Employer of Record & PEO — 10 min
In a world where you can hire great talent without regard to geography, today’s leading companies are focused on the global workforce rather than a specific postal code. And some countries historically overlooked by global businesses are now coming to the forefront, thanks to skilled, diverse talent pools and, often, a greater ease of doing business. One of these countries is Costa Rica, an emerging Central American economic powerhouse for reasons that go far beyond its lush rainforests and famed ecotourism opportunities. So, why is Costa Rica so attractive for workers and businesses — and how are these companies offering benefits for employees in Costa Rica?
Costa Rica has long been a popular destination for tourists and expats, thanks to its stable economy, international outlook, world-class university system, and tax laws that support foreign investment. And it’s not only individuals: An increasing number of foreign businesses are putting down roots in Costa Rica.
The capital city of San José is a leading contender for the title of “Silicon Valley of Latin America,” with companies such as Intel Corporation, Abbott Laboratories, and Microsoft already operating within its borders. This trend toward high technology has also helped diversify the country’s economy from its historic base in agriculture and tourism.
So, along with the country’s many advantages comes the need for employers to understand in fine detail how employee benefits in Costa Rica work, particularly in terms of staying competitive and compliant in today’s remote work environment. Laws and regulations here can be complicated, so you can’t afford the mistakes that come when you lack expert, up-to-the-minute guidance.
This article provides a detailed overview of how to create attractive offers for remote workers based in Costa Rica with locally compliant Costa Rican benefits plans. You’ll learn how to stay compliant with the country’s labor laws while boosting your chances of retaining the skilled employees you need.
If you are an employer looking to hire in Costa Rica, you’ll need to stay current on both the statutory benefits you are required to provide by law and the supplementary benefits most in-demand among the country’s workforce.
According to Remote’s Employee Cost Calculator, employers hiring in Costa Rica should budget an additional approximately 26% of an employee’s salary for benefits.
As an employer hoping to attract and retain the most talented workforce in Costa Rica, you should consider supplementing the core, government-mandated benefits — paid public holidays, basic insurance, maternity/paternity leave, and pensions — with desirable supplemental benefits as well.
Costa Rica’s labor law mandates a number of non-negotiable benefits that must be provided to an employee by an employer. Here’s a quick snapshot:
As is the case across much of Latin America and in other countries like the Philippines, every public and private sector employee in Costa Rica is entitled to a 13th-month bonus. Called in Spanish the aguinaldo, or Christmas bonus, this additional month’s salary is typically paid toward the end of December. Regardless of the length of their employment with a company, Costa Rica’s labor laws mandate the aguinaldo for every employee. Failing to factor in this 13th-month salary can derail even the most carefully planned salary and benefits program.
A standard work week in Costa Rica cannot exceed 48 hours and six consecutive days. If an employee works more than 48 hours, the additional time must be paid at overtime rates. Most professional employees in Costa Rica typically work eight hours per day, five days per week, while some labor specialties might also require employees to work on weekends.
Employees establish their work schedule with their employer as part of a general employment agreement, whether written or verbal, and their work time may also be governed by specific labor union contracts. Any hours worked above the standard result in overtime pay for the employee.
Costa Rica has nine public holidays guaranteed to all employees with full pay. These include Holy Thursday and Good Friday, the days that lead into Easter weekend, as well as Labor Day on May 1 and Mother’s Day on August 15. There are three additional official public holidays for which payment is not mandated. Non-Catholic employees are able to request other days off for religious observance within their own faiths.
According to Costa Rica’s Labor Code, the standard required paid vacation leave is 12 days per year — two six-day work weeks — for individuals employed continuously for more than 50 weeks. The amount paid during these two weeks of paid leave should be based on the employee’s average salary.
If an employee has been continuously employed for less than 50 weeks, they are entitled to one day of paid vacation every month.
A number of employers choose to boost their competitiveness by offering additional paid days off.
Employees in Costa Rica are typically not entitled to accumulate or carry over any paid leave unless the employer and employee have signed an agreement including this provision.
Employees in Costa Rica are entitled to paid sick leave for the first three days of an illness. The employer is required to pay 50% of an employee’s regular salary, with the country’s social security system (Caja Costarricense de Seguro Social, or CCSS) paying the remaining 50%, provided the employee has made the requisite contributions. Beginning on the fourth day, the employee receives 60% of their regular salary, paid by the CCSS.
Pregnant employees are entitled to four months of maternity leave, paid at 100% of salary. This includes one month before the due date and three months after. The maternity payment is split 50/50 between the employer and the CCSS for the full four months.
A 2022 law now provides paid paternity leave to all biological fathers in Costa Rica. During the first four weeks after the birth of a child, a father may take two days of paid leave each week. The costs are again shared 50/50 between the employer and the CCSS.
Another new law affecting private as well as public sector workers provides paid leave for three months after the adoption of a child. This leave can be shared by both parents.
The minimum wage in Costa Rica is not set as a universally applicable figure, but instead determined on a sliding scale, according to the skills and education required for each type of work. Employees negotiate their salaries with their employer through collective bargaining agreements or individual employment contracts, and the government publishes regular mandated minimum wage increases.
In addition to paying into the social security and health insurance system through the CCSS, every employer must purchase labor risk insurance (“seguro de riesgos del trabajo”), the equivalent of workers’ compensation insurance, to cover employees against work-related injuries and accidents. This insurance is handled by the Instituto Nacional de Seguros (INS), or National Insurance Institute.
This insurance is usually paid once a year, but it is also possible to pay quarterly or twice yearly.
Costa Rica’s pension system consists of several tiers. The Régimen Invalidez, Vejez y Muerte (IVM) provides basic coverage through a contributory public pension based on an employee’s earnings. The Régimen Obligatorio de Pensiones (ROP), also mandatory, offers a further layer of coverage through a savings plan. An additional voluntary personal pension plan is built on defined contributions.
Aside from these employment-based programs, the Pensiones del Régimen No Contributivo (RNC) offers public pensions through the social welfare system to those who meet a low-income threshold.
With the world in its pandemic recovery phase, employees are looking for more flexibility and opportunities to grow within a company. They want to learn new skills that will help them build out their careers over the long term, and they want to feel supported in their lives away from work. Desirable supplemental benefits that further these goals will help your company stand out from the competition with Costa Rica’s most talented workers.
Any company hiring here needs to consider the advantages of an internationally competitive benefits package for employees in Costa Rica that goes beyond the basic statutory requirements. The best benefits for international employees can often make the difference between an accepted or rejected employment offer.
There are several options for supplemental medical benefits in Costa Rica. The country does provide a robust free public health insurance system for all citizens, but this benefit is targeted to those in the most financial need. Employed professionals and expats are expected to pay for their use of the public system. Therefore, private health insurance is one of the most popular supplemental benefits in the eyes of Costa Rican employees. Premiums are typically affordable - ranging from approximately $60-$250 per month, depending on an employee’s age, income, and other factors.
You could also offer home office stipends, reimbursements for work-related expenses such as cell phone bills, and personal development programs. While these add-ons might seem insignificant for your company, they can make a big difference to potential employees looking for a work environment that will help them grow and thrive both personally and professionally.
Today’s remote workers expect more mobility and freedom, better healthcare plans, and flexible hours outside the traditional 9-to-5 work schedule. While the benefits available to remote workers differ from company to company, it’s in every employer’s best interest to create the most robust, and most broadly applicable, benefits package possible.
Putting together a comprehensive benefits package with a competitive salary can be time-consuming, and, depending on the number of employees in your company, costs can add up quickly.
But monetary compensation is not the only kind of perk you can offer your remote workers in Costa Rica. There are many affordable perks, ranging from gym memberships, unlimited paid time off, stock options, profit-sharing, and assistance with internet access bills and other remote-work necessities.
For more ideas on how to identify affordable benefits for your remote employees in Costa Rica, check out our remote benefits guide.
Setting up and administering benefits for international employees and contractors requires experience, dedication, skill, and extensive, local, in-country knowledge. Remote’s global HR platform is one of the best tools available for simplifying the process of global onboarding, payroll, and compliance. It also offers streamlined documentation and approval systems.
Forget about remembering every nuance involved in the complicated process of managing payroll, computing tax payments, and staying compliant with the variety of benefits regulations that apply from one country to another. Remote’s software system puts managing all these tasks within easy reach. Remote allows you to focus on what matters most - building a dedicated team of remote workers and growing your business.
The Remote advantage centers on our ability to act as your legally recognized employer of record (EOR) in more than 60 countries where remote workers are most in demand. Most countries, including Costa Rica, require that any company doing business within their borders maintain an in-country legal entity responsible for administration and legal compliance. That’s where Remote comes in.
As your EOR, Remote serves as your employees’ employer on paper, fulfilling all statutory requirements while you retain full control over your business decisions and the work of your team. Whether you’re building a completely remote workforce, a globally distributed office, or a hybrid team, Remote can help you protect your interests throughout the complexities of hiring, employment, and benefits administration in another country.
The costs — in time, resources, and money — to companies that make a mistake in, for example, the legal classification of employees in Costa Rica, are often steep. Remote handles the legal and administrative problems for you, using the in-depth local legal and regulatory knowledge of our multi-experienced team on the ground.
Based on our local expertise, we can structure highly competitive employee benefits packages focused on the core benefits Costa Rica’s government requires and the most desirable perks in that specific market.
Let us know how Remote can help you achieve your business expansion goals, while giving you the peace of mind that comes with partnering with one of the world’s most trusted teams of experts on employing in Costa Rica.
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