withholding employee income tax and social security contributions, and contributing employer social security, labour risk insurance, training funds, and other statutory levies. The Christmas bonus (aguinaldo) is an obligatory 13th salary that must be paid by 20 December each year.
- Ensure ongoing compliance and reporting: Employers must submit payroll and social contributions on time — income tax by the 15th of the following month, social security by the end of the month, and labour risk insurance per insurer guidelines. Late or incorrect filings can lead to fines and legal liabilities.
Do you need a local bank account to run payroll in Costa Rica?
There is no specific legal obligation to have a local bank account in order to run payroll in Costa Rica. However, opening one is strongly recommended for administrative purposes as it will help to facilitate compliance and smoother business operations. Working with a payroll provider like an employer of record (EoR) is an alternative to opening a local bank account.
Easily hire employees in Costa Rica with our EoR solution
Hiring employees in Costa Rica usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.
Through our EoR solution, you can confidently hire employees in Costa Rica, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.
Compliantly hire employees anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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