Costa Rica

A. Hiring of employees (on boarding)

1. Mandatory employer requirements

Employee Requirements:
Costa Rican citizens must:

• Be at least 15 years of age, subject to certain restrictions, or
• 18 years of age under general employment regulations.
• Have legal capacity and aptitude to assume obligations.

For foreigners:
Must have a migratory status that enables them to work in Costa Rica (temporary residence, permanent residence, work permit, or refugee). 

Employer Requirements:

• Be registered as employers with the Costa Rican Social Security Fund (“CCSS”).
• Subscribe an occupational risk insurance policy.
• Register employees in their payroll with the CCSS from the first day the employee starts working at the Company. Obligation to withhold and pay social security contributions monthly. Withhold 10.67% of the employee's salary and contribute 26.67% as the employer's contribution. These percentages change starting January 1, 2026.
• Contracts:
  Article 24 of the Labor Code requires that the employment contract be issued in writing. It must include: (i) identification of the parties, (ii) employee's address, (iii) contract duration, (iv) work schedule, (v) salary, (vi) method, place, and period of salary payment, (vii) place of service provision, (viii) other stipulations agreed upon by the parties, (ix) place and date of signing, (x) signatures of the parties.
• The legal minimum wage established for the occupation or position held by the employee must be met. In the case of foreign individuals with a work permit, an additional 25% above the minimum wage must be recognized.

2. 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).

3. 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.

4. 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.Costa Rican regulations ensure and guarantee fair and equal treatment for all individuals (Article 33 of the Political Constitution). Discrimination in terms of remuneration is not allowed when performing the same functions under equal conditions among several workers, except when it can be demonstrated that the difference is based on objective criteria. Likewise, the Labor Code in its eighth chapter regulates the prohibition of discrimination at work based on age, ethnicity, sex, religion, race, sexual orientation, marital status, political opinion, national ancestry, social origin, affiliation, health condition, disability, union membership, filing complaints or giving testimony about acts of corruption, or any other analogous form of discrimination.

5. Types of employment contracts 

Employment contracts are classified: (i) according to their duration as either fixed-term (temporary) or indefinite, and (ii) according to the working hours as part-time or full-time. 
Indefinite contracts may also take the form of fixed-discontinuous contracts when the activity is intermittent or seasonal in nature. Fixed-term contracts should be issued solely and exclusively when it involves the hiring of a service that is not inherent to the core business of the Company. Fixed-term contracts cannot exceed a period of 1 year; otherwise, they become indefinite, except in very specific cases.

6. 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 positions 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.

7. 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, to review them.

8. 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.”  Every person performing the same function under the same conditions must receive the same salary, without any kind of difference.

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 framework 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.

9. 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 teleworking will be carried out must be clearly documented. 

Employer´s obligations:

1. Telework cannot be contrary to the provisions of the Labor Code (salary and work shift e.g.);
2. 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;
3. The employer should train for the proper management and use of the equipment and programs necessary to carry out their services;
4. The employer should inform on compliance with the standards and guidelines related to occupational health and prevention of occupational risks;
5. 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

1. 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:

• Prior 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.

Employees protected by a legal safeguard —such as maternity, special licenses, breastfeeding, union leadership, or those who have reported corruption or sexual harassment— may only be dismissed for serious misconduct. In such cases, the employer must obtain prior authorization from the Ministry of Labor. Without this approval, dismissal is not permitted.

Termination by mutual agreement: The employer and employee can agree to terminate the employment relationship, and they can also agree on the amounts to be paid as legal benefits, (except non-waivable rights: Christmas bonus and vacations). This kind of termination is allowed for employees protected by a legal safeguard (maternity, paternity leave, among others).

Resignation:  Type of termination where the employee voluntarily decides not to continue providing services to the employer. In this case, the employee must give prior notice depending on their length of service with the company and receives the benefit of one day off per week during the prior notice. In this type of termination, severance pay is not provided. Only vacation and Christmas bonus are paid."

2. 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 

In specific cases, such as dismissals for discriminatory purposes, the employee may request reinstatement through judicial proceedings.

The termination letter in cases of dismissal without cause does not need to include the reason for termination.
The voluntary resignation letter does not require including the reasons that motivate the decision.
In cases of termination by mutual agreement, the agreement signed by the parties must indicate the amounts and concepts to be paid, but it is not necessary to include the reason that motivates the agreement.
In cases of dismissal for serious misconduct (with cause), the letter must include the specific reasons that motivate the dismissal. If, for any reason, the dismissal is unjustified, the worker may claim their employment benefits through a legal lawsuit.

3. 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.

4. 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:

“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).

5. 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.

6. 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.

7. 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).

8. Specific rules for executives

There are no specific rules for executives on this regard. The same rules apply as those for employees.

9. 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
 

Guell Ricardo
Costa Rica
riguell@deloitte.com | +506 22 465109