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Mercans CountryIntel ® Costa Rica Payroll And HR Insights

Mercans offers complete payroll, PEO and HR services in Costa Rica

The #1 country in Latin America for innovation outputs, Costa Rica’s talent is their greatest resource. Key investment sectors include Smart Manufacturing and knowledge-intensive services such as digital technologies, creative industries, shared services and supply chain logistics. The Free Trade Zone Regime is the bedrock of Costa Rica’s export and investment promotion strategy, providing tax incentives on income, imports and exports. Costa Rica’s network of free trade zones have expanded and the number of multinational companies investing in the country have risen dramatically.

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Doing Business in Costa Rica

Enjoying an excellent business climate and solid infrastructure, the country has solid infrastructure and boasts 95% renewable energy. The Costa Rican labour force is relatively well-educated and there are no controls or capital flows in and out of the country or on portfolio investment in publicly traded companies. However, companies are subject to local taxes. Their laws and regulations generally foster competition except in sectors controlled by a state monopoly (in which case competition is explicitly excluded). Its proximity to the US is a major opportunity for US exporters and market prospects appear excellent in these sectors: building products, hotel and restaurant equipment, renewable energy and cosmetics.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Costa Rica is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.


Banks are open from Monday - Friday 8:30 am (or 9 am) to 3:30 pm

Working Week

The standard working week is 40 hours per week usually worked from Monday to Friday, 8 hours per day

Labor Law

The legal system in Costa Rica is civil law. The primary law regulating employment relationships is the Labour Code which applies to any employment relationship in Costa Rica. While local law may apply to foreign employees under an employment contract in Costa Rica, it does not apply to Costa Rican employees working abroad unless the relationship is established in Costa Rica and the work completed abroad is not considered to be occasional. The rights conferred on employees cannot be renounced.

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Main Industries

Medical equipment, food processing, textiles and clothing

GDP Growth


Dates & Numbers


Official State Name

the Republic of Costa Rica


5.094 million


San Jose

Major Languages



Costa Rican colón

Internet Domain


International Dialing Code


Costa Rica
San Jose, US
1:08 am, September 4, 2022
clear sky


The Costa Rican Ministry of Labour and Social Security determines the minimum daily salaries for the majority of professions. The National Wages Council has the power to determine the specific minimum wages across the country which is established twice a year. Multinational companies who operate global payroll should take note that the CRLC (Costa Rica Labour Code) defines the employment contract as a written one which is binding on both employer and employee. However, verbal employment contracts are recognised in certain instances.

It is acceptable to provide employees with online payslips


Payroll reports must be kept for 5 years


2 weeks

Annual Leave

3 days paid sick leave

Sick Leave

1 month of paid maternity leave and 4 weeks of paid paternity leave

Maternity & Paternity Leave

On provision of 1 week’s notice

Employee Termination

This payment is compulsory and must be made by 20th December

13th month salary

₡9,598.73 per eight hour work day

Minimum Wage

An additional 50% paid for the extra hours worked


14 days severance payment for an employee working 6 months to 1 year

Severance Pay

Tax and Social Security

Costa Rica’s income tax system is based on the territoriality principle, that is, only Costa-Rican sourced income is subject to income tax regardless of the taxpayer’s nationality, domicile or place of incorporation.


Income tax rates for both companies and individuals are calculated on a progressive scale depending on gross income. New entities must pay tax proportionately as of the filing of their deed of incorporation. Employers must act as withholding agents of payroll tax.


Corporate Income Tax


Personal Income Tax


Sales Tax



Social Security

The Labour Code makes it mandatory for employers to have their employees register with the Caja Costarricense del Seguro Social (CCSS) (otherwise known as Caja), the Social Security system. Employers must first register with the Social Security Administration as an employer. This system covers all employees for hospitalization, medical costs and medical care. The Social Security fund also covers maternity, old age, invalidity, widowhood, burials and more.


Social Security Rate


Social Security Rate for Employers


Social Security Rate for Employees

Employment Law

The Costa Rica Labour Code provides detailed provisions covering all aspects of hiring employees. However, in cases where a dispute arises on a subject that is not covered by the Code, this is resolved according to the general principles of local custom, equity and Labor Law.

Employment agreement

The Code defines the employment contract and there are specific provisions for contracts relating to certain professionals. Three copies of the agreement are required, that is for the employer, employee and the Employment Bureau of the Ministry of Labour and Social Security

Working condition

The Code protects employees with regulations on minimum wages, maximum work weeks, overtime and mandatory vacation days. Typically, a 45 minute break is provided for lunch and short breaks for coffee during the day. Overtime is viewed as an exception and allowed only in very necessary conditions


Where a worker is required to work on a legal holiday, the worker is to be paid double wages. Workers are generally entitled to a minimum of two weeks’ paid vacation for each 50 weeks of continuous employment with the same employer. Accumulated vacation time is not allowed.

Employment termination

The reasons for which an employee may be fired are outlined in the Código de Trabajo (Article 81) and the employer has one month to censure the employee which can include warning letter and verbal warnings in the presence of witnesses. In the case of termination of service, the employee should receive all compensation due.

1 week

Minimum notice period for terminating an employee


Total number of public holidays


Working hours per week

3 days

Total number of days for Compassionate & Bereavement Leave


The government is protective of the country’s labour force but does offer foreign workers work permits in specific cases. The decision on allowing foreign labour will depend on whether the worker has a skill set that cannot be found in local employees.

Residency permits

There are different requirements for residence in Costa Rica depending on the status of the individual concerned (retiree, student, researcher, intern or other) and whether residence is temporary or permanent.

Work Permit validity

3 years

Required Documents

A signed and completed application form

A birth certificate

Two passport-sized photos

Copies of each page of the applicant’s passport, including all blank pages

The potential employer’s Legal Constitution and Registration Documents
A letter explaining the reason for applying for a work permit, which should include the applicant’s full name, age, nationality, current address, and occupation

A statement from the potential employer which indicates the duration of the employment contract, the salary, and the functions of the job
Proof that an insurance policy has been taken (in the form of a statement from the applicant’s insurance company)

Receipt of the consular’s inscription

A receipt of fingerprint registration issued to the applicant by the Ministry of Public Security

A certificate of police clearance from the applicant’s country of origin or residence, along with a copy of a document proving their legal residence in that country

Proof that the applicant has sufficient financial means and income
Certification of the Costa Rican Social Security Institution for the employing company

Compliant, reliable, error-free and touchless payroll in Costa Rica

Build the best team and hire top talent compliantly in Costa Rica. Get in touch with Costa Rica payroll outsourcing & PEO specialists for a free consultation!

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This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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