Using an employer of record in Costa Rica

Employers choose to hire in Costa Rica primarily for its cost-effective, skilled workforce and stable business environment. However, hiring and paying employees in Costa Rica can be complicated because one must comply with local labor and employment laws, which are subject to change. 

Fortunately, using a Costa Rica Employer of Record (EOR), like Payoneer Workforce Management (WFM), makes things much easier.

Find out more about how Payoneer WFM can help your business.

Continue reading to learn how an EOR in Costa Rica helps.

How to hire employees in Costa Rica

There are three key ways to hire employees in Costa Rica:

1. Setting up a local entity gives you total control over your operations in Costa Rica, but it can be expensive and time-consuming.
2. Hiring independent contractors offers flexibility and talent with specialized skillset but care should be taken to avoid misclassifying contractors as employees.
3. Hiring with an employer of record in Costa Rica allows you to employ local talent in Costa Rica while meeting legal obligations without setting up a local entity.

Partnering with an employer of record in Costa Rica

An Employer of Record is a third-party company that employs international talent on your behalf.

By partnering with a Costa Rica EOR, you can hire Costa Rican nationals without having to incorporate a business or set up registered offices in the country. An EOR helps manage employment legalities, payroll, taxes, benefits, and compliance on your behalf.

Payoneer WFM offers EOR services in Costa Rica, helping you harness the potential of Costa Rican talent without the administrative burden. 

How to onboard employees in Costa Rica

Taking the time to welcome and introduce a new hire to your company is so important. This starts with a smooth and thorough onboarding. 

When onboarding a new Costa Rican employee, you need to:

• Verify their work permit status
• Enroll them in benefits and payroll
• Enroll them in social security
• Make introductions to the team and colleagues
• Set up all the devices and workplace software they’ll be using
• Set expectations and objectives
• Assign an onboarding buddy or other onboarding support

By letting your Employer of Record in Costa Rica manage compliance, you can focus on welcoming your new employee and helping them hit the ground running.

Pay employees in Costa Rica

The fiscal year in Costa Rica runs from January 1st to December 31^st, and employees are paid monthly, at a minimum.

When paying employees in Costa Rica, employers need to withhold income tax and employee social security contributions. 

The minimum wage differs depending on job category and skill levels, but Costa Rican employees also receive a yearly bonus known as Aguinaldo, equivalent to 1 month’s salary. Employers pay this bonus during the first 20 days of December.

A Costa Rica EOR is one of the easiest ways to pay employees while staying compliant with local laws.

Employment laws in Costa Rica

When hiring employees in Costa Rica, you need to abide by the following labor laws, as laid out in the Costa Rica Labor Code:

• Working hours: Work between 5 am and 7 pm is considered a day shift. Work between 7 pm and 5 am is considered a night shift. An ordinary working day must not exceed 8 hours during the day, 6 hours during the night, and 48 hours per week. There are some exceptions to these rules for managerial roles and specific industries.
• Overtime: Overtime is any work outside previously established limits and should be paid at 150% of the employee’s regular wage. A maximum of 4 hours’ overtime is permitted per day. 
• Rest days: Employees are entitled to a 30-minute rest period during the work day. They are also entitled to 1 day of rest after every 6 days of continuous work.  
• Remuneration frequency: Employees are paid monthly, according to the schedule laid out in their employment contract.
• Insurance: Employers have to insure all workers against occupational hazards. Any employer who fails to insure their workers is liable to them and the insurance company for all medical, rehabilitation, and monetary benefits.

Minimum wage in Costa Rica

There is a mandatory minimum wage in Costa Rica that varies for skilled and unskilled workers:

• The minimum wage for an unskilled worker is CRC 12,236.95 ($24.25) per day and CRC 367,108.56 ($727.17) per month.
• The minimum wage for a skilled worker is CRC 15,983.95 ($31.68) per day and CRC 413,023.56 ($818.57) per month.

The minimum wage is reviewed and adjusted by state governments periodically to align with inflation and the cost of living. So, to comply with labor laws, it’s important for employers to stay up-to-date with the latest rates.

The easiest way to do this is by using Employer of Record services in Costa Rica. Your EOR can help you keep track of any minimum wage updates.

Employment contracts in Costa Rica

The most common types of employment contracts in Costa Rica are:

• Indefinite-term: A contract with no specified end date, suited to permanent positions within a company
• Fixed-term: A contract with a defined start and end date, suited to seasonal, temporary, and project-based roles

As per Article 22 of the Costa Rica Labor Code, you need to provide a written employment contract if the period of work is longer than 90 days. 

This should be sent to both the employee and the Employment Office of the Ministry of Labor and Social Security within 15 days of the contract starting and following any contract changes.

The Costa Rica Labor Code specifies that an employment contract needs to include:

• The names and surnames, nationality, age, sex, marital status, and address of the contracting parties
• Identity card numbers, if the contracting parties are required to carry them
• The worker’s residence when they’re contracted to provide services in a place other than their usual one
• The duration of the contract
• The length of the workday and the hours during which work must be performed
• The salary, wage, or share the worker is to receive, and the form, period, and place of payment

Leave policy in Costa Rica

Employees in Costa Rica are entitled to the following:

Type of leave	Leave entitlement
Vacation	14 days per year, after completing 50 consecutive weeks of employment
Public holidays	9 days per year
Sick leave	Full pay for the first 3 days (50% paid by the employer, 50% by social security)60% pay from the 4th day onward (paid exclusively by social security with top-ups at an employer’s discretion)
Maternity	4 months, with 1 month taken before and 3 months taken after the birth of the child
Paternity	8 days, taken as 2 days per week in the first 4 weeks after the birth of the child

As these policies are subject to change, employers must stay up-to-date with the latest employee leave entitlements.

Work permit in Costa Rica

In Costa Rica, any foreign national who seeks to work as an employee needs to obtain a work permit. This tends to be a lengthy and complicated process, and applications aren’t always successful.

To start a work permit application, an employer has to prove that the foreign national is filling a position that couldn’t be filled by a Costa Rican. 

The application process takes 3 to 8 months or longer. The first work permit application costs 28,300 CRC (around $50), and renewals come at an additional cost.

Background check in Costa Rica

Background checks are a common practice in Costa Rica, particularly when hiring for finance, healthcare, education, security, law enforcement, and public sector roles.

Some common background checks include:

• Criminal record check
• Employment verification
• Education verification
• Reference checks

Employers generally run these checks before signing the employment contract and after seeking written consent from the candidate. It is illegal to conduct background checks without explicit consent and without proper adherence to Costa Rica’s privacy laws.

It is also against the law to discriminate against a candidate based on information uncovered during background checks. This includes information on their marital status, religion, or sexual orientation.

The simplest way to conduct background checks is with the support of an employer of record in Costa Rica. 

Employment termination in Costa Rica

If an employee in Costa Rica wants to end their contract, notice periods are as follows:

Length of service	Notice period
0 to 3 months	No notice required
3 to 6 months	1 week
6 to 12 months	15 days
1 year+	1 month

If the employer terminates an indefinite contract for unjustified reasons or reasons beyond an employee’s control, they have to pay severance pay. 

This is calculated based on the length of time an employee has been working for the company, according to Article 29 of the Labor Code:

Length of service	Severance pay (per year worked)
3-6 months	7 days
6-12 months	14 days
1 year	19.5 days
2 years	20 days
3 years	20.5 days
4 years	21 days
5 years	21.24 days
6 years	21.5 days
7 years	22 days
8 years	22 days
9 years	22 days
10 years	21.5
11 years	21 days
12 years	20.5 days
13 years or more	20 days

Employers can end an indefinite contract without notice or severance pay if an employee is found guilty of gross misconduct.

However, if an employer can’t prove just cause for dismissal, the employee is entitled to receive their notice pay, any severance pay they’re owed, and, as compensation, the wages they would have earned from the date of termination until the final legal decision against the employer.

Company registration in Costa Rica

Registering a company in Costa Rica is a big undertaking that involves a lot of administrative overhead.

To register a business in Costa Rica, you need to:

• Choose your business structure
• Reserve a company name that complies with Registro Nacional guidelines
• Prepare and file the required documentation (including identification documents for directors, proof of address in Costa Rica, and taxpayer identification number)
• Open a corporate bank account
• Register for tax obligations

However, using a Costa Rica EOR is a much simpler and easier option for most foreign businesses like U.S.-based companies.

PEO in Costa Rica

For companies looking to build a workforce in Costa Rica, EOR services are considered as one of the best options. But a Professional Employer Organization (PEO) is also suggested as an alternative.

A PEO offers HR and administrative support for your business. It provides payroll, benefits management, and legal support services. However, a PEO can’t employ workers on your behalf. So, you would still need to register your company or create a legal entity in Costa Rica to hire Costa Rican workers.

The best EOR services in Costa Rica offer everything you need to hire employees and stay compliant with local laws.

Payoneer WFM: One of the best employer of record in Costa Rica

By working with an employer of record in Costa Rica, you can easily access global talent without setting up a legal entity.

An EOR helps mitigate risk, grow your business, and enter new markets on your terms.

FAQs about the Costa Rica employer of Record 

1) What is an employer of record in Costa Rica?

An employer of record in Costa Rica helps you employ Costa Rican nationals, manage payrol, benefits, taxes and adhere to local labor laws without setting up a legal entity in the country.

2) Does Costa Rica do background checks?

An employer is permitted to run background checks on employees as long as they have written consent from the employee and all checks are conducted in line with Costa Rican privacy laws.

3) What is the minimum wage in Costa Rica per hour?

As of July, 2025, the minimum wage for unskilled workers in Costa Rica is CRC 1,529.62 ($3.03) and the minimum wage for skilled workers in Costa Rica is CRC 1,714 ($3.39).