Global HR Compliance in Costa Rica

If you hire an international workforce, or plan to hire, then Hiring and Firing Workforce in Costa Rica Guide below will help you understand the nuances of labor legislation in the country.

When the company is planning to enter a new foreign market of Costa Rica and has a need to employ a local national there, the first question to answer is how it is going to make local hires.

We have designed a Global Employer of Record service to help you outsource global employment of your foreign workforce to companies like ours.

This solution helps you employ your global sales force in Costa Rica as well as in other 180+ countries of the world, and provide pay and benefits to your employees, as well as administer any business expenses with our help.

Our solution is different from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from any non-compliance and employee misclassification risks while we bear all employment risks, not you.

So, it looks very much like hiring your in-house sales force in your home country. However, you focus on only on your global business development while we admin your global HR. In addition, you don’t need to open your own entities in the foreign countries and can leverage our infrastructure in Costa Rica instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end.

Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps.

Global Employer of Record solution is 100% compliant solution that guarantees you and your employees fully compliance with local legislation in Costa Rica .

We are experts in global workforce employment in Costa Rica, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Costa Rica.

See Hiring and Firing Workforce in Costa Rica Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Costa Rica or would like to get more details.

Hiring and Firing in Costa Rica Guide

#Employment Agreements

Types of employment agreements:

• Permanent employment contracts

Indefinite agreements are the general norm in the country, since they usually are more favorable for the employee. Termination provisions are not usually included in employment agreements, nor are they recommended. Termination provisions could later be considered unlawful by a judge or could force the company to retain an employee for which there would otherwise be a legal basis for dismissal.

• Casual employment contracts
• Fixed-term contracts

A fixed-term contract must be stipulated for a period not exceeding one year, including its extensions; however, if special technical preparation is required, it can be extended to up to five years. If, at the end of a fixed-term contract, the cause and the nature of the work subsists and is not renewed, it shall be interpreted as indeterminate for the benefit of the worker and for the payment of the resultant compensation.

#Employment Termination and Severance Pay (Dismissal)

Reasons justify employees to resign while retaining their right to demand severance payments:

• Nonpayment of agreed salary. Dangerous working conditions or contagious diseases in the work place.
• Moral or physical damage, or defamation against worker by the employer or his representatives during or after working hours.
• On purpose damage to worker’s tools by employer.

Employment law in Costa Rica carries the Freedom of Dismissal principle, which means employers can legally terminate their employees at any given time without liability, as long as the following conditions are met:

• The employee is not covered by a protective immunity, such as pregnancy, alleged sexual harassment, certain unionized employees, etc.
• The employer makes full payment of all labor benefits, taking into account all the items the employees’ salaries include (i.e., base salary, commissions, bonuses, etc.). Benefits include previous notice, severance payments, pending vacations, and Christmas bonuses.

If an employee commits certain acts considered as severe, the employer can fire the employee without incurring liability, paying only pending vacations and the proportional Christmas bonus.

#Notice period

Before an employer can dismiss an employee without cause, he/she must notify the individual. Failure to do so will trigger additional obligations. The amount of notice required depends on the length of time that the employee has worked for that particular employer:

• if the period is greater than three months but less than six months, he is entitled to one week notice of termination;
• six months to one year: two weeks notice;
• more than one year: one month prior notice.

Instead of written notice, the employer can pay the employee a sum of money equivalent to the salary that would have been earned during the notice period.

#Severance payments

When an employment relationship ends in the following manner, employees (or their relatives, if applicable) are entitled to receive severance payments:

• when the employer uses the freedom of dismissal principle to terminate an employee;
• when an employee is forced to resign;
• when an employee dies;
• when an employee retires due to old age or disability and begins receiving a pension;
• when an employee’s necessity to fulfill legal duties (such as military service) prevents the continuity of employment (unseen nowadays);
• when a force majeure, bankruptcy, or fortuitous case prevents the employment relationship from continuing; or
• when an employee is terminated without responsibility or just cause, without justification or based on a nonexistent cause for dismissal.

The number of days that correspond to severance are calculated based on the average of the last six months of income. As an employee gains seniority, the severance payment increases. Unless otherwise established by a collective bargaining agreement or similar instrument, no employee is entitled to receive payment for more than eight years of severance.

#Employee Benefits and Contributions

During employment, employers must provide to employees all the benefits required under the labor laws. Failure to comply with these requirements will subject the employer to liability to the employees and the corresponding public institution, when applicable. Some of the benefits granted to employees per Costa Rican law are:

• social security registration;
• employment risk insurance;
• mandatory rest days (one day for every six days of continuous work);
• Christmas bonus;
• holidays
• maternity leave; and
• immunity against dismissal for pregnant and breast-feeding employees, victims of alleged sexual harassment and discrimination, and certain unionized employees.

#Probationary period

Although not strictly recognized by law, the probation period in Costa Rica encompasses the first three months of employment. In practice the following rules apply:

• Since severance payments and previous notice applies only for permanent employment, the probation period only exists for indefinite employment contracts and not for fixed-term or piecework agreements.
• The probation period does not allow an employer to terminate pregnant employees, who enjoy protection from the moment they notify their employers of their condition.
• Termination during the probation period cannot be used as a guise for a discriminatory practice against the employee.
• Domestic service does have a legally established probation period.

#Overtime

Overtime in Costa Rica is limited to a maximum of 12 hours per day, including ordinary working hours.

#Work hours

As with many laws in the region, Costa Rican labor regulations establish limits on the number of hours an employee may legally work on a daily and weekly basis. For this purpose, working days have been divided into day, night, mixed, or split shifts, all of which carry different limitations. The principal characteristics of each shift are the following:

• Day shift: Covers the employees working between 5:00 a.m. and 7:00 p.m. each day. The limit of working hours per day is eight, while the weekly limit is set at 48. If the work and/or work center are not dangerous or unhealthy, the daily limit can be extended to 10 hours, as long as the weekly limit of 48 hours is maintained.
• Night shift: Takes place between 7:00 p.m. and 5:00 a.m. and is restricted to six hours per day and 36 per week.
• Mixed shift: Takes place in both day and night shift time periods. However, if three-and-a-half hours or more take place on the night shift, then it automatically becomes a night shift. The daily limit is seven hours, while the weekly cap is 42. As with the day shift, if the tasks are not dangerous or unhealthy, the daily limit can be set at eight hours and the weekly limit at 48.

#Annual leave

In general terms, employees are entitled to receive no less than two weeks of paid vacation time for every 50 weeks of continuous work for one employer. The right to take vacation time is acquired once the employee completes 50 weeks of employment with the same employer. Vacations cannot be paid off by the employer in lieu of allowing employees to use vacation time, save for certain specific circumstances:

• When the employment relationship ends for whatever reason. In this scenario, the employee is entitled to receive the remaining balance of vacation. If the 50-week period has not been completed, vacation time is calculated at a rate of one day per month of work.
• When employment is occasional.
• When the employer, due to its internal policies, has a benefit of more than the minimum vacations per year, the excess of the two-week minimum can be compensated with money every three years.

#Sick leave

Employees are entitled to receive medical care for any disease and medical condition, except those originating from an occupational risk or disease. When an employee suffers from a medical condition that incapacitates him/her from working, the Constitution of the Department of Social Security can extend sick leave for as long as the doctor deems it advisable for the employee’s medical condition. During the first three days of the sick leave period, it is customary (and considered mandatory) for the employer to pay at least half of the employee’s wage. In order to acquire the right for sick leave, an employee must submit to the employer the “slip” (form) provided by the CCSS, which contains the days the sick leave begins and ends.

#Parental leave

Pregnant employees are granted special protection under Costa Rican law, as well as paid time off, both before and after childbirth. Pregnant employees must submit a medical certificate with the expected birthdate in order to receive one month of leave from work before this date. After childbirth, employees are granted three months of maternity leave. During the pre- and post-childbirth leave, the employee receives her complete salary, half of which is paid by the employer and the remaining half by the Constitution of the Department of Social Security. Currently, there is no legal right to paternity leave in the private sector. However, it is customary for companies to freely grant some days of paid leave to parents, although this usually depends on internal policies and is not mandatory.