Starting Operations In Costa Rica: Labor Must-Haves

Registration of the local entity as an employer before the Social Security Institution (CCSS): The company must submit its registration request to the CCSS no later than 8 business days after the first employee begins work. Once the application and required documentation are submitted, the CCSS will carry out its review process and will either approve or reject the employer registration. Under local regulations, this process must be completed within one month from submission. Currently, the monthly employer contribution is 26.67% of the employee’s gross monthly salary, including extraordinary salary payments such as overtime and other benefits categorized as salary under local law. In addition, the employer must withhold from the employee 10.67% of their gross monthly salary, including the same amounts used to calculate the employer’s contribution. Once registration is finalized, the company must pay the first invoice and subsequently continue filing and paying the monthly payroll to the CCSS. 

Obtaining Work Risk Insurance Policy from an authorized insurer: Employees must be covered by this policy from their first day of work to avoid any contingencies in the event of a workplace accident or occupational illness. It is recommended to obtain the policy before the first employee starts work. This request can be submitted to any insurer authorized to market such policies by the General Superintendence of Insurance (SUGESE). Once the request is submitted, the insurer will process it and provide a bank account number for the company to deposit the corresponding payment. This process has no statutory resolution period, but it typically takes 1 to 5 days depending on whether it is submitted in person or online. The policy cost ranges between 2% and 4% of the company’s payroll, depending on the chosen payment method. 

Minimum wage: Employers must pay no less than the legal minimum wage established periodically by the Ministry of Labor and Social Security. 

Payment of the Christmas Bonus (Aguinaldo): Employees who have worked at least one month for the company are entitled to Christmas Bonus, which must be paid no later than December 20 of each year. It is calculated based on all gross ordinary and extraordinary salaries (including bonuses categorized as salary under local law) earned by the employee during the twelve months between December 1 of the previous year and November 30 of the current year. The total amount is divided by twelve to determine the amount payable. 

Annual vacation: In Costa Rica, all employees are entitled to two weeks of paid vacation time for every fifty continuous weeks of work with the same employer. The splitting or accumulation of vacation time must be analyzed case by case, as misuse of these arrangements could generate contingencies for the employer. 

Overtime: Overtime is any time worked beyond the ordinary daily workday or of a shorter workday agreed upon by the parties. It must be paid at the rate of one regular hour plus fifty percent (time and a half). Overtime must be reported as part of the employee’s salary to the CCSS and included in the calculation of labor rights. To manage this correctly, it is recommended to establish in writing that overtime will only be recognized if it is duly approved in writing by the company, in order to avoid recognition of hours worked voluntarily by the employee without being required by the employer. 

Other labor rights: Examples include sick leave, maternity leave, adoption leave, paternity leave, weekly rest days, maximum daily and weekly work hours, and meal breaks, among others. 

Payment of termination entitlements: Upon termination of employment, the employee is entitled to payment of any pending salary and termination entitlements. The items to be paid as part of the termination package will depend on the reason for the termination and the employee’s length of service.