Costa Rica
International Employment Law Guide
This page outlines country-level details about the onboarding process when hiring employees, and touches upon the applicable rules when terminating employment contracts.
A. Hiring of employees (onboarding)
Mandatory employer requirements
Every employer must be registered at:
- Social Security Administration (Caja Costarricense de Seguro Social – CCSS),
In 2022, the employee contributed 10,5% to the social security tax and the employer 26,5%.
For 2023, the contributions have been increased to 26,67% for the employer and 10,67% for the employee.
The increased amounts set forth above will be effective as of January 1st,2023, and will remain in force until December 31st, 2025.
- The national insurance institute (Instituto Nacional de Seguros – INS), in charge of issuing the workers’ compensation insurance policy that must cover every employee, subscribed by the employer (1% to 6% of the employee’s monthly salary); and
- The tax authority (Dirección General de Tributación - DGT), the institution in charge of collecting salary tax withheld from each employee whose salary exceeds the exempt portion.
Further, every employer must insure its employees against risks at work.
Probation periods
The probation period in Costa Rica is established by an interpretation of the Labor Code, which provides compensation for notice of termination and severance payment after a working time of three months. If, within that period, the employer considers that the employee is not suitable for the position, the employee can be dismissed, and the employer is not liable for notice periods or severance payment. The employer’s only obligation is to pay the vacation time and a prorated Christmas bonus (if the employee has worked for at least one month).
Hiring checks
Medical examination
There is no specific law relating to medical checks; however, based on the employer’s need, medical exams can be justified by objective and reasonable reasons, considering the nature of the position, including the protection of the candidate’s health. The checks must be performed by qualified personnel and cannot affect the dignity and intimacy of the employee. This information is considered sensitive data, so the company itself is not allowed to process this information or even store it in its databases.
Medical exams to verify that the employee does not suffer any permanent disability or any professional, contagious, or incurable disease, HIV, and pregnancy tests are prohibited by local law.
Criminal background check
Costa Rican law does not prohibit an employer to ask for criminal records prior to hiring a candidate. However, the decision not to hire a candidate cannot be based on his/her background, as this can be considered an act of discrimination. This is applicable to any position within the company.
For some functions, there could be objective reasons not to hire a candidate based on his/her background. All claims by an employee will be analyzed in court. The employer will need to prove that its actions (i.e. not hiring the employee) were justified and not based on discriminatory grounds.
Also, criminal records are considered restricted access data pursuant to the data protection law; therefore, the candidate’s written consent is required to store the certificate in a database.
Reference and education checks
The employer can request and verify references and the education history of the candidate and there are no special requirements to do so. However, the educational background is also considered as restricted access data pursuant to the current data protection law. The written consent of the candidate is therefore required to obtain and store the corresponding information.
Diversity & inclusion
There is no specific law on this regard. However, the Labor Code prohibits any kind of discrimination. If, during the hiring process, preference is given to certain candidates or groups of people, the employer must demonstrate that this preference is based on objective and reasonable reasons.
Types of employment contracts
There are two types of employment contracts:
- Fixed-term or fixed-work employment agreements with either a pre-established termination date or a specific work to be carried out; and
- Open-ended employment agreements.
Fixed-term and fixed-work employment agreements are allowed in Costa Rica, only if justified by the characteristics and nature of the work. If the employee continues to perform the work for which he/she was hired after the expiration of the term of completion of the work, the employment agreement will be considered open-ended.
Also, fixed-term or fixed-work agreements may not exceed one year, except if the employment agreement refers to services that require a special technical expertise, in which case, the agreement may be for up to five years.
Specific rules for executives
There are no specific provisions for executives. However, in Costa Rica, certain employees are exempt from the maximum daily work shift (eight hours), including managers, administrators and workers in positions of trust.
There is no specific list of positons that are considered to be exempt in this regard. It depends on the specific work carried out by the employee, which must be carefully reviewed by the employer.
Language requirements
All instructions and communications to employees must be given in Spanish. Also, in case of an administrative or judicial claim, the government agencies will require all documents in Spanish, in order to review them.
Equal pay
The legislation on equal pay sets forth that “Every person is equal before the law and no discrimination contrary to human dignity may be perpetrated.”
The Costa Rican Labor Code includes a full title on “Ban of Discrimination”, which sets forth that any discrimination is not allowed. Likewise, both the Labor Code and Convention 100 of the International Labor Organization (ILO) establish that all employees who carry out the same work are entitled to the same rights, the same work shift, and the same payment, without being discriminated against due to age, ethnic origin, gender, or religion.
In addition, all employees who perform work in the same subjective and objective conditions should enjoy the same rights regarding working hours and payment.
Finally, there are specific guidelines regarding the equal payment for men and women in the legal frame work which includes the duty of the employer in the public and private sector to implement measures to promote equal pay.
Since 2019, the ban on night work for women has been lifted.
“Equal Pay” Laws do not expressly define sanctions from the authorities for non-compliance with the rules on equal payment. However, the Labor Code establishes the right for the employees to file a claim regarding discrimination before the Labor Court.
Remote work
Remote work requires prior consent from employees, because teleworking is not mandatory for either party to the employment relationship. On the other hand, there is no legal requirement to inform or consult the unions or works council before implementing remote work.
The parties should also sign a teleworking contract or an addendum to the employment agreement for the application. The conditions under which telework will be carried out must be clearly documented.
Employer's obligations:
- Telework cannot be contrary to the provisions of the Labor Code (salary and work shift e.g.);
- The employer should provide and guarantee the maintenance of the equipment and programs, and the supply of the electric power, necessary to carry out the work;
- The employer should train for the proper management and use of the equipment and programs necessary to carry out their services;
- The employer should inform on compliance with the standards and guidelines related to occupational health and prevention of occupational risks;
- The employer should coordinate the way to reestablish the services of the employee, when he/she is unable to perform his/her work or his/her work is interrupted.
The employer has the power to revoke telework given a prior notice of 10 calendar days (this provision is not applicable if the home office is established by the parties since the beginning of the labor relationship).
The employer can still apply disciplinary actions.
All the related evaluation and control criteria of the teleworker will be previously determined in the agreement or addendum that the parties sign.
Employees have the obligation to preserve the data protection of the company.
The payment of electricity is established by law. Nevertheless, there is no legal requirement to reimburse specific electricity costs upon submission of supporting documents.
B. Termination of employees (offboarding)
Kinds of dismissal
- Dismissal without cause
The employer can decide to dismiss an employee at any time without just cause, which means that the following payments are due to the employee:
- Notice (varies depending on seniority);
- Severance (“cesantía”), which varies depending on seniority, with a cap of eight years;
- Vacation time (two weeks for every 50 weeks of continuous work), the employer would have to pay any outstanding vacation time not enjoyed by the employee; and
- Christmas bonus (one month’s salary for every year worked or a proportion thereof for work rendered between 1 December of the previous year and the effective termination date).
Special rules apply to pregnant or nursing female employees, employees on sick leave, minors, union leaders, and employees who have filed a sexual harassment claim at the workplace. In these cases, dismissals can only take place for cause and after a dismissal process with the Ministry of Labor. This is to make sure these protected employees are not dismissed because of their “condition” or situation.
2. Dismissal for (serious) cause:
The law describes the conditions under which an employer may terminate an employment contract for (serious) cause. In these cases, the employer does not have to pay either notice or severance to the employee. For example, the employer can terminate the employment contract when the employee:
- Behaves in an immoral way while performing the job, or when he/she abuses his/her employer, either verbally or physically;
- During working hours, behaves towards a co-worker in any of the aforementioned ways; and if, as a direct consequence, discipline is deeply disrupted and work interrupted;
- Commits a criminal offense or crime against the employer’s property; or when he/she intentionally causes any material damage to the machinery, tools, raw materials, or other products immediately related to his/her work;
- Reveals company secrets;
- Jeopardizes the security of the workplace or his/her co-workers through his negligence or lack of attention;
- Is absent from work without justified cause, either for two consecutive days, or for more than two non-consecutive days within the same calendar month, without the employer’s permission;
- Breaches any obligation set forth in the employment contract; or
- Carries out any act of coercion or violence, against people or things, or conducts himself/herself in a manner which promotes disorder or disrupts the peaceful nature of a strike.
Dismissal motivation
The termination letter must specify the cause of termination, since dismissed employees have the right to know the specific reasons that have led to their dismissal. In addition, the causes established in the termination letter are the only causes that can be alleged in case of a judicial complaint.
In case of a wrongful dismissal, the employee is entitled to receive all his/her severance payment and up to six months’ additional salary.
Notice period
When the employment relationship is terminated without cause, the notice periods are as follows:
- For three months up to six months of continuous work: minimum of one week;
- For six months up to one year of continuous work: minimum of 15 days; and
- For one year or more of continuous work: minimum of one month.
If no notice can be served, an indemnity in lieu of notice is to be paid. This indemnity is calculated based on the average of the total salary of the previous six-month period worked.
Severance pay
When the employment relationship is terminated without cause the employee is entitled to severance pay (“cesantía”). Employees with three to six months of service are entitled to seven days’ severance pay; employees with six to 12 months of service are entitled to 14 days’ severance pay.
After a year of service with the company, severance is paid according to the following guidelines:
| Years of service by employee | Severance payment (per year of service) |
| Over one year | 19.5 days |
| Over two years, or fraction over six months | 20 days |
| Over three years, or fraction over six months | 20.5 days |
| Over four years, or fraction over six months | 21 days |
| Over five years, or fraction over six months | 21.24 days |
| Over six years, or fraction over six months | 21.5 days |
| Over seven years, or fraction over six months | 22 days |
| Over eight years, or fraction over six months | 22 days |
| Over nine years, or fraction over six months | 22 days |
| Over 10 years, or fraction over six months | 21.5 days |
| Over 11 years, or fraction over six months | 21 days |
| Over 12 years, or fraction over six months | 20.5 days |
| Over 13 years, or fraction over six months | 20 days |
“Fraction over six months” means that the employee has worked for more than six months during a year and a value equal to the scale corresponding to his/her seniority must be added to the severance payment.
Severance pay cannot compensate more than eight years of employment, which means that the maximum seniority that can be recognized for severance pay is eight years. The severance pay is calculated based on the average total salary of the previous six-month period worked.
- Example: 3 years, 7 months: 20.5 days (3 years of service, section c.) x 4 years (82 days). This is so because the employee has worked for over six months in year three but has not yet reached four years; therefore, we could not multiply 21 days (4 years of service, section d.) times 4.
- Example: 3 years, 4 months: 20.5 days (3 years of service, section c.) x 3 years (61.5 days). This is so because the employee has worked for less than six months; therefore, the days of the year used are those for year three and not year four, and the multiplication is not made by 4 either because the employee has worked for less than six months in year 4.
- Example: 20 years: 20 days x 8 years (160 days).
Dismissal formalities
The employer must give the employee who will be dismissed an employment termination letter.
In case of a dismissal for just cause, the contract must be terminated within the following month after the date in which the employer learned about the act constituting the dismissal cause. If the employee does not receive the letter, the document must be filed before the closest office of the Ministry of Labor within the 10 days following the dismissal.
Special dismissal protection
According to local law, unless the employee is protected by a "special condition" ("fuero de protección especial"), the employer, under the similar rule of "employment at will", can decide to dismiss an employee with full severance payment.
Special dismissal protection applies to: a) pregnant employees or employees during the nursing period; b) minors; c) union leaders; d) sexual harassment claimants, whose investigation has not been finished; and e) employees on sick leave at the time of dismissal. In these cases, dismissals can only take place with cause and a dismissal process through the Ministry of Labor has to be followed. This is to protect employees under special or vulnerable circumstances so that they are not dismissed because of their condition.
Legal means of employees
The employee’s right to claim any employment-related benefit remains standing throughout the whole employment relationship and up to one year after the relationship has ended (statute of limitations).
Specific rules for executives
There are no specific rules for executives on this regard. The same rules apply as those for employees.
Collective dismissals
Costa Rican labor law does not refer to collective dismissals. There is no legal requirement to give previous notice of or disclose any reduction-in-force to the employee, nor to any governmental institution, i.e., the Social Security Administration (CCSS), the National Insurance Institute (INS), Tax Authority (DGT) or the Ministry of Labor.
In regards to employee payroll, the only requirement is to report the exclusion of each impacted employee in the corresponding payroll (because of employment termination): CCSS, INS, and DGT.
Get in touch
Graciela Soto
Costa Rica
gsoto@deloitte.com | +506 22 465104
