To attract and retain talent, it’s crucial to pay employees in Costa Rica accurately, on time, and in compliance with local payroll regulations. Offering competitive benefits and bonuses that reflect local expectations is equally important.

For U.S.-based companies, a streamlined way to manage Costa Rica payroll is by partnering with an Employer of Record (EOR). 

An EOR like Payoneer Workforce Management offers payroll services in Costa Rica that help you comply with local laws around payroll, social security contributions, tax deductions, and employee benefits.

Payroll in Costa Rica: Wages and other payments

Handling payroll processing in Costa Rica requires a solid understanding of the local payroll cycle, minimum wage requirements, mandatory benefits, and bonus payments. 

Costa Rica’s payroll cycle

At a minimum, you must pay employees in Costa Rica every month, typically on the last working day of the month. Payment intervals are usually specified in the employment contract.

Minimum wage

Employers must pay employees in Costa Rica the mandatory minimum wage. This wage varies for skilled and unskilled workers as follows:

• Unskilled workers: CRC 11,738.83 per day
• Specialized workers: CRC 15,333.31 per day

The National Wage Council sets the minimum wage on an annual basis. 

Overtime

Overtime is any work outside previously established limits. It is paid at 150% of the employee’s regular salary, and employees can work a maximum of 4 hours of overtime per day.  

Sick pay

All employees on your payroll in Costa Rica are entitled to sick leave. They receive full pay for the first 3 days of sick leave, with 50% paid by the employer and 50% by social security.

For sick leave that lasts 4 or more days, employees are entitled to 60% of their regular pay, paid for exclusively by social security. Some employers choose to top up this amount.

Sick leave in Costa Rica requires a medical certificate and is managed through the CCSS (Caja Costarricense de Seguro Social).

Maternity pay

Female employees are entitled to 4 months of paid maternity leave. They can take 1 month of maternity leave before the birth of their child and 3 months afterward. This payment is shared equally between the employer and the Costa Rican Social Security Fund (CCSS).

Maternity leave is a legal entitlement under Costa Rican labor law and requires medical certification.

Paternity pay

Fathers, who are employed in the public sector, on the Costa Rica payroll, are entitled to 8 days of paid paternity leave, to be taken as 2 days per week during the first 4 weeks after the birth of their child. Again, this payment is split equally between the employer and the CCSS.

Severance packages

If the employer terminates an open-ended employment contract for a reason beyond an employee’s control, the employer has to offer a severance package.

The amount payable depends on the length of service. If the employee has worked for you between 3 and 6 months, they are entitled to 7 days’ salary. If they have worked for you for 6 months to 1 year, they are entitled to 14 days’ salary.

If they have worked for you for 1 year or more, they are entitled to the following payments:

Length of service	Severance pay (per year worked)
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

If an employer can prove just cause for terminating an employment contract, they don’t have to provide severance pay. 

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

13th-month salary

Another important consideration when managing payroll in Costa Rica is the country’s bonus system.

Employees in Costa Rica are entitled to a 13th-month salary known as Aguinaldo. This bonus is equivalent to 1 month’s salary and is paid by employers during the first 20 days of December.

Aguinaldo is calculated based on total earnings from December of the previous year to November of the current year.

Costa Rica payroll: Taxes, contributions, and deductions

When you pay employees in Costa Rica, you need to understand the tax and social security obligations for both the employer and the employee. Here, we explain all the Costa Rica payroll taxes you need to account for.  

Income tax

Income tax in Costa Rica is charged at a progressive rate of 0% to 25%, and employers are responsible for withholding an employee’s income tax contributions. 

The tax bands for 2025 are as follows:  

Income bracket (in CRC)	Tax rate
0 to 929,000	0%
929,001 to 1,363,000	10%
1,363,001 to 2,392,000	15%
2,392,001 to 4,783,000	20%
4,783,000 +	25%

Social security

Both employers and employees have to make Costa Rica payroll contributions to the social security program to cover various benefits such as health insurance, maternity, pensions, and family allowances.

Employers contribute around 26.67% of an employee’s gross salary, while employees contribute about 10.67% that is withheld from their salaries.

Occupational Risk Insurance

Employers are required to pay Occupational Risk Insurance. This insurance covers employees in the event of accidents or illnesses that result from work-related activities. The rate varies depending on whether you operate in a high- or low-risk industry.

Costa Rica payroll compliance best practices

Managing your Costa Rica payroll requires strict compliance with local employment and tax laws. To help ensure your business remains compliant, follow these best practices:

• Stay up to date with Costa Rica’s payroll taxes and laws, labor laws, and statutory requirements
• Keep accurate and detailed payroll reports
• Conduct periodic payroll audits to catch and correct any errors
• Provide ongoing training for payroll and HR staff

Implementing these best practices often requires specialized knowledge and local expertise. If your team lacks in-house resources, an EOR that offers global payroll, like Payoneer Workforce Management, can help.

As a provider of payroll services in Costa Rica, Payoneer Workforce Management helps support payroll compliance and assists your business with hiring, onboarding, and contracting Costa Rican talent via a unified, streamlined platform.

Your options for payroll services in Costa Rica

There are three ways to pay employees in Costa Rica:

• Set up a legal entity: This allows you to hire employees and manage payroll directly, but it’s often a complicated and time-consuming process.
• Engage workers as contractors: This option doesn’t require a legal entity, but you must be careful not to misclassify employees as contractors. This can lead to legal and financial penalties.
• Pay employees through an EOR: An EOR can offer the expertise and infrastructure to pay employees accurately and on time, as per Costa Rica’s payroll laws.

With Payoneer Workforce Management, you can pay employees in 70 currencies and manage global payroll with ease.

Book a demo today.

FAQs

1) How much income tax do you pay in Costa Rica?

Income tax in Costa Rica is charged at a progressive rate. There are 5 tax bands, and the maximum rate of tax is 25%.

2) What is the payroll tax in Costa Rica?

In Costa Rica, both employees and employers have to make social security contributions. Total employer contributions amount to roughly 26.67% of an employee’s salary. Total employee contributions amount to around 10.67%.

3) What are wages like in Costa Rica?

The minimum wage in Costa Rica is CRC 11,738.83 per day for an unskilled worker and CRC 15,333.31 per day for a skilled worker.