Costa Rica labour law: the basics every employer should know

Costa Rican employment law is codified, enforced, and generally protective of the employee. For a foreign employer that is not a problem, it is simply a set of rules to plan around. The companies that struggle here are the ones that assume their home country practices transfer.

This is an orientation, not legal advice. Before you hire, have a Costa Rican employment lawyer review your contract and your process.

Contracts

Employment can be for an indefinite term or a fixed term, and indefinite is the default assumption. Fixed term contracts are permitted only where the nature of the work genuinely justifies them. Using rolling fixed term contracts to avoid indefinite status is the kind of arrangement that does not survive scrutiny.

Put the agreement in writing, in Spanish, covering role, salary, schedule, and place of work. A written contract protects the employer at least as much as the employee, because it establishes what was agreed.

Working hours

Costa Rica regulates ordinary working hours by shift type, with daytime, night, and mixed shifts each carrying their own limits. Work beyond the ordinary day is overtime and is paid at a premium rate set by law.

Two practical points for remote and nearshore teams. First, if your team in Costa Rica is covering hours for a customer in another time zone, classify the shift correctly, because night and mixed shifts have different rules. Second, overtime is a legal entitlement rather than something an employee can waive by agreement.

Vacation, holidays, and leave

Paid vacation accrues with continuous service. Costa Rica also observes national public holidays, some of which are mandatory paid days, and there are statutory maternity and other leave entitlements.

Employers should track accrued vacation carefully. It is a real liability on the books, and it becomes payable in cash when employment ends.

Aguinaldo

The thirteenth month is paid within the first twenty days of December, calculated on earnings over the preceding twelve month reference period. It is mandatory. It is not performance related, and it cannot be folded into monthly salary by agreement.

Ending employment

This is where unprepared employers get hurt, so it deserves the most attention.

Dismissal with just cause

An employer may dismiss without severance where the employee has committed a serious breach defined by law. The bar is real, the employer carries the burden of proof, and the process matters. Documentation created after the fact rarely helps.

Dismissal without just cause

An employer can end the relationship without cause, but owes notice and severance calculated on length of service, plus accrued vacation and the proportional thirteenth month. Budget for this from the beginning rather than treating it as an unexpected event.

Protected situations

Certain circumstances carry additional protection, including pregnancy and situations where a dismissal could be characterised as discriminatory or retaliatory. Take advice before acting in any of them.

Social security registration

Employers must register with the CCSS and report employees and wages. Occupational risk insurance through the INS is also required. Operating without these is not a paperwork oversight, it creates direct liability.

The practical takeaway

Costa Rica is a good place to build a team, and none of the above should discourage you. The rules are knowable and the administration is routine once it is set up. What causes damage is improvising: hiring someone as a contractor because it is faster, agreeing a salary without loading employer costs, or dismissing someone the way you would at home.

Get local counsel for the contract, a local accountant for the payroll, and be deliberate about who you hire in the first place. We can help with the last part.