Costa Rica requires a mandatory thirteenth salary, known as the "aguinaldo," paid to every employee once a year. Miss this, get the timing wrong, or forget to include it in your budgeting, and you're looking at back payments plus an employee who's rightfully upset. It's one of several rules that catch companies off guard when they hire here for the first time.
That's just the start. Add mandatory social security contributions, a notice period tied to tenure, and severance rules that kick in the moment things don't work out, and you've got a compliance list that's easy to underestimate and expensive to get wrong.
Your three options for hiring in Costa Rica
Option 1: Set up your own entity
- Cost: Significant upfront legal, registration, and incorporation costs, plus ongoing accounting and compliance overhead
- Timeline: Several months minimum before you can legally put someone on payroll
- Complexity: Tax registration, a local payroll system, HR infrastructure, and ongoing legal compliance
- Makes sense when: You're hiring a large team long-term and want permanent operations in Costa Rica
Option 2: Hire contractors
- Cost: No upfront cost, but you lose control over how the relationship is managed
- Timeline: Immediate
- Risks: Misclassification is a real issue if the person works like an employee (set hours, direct management, exclusivity). That exposure includes back taxes and mandatory benefits you should have been paying all along
- Makes sense when: You need someone for a short, defined project or a specialized one-off skill
- Note: Hire with Columbus also handles compliant contractor agreements and payments, so you're covered either way
Option 3: Use an employer of record (recommended for most)
- Cost: Starting from $179/month per employee
- Timeline: 2-3 days to get someone hired and paid legally
- Complexity: None on your end. We handle contracts, payroll, taxes, and compliance
- Makes sense when: You're hiring anywhere from one person to fifty, testing the Costa Rican market, or building a team across multiple countries
Why most companies go with an EOR
If you're hiring one to ten people, entity setup costs more than several years of EOR fees combined, and that's before you factor in the months of delay. At $179/month per employee, hiring three people runs about $537/month, a fraction of what incorporation and ongoing legal upkeep would cost you in the same period.
The math gets worse if you're hiring across several countries at once, since each one would need its own entity, its own compliance calendar, and its own local expertise. An EOR like Hire with Columbus takes on the employment contract, payroll, tax filings, social security contributions, and every ongoing compliance update, so you can hire fast without building out a legal function you don't need yet.
Ready to hire in Costa Rica without the setup headaches? Get started with Hire with Columbus.
What employment types can you use?
Before you draft an employment contract in Costa Rica, you need to decide: entity, contractor, or EOR. That decision shapes everything else, from how fast you can hire to how much risk you're carrying.
How can you hire in Costa Rica?
You've got three paths here. Let's see how they stack up.
| Approach | Speed to hire | Upfront cost | Ongoing burden | Best for |
|---|---|---|---|---|
| Set up your own entity | Months, not days | Incorporation, legal, and registration costs | Annual accounting, payroll systems, compliance filings | 20+ employees, long-term local presence |
| Hire contractors | Immediate | Low | Misclassification risk, limited control | Short projects (under 6 months), specialized one-off work |
| Use an EOR (recommended) | 2-3 days | None | We handle it | 1-50 employees, market testing, multi-country teams |
Setting up your own entity
This is the "we're planting a flag here for good" option. You'll deal with incorporation paperwork, legal registration, and building a local payroll and tax infrastructure from scratch.
It takes months to get running, not weeks. Once it's live, you're on the hook for ongoing accounting, compliance filings, and HR infrastructure whether you have 3 employees or 30.
This route makes sense once you've got 20+ people in Costa Rica and know you're staying long-term. Below that headcount, the fixed costs rarely pencil out.
Hiring contractors
Contractors are fast. You can have someone invoicing you this week.
But Costa Rica's labor authorities look closely at how a contractor actually works, not just what the contract says. If you're setting hours, providing equipment, and directing day-to-day tasks, that person looks a lot like an employee. Misclassification brings back taxes and legal exposure you don't want.
Contractors work well for short, defined projects, under 6 months, where you need a specific skill and not ongoing integration into your team. Hire with Columbus also manages compliant contractor agreements and payments if that's the right fit for the role.
Using an employer of record
With an EOR, Hire with Columbus becomes the legal employer of record in Costa Rica. You still run the day-to-day: assigning work, managing performance, setting goals. We handle the paperwork that makes it legal.
Pricing starts from $179/month per employee. Five employees runs from $895/month, no incorporation costs, no local entity to maintain, no compliance team to hire.
You can have someone employed and paid within 2-3 days, compared to the months an entity setup takes. That's why most companies testing Costa Rica, or hiring under 50 people there, go this route.
Employment contract types in Costa Rica
Once you've picked how you're hiring, you still need the right contract type for the role. Costa Rica recognizes a few distinct categories, and picking the wrong one creates problems down the line.
| Contract type | Typical use | Key notes |
|---|---|---|
| Indefinite (permanent) | Core, ongoing roles | Default contract type; no fixed end date |
| Fixed-term | Specific projects or seasonal work | Must have a genuine end date tied to the work; repeated renewals risk reclassification as indefinite |
| Part-time | Reduced-hour roles | Same statutory protections as full-time, on a pro-rated basis |
Indefinite contracts are the default and the right call for most full-time, ongoing positions. If the role isn't tied to a specific project or a defined end date, this is what you want.
Fixed-term contracts only work when there's a genuine, temporary reason for the arrangement, like a project with a clear end date or seasonal demand. Renewing a fixed-term contract over and over for what's really a permanent role invites it to be treated as indefinite employment, with all the protections that come with it.
Part-time employees get the same statutory rights as full-time staff, just calculated on a pro-rated basis for things like leave. It's not a way to reduce someone's legal protections, just their hours.
Whatever contract type you land on, Hire with Columbus drafts it to match Costa Rican labor law, handles the language and formatting requirements, and keeps it compliant if the terms of the role change down the line.
How does payroll and taxation work?
Most companies budget salary only. Then payroll hits, and employer contributions add 24.6% on top of gross wages, before you even get to the mandatory 13th month payment.
Income tax
The verified average income tax rate for Costa Rica sits at 0%. Costa Rica's income tax system is progressive, but at typical wage levels the effective burden lands near zero once exemptions are applied. That said, social security contributions are mandatory regardless of income tax owed, so don't mistake a low income tax bill for a low total cost of employment.
Minimum wage and average wage
The minimum wage in Costa Rica is about CRC 367,000 per month. The average monthly wage sits at roughly CRC 606,500. If you're budgeting a role above minimum wage, use the average as your baseline sanity check, not the floor.
Social security contributions
Both employer and employee pay into Costa Rica's social security system, and the employer share is the bigger number to plan for.
| Party | Contribution | Rate |
|---|---|---|
| Employer | Employer social contributions | 24.6% of gross salary |
| Employee | Employee social contributions | 9.8% of gross salary |
The employee's share comes out of their paycheck automatically. The employer's share is a separate cost on top of gross salary, and it's the number that catches unprepared companies off guard.
Payment schedule and the 13th salary
Costa Rica requires a mandatory 13th salary (aguinaldo), paid on top of the normal 12 months of pay. Budget for it as a 13th month of salary, not a bonus you can skip in a lean year. Missing it isn't optional and it's one of the most common compliance gaps for companies new to the country.
Total employment cost example
Say you hire someone at CRC 800,000 per month, an illustrative number a bit above minimum wage. Here's roughly what that employee costs you annually:
| Cost component | Amount (CRC) |
|---|---|
| Base salary (12 months) | 9,600,000 |
| Employer social contributions (24.6%) | 2,363,000 |
| 13th salary (aguinaldo) | 800,000 |
| Estimated annual cost | ~12,763,000 |
That's roughly 33% above the base salary once contributions and the mandatory bonus are factored in. This is an illustration to show the math, not a quote, actual costs shift with role, tenure, and any additional benefits you offer.
Common payroll mistakes
- Budgeting only the 12 monthly salaries and forgetting the 13th salary entirely.
- Treating employer social contributions as an afterthought instead of building them into the offer letter math from day one.
- Miscalculating contributions when bonuses or allowances are added mid-year.
- Assuming a low income tax rate means low total cost, when social contributions make up the bulk of the employer burden.
Managing this without an entity
Running payroll yourself means engaging a local accounting firm, keeping up with social security registration, and owning the compliance risk if a filing slips. That's real in-house HR time, on top of software and advisory costs.
With Hire with Columbus, we run Costa Rica payroll, handle the 13th salary calculation, and remit contributions correctly, starting from $179/month per employee (USD), fully compliant.
Okay, that's a lot of legal jargon.
Here's the thing: you don't actually need to remember any of this. That's literally what we're here for. We'll handle the compliance while you focus on building your team in Costa Rica.
No lawyers required. Promise.
What benefits and leave are required?
You'll pay salary 14 times a year in Costa Rica, not 12. The extra payment is the aguinaldo, a mandatory 13th-month salary that's separate from vacation pay and due every December. If that's news to you, you're not alone, and it's exactly the kind of thing that trips up companies hiring here for the first time.
Annual vacation
Employees get 12 days of paid vacation per year, as of 2026. Vacation typically accrues based on time worked, and Costa Rican law is strict about actually letting people take it, this isn't a "nice to have" you can quietly skip.
Carryover and payout rules are set by the employment contract within statutory limits. If you're structuring vacation policies, don't assume you can just default to whatever your home country does, Costa Rica has its own rules here.
Sick leave
Sick leave in Costa Rica runs through the national social security system (CCSS). Once an employee provides a medical certificate, CCSS and the employer share responsibility for pay, with the exact split set by law depending on the certificate and circumstances.
The takeaway: you can't just wing this with a generic "call in sick" policy. You need a process for handling medical certificates and coordinating with CCSS, which is exactly the kind of administrative task an EOR handles for you.
Parental leave
| Leave type | Duration | Pay |
|---|---|---|
| Maternity leave | 17.3 weeks | Funded through a combination of employer and CCSS contributions |
| Paternity leave | 1.1 weeks | Set by statute |
| Shared parental leave | Not applicable (0 weeks) | N/A |
Maternity leave is substantial, over 17 weeks, so plan staffing coverage well before your employee's due date. There's no separate shared parental leave scheme beyond maternity and paternity entitlements.
Public holidays in 2026
Costa Rica has 11 public holidays per year. Here's the 2026 calendar:
| Date | Holiday |
|---|---|
| January 1 | New Year's Day |
| April 2 | Maundy Thursday |
| April 3 | Good Friday |
| April 11 | Juan Santamaría Day |
| May 1 | Labour Day |
| July 25 | Annexation of Guanacaste |
| August 2 | Feast of Our Lady of the Angels |
| August 15 | Mother's Day |
| September 15 | Independence Day |
| October 12 | Day of the Cultures |
| December 25 | Christmas Day |
Working on a holiday triggers extra pay obligations under Costa Rican labor law. Build these dates into your production and support schedules now, especially if you're running customer-facing operations.
Mandatory benefits and contributions
Three things are non-negotiable: health insurance, pension, and related social contributions, all administered through CCSS. Here's who pays what:
| Contribution | Rate | Paid by |
|---|---|---|
| Employer social contributions | 24.6% of gross salary | Employer |
| Employee social contributions | 9.8% of gross salary | Employee (withheld from pay) |
| 13th-month salary (aguinaldo) | Mandatory | Employer |
That employer contribution rate, 24.6%, isn't optional and isn't negotiable per employee. Factor it into your cost modeling from day one, not after you've already made an offer.
Optional benefits that help you compete
Legal minimums get you compliant, not competitive. Companies hiring in Costa Rica often add:
- Private health insurance on top of CCSS coverage
- Additional vacation days beyond the 12-day minimum
- Meal or transportation allowances
- Performance bonuses beyond the mandatory aguinaldo
- Remote work stipends for home office setup
None of these are required, but in a labor market where unemployment sits around 7.4%, a competitive benefits package still matters for attracting the candidates you actually want.
Common mistakes companies make
The most common error is forgetting the aguinaldo entirely, treating it as an optional bonus instead of a mandatory 13th payment. Companies also underestimate the employer contribution rate, budgeting salary alone without the 24.6% add-on.
Another frequent miss: not tracking vacation accrual properly, which creates disputes at termination time. Getting this wrong doesn't just cost money, it creates compliance exposure with Costa Rican labor authorities.
What this costs you to manage yourself
Handling all of this correctly usually means:
- A local HR resource who understands CCSS processes and Costa Rican labor law
- Payroll software configured for local contribution rates and the 13th-month cycle
- Ongoing legal review to keep policies current
Hire with Columbus handles benefit administration, contribution calculations, and leave tracking for $179/month per employee, so you're not building this expertise from scratch or hoping your spreadsheet catches every mandatory payment on time.
What are the compliance requirements?
You can't fire someone in Costa Rica without cause, notice, and usually severance. Get any part of that process wrong and you're looking at back pay, legal fees, or a labor court ordering you to reinstate the employee. Here's what the law actually requires, step by step.
Employment contract requirements
Your employment contracts should be in writing and in Spanish. The Labor Code technically recognizes verbal agreements, but a written contract is the only reliable way to prove what you agreed to if a dispute ends up in front of a labor inspector or judge.
At minimum, your contract needs to spell out:
- Job title and duties
- Salary and payment frequency
- Work schedule
- Start date and contract type (indefinite or fixed-term)
- Probation terms, if you're using them
You'll also need to register the employee with the CCSS (Caja Costarricense de Seguro Social), Costa Rica's social security agency, so contributions start flowing correctly from day one. Skip this step and you're exposed to unpaid contribution claims later, on top of whatever penalty the CCSS decides to hit you with.
Probation periods
Costa Rican law allows for a probationary period, but there's no single fixed length. It's set in the employment contract, within limits the Labor Code allows. During probation, both sides get more flexibility to end things without the full severance obligations that kick in later.
Working time regulations
The average Costa Rican employee works about 44.6 hours a week. Overtime needs to be paid at a premium above the regular rate, though the exact amount depends on your contract and the Labor Code provisions that apply. Keep accurate time and payroll records, because if you can't produce them during an inspection or dispute, the burden of proof shifts against you.
Notice periods
| Tenure | Notice period |
|---|---|
| Statutory benchmark across tenure bands | Averages 4.3 weeks (about a month) |
Costa Rica's Labor Code ties notice length to how long someone's worked for you. The longer they've been employed, the more notice you owe. That 4.3-week figure is the statutory average, so confirm the actual number against the employee's specific tenure and contract terms.
Termination process
Firing someone for just cause (theft, serious misconduct, repeated policy violations) doesn't require severance, but you still need documented evidence. Terminate without cause and you owe notice and severance, no exceptions.
If your workforce includes union members, tread carefully. About 22.4% of Costa Rica's labor force belongs to a union, and 10.4% of jobs fall under a collective bargaining agreement. If either applies to your hire, check the CBA before finalizing any termination. It might add extra consultation steps or protections on top of the general Labor Code.
Severance pay
| Termination type | Severance owed |
|---|---|
| Just cause | None |
| Without cause (indefinite contract) | Statutory average of 14.4 weeks' pay |
Severance (auxilio de cesantía) scales with tenure, and 14.4 weeks is the statutory average. Longer-tenured employees accrue more, so run the exact calculation based on years of service before you make an offer to separate.
Data protection
Costa Rica has its own data protection framework governing how employers collect, store, and use employee personal information. That means getting consent for sensitive data processing, keeping storage secure, and having a clear reason for anything you collect beyond payroll and benefits needs. Treat employee files (ID numbers, salary history, health information) as sensitive by default.
Common compliance mistakes
- Relying on a verbal-only agreement and having no documentation when a dispute arises
- Terminating "for cause" without written evidence, then losing the case for lack of proof
- Skipping CCSS registration or delaying it, which creates contribution gaps
- Ignoring CBA terms for unionized staff during a termination
Penalties for violations
Getting this wrong costs you in ways that go beyond the paycheck:
- Invalid or incomplete contract: exposes you to wage claims and disputes over terms you can't prove
- Wrong termination process: full severance plus legal costs, and maybe a reinstatement order from a labor court
- Missing CCSS registration: back contributions owed, plus whatever penalty the CCSS applies for the gap
- Improper dismissal without cause or notice: severance, notice pay, and legal fees stack up fast
Hire with Columbus handles the contract drafting, CCSS registration, and termination process according to Costa Rica's Labor Code, so you're not the one figuring out whether your paperwork holds up in a labor court. Every contract we generate and every termination we manage follows the requirements above, exactly.
What has changed recently?
Costa Rica's employment rules haven't been overhauled this year, but a few numbers moved enough that you'll want to double check your contracts and payroll setup before you hire.
Paternity leave increased in February 2026
The biggest update is paternity leave, which now stands at 1.1 weeks as of February 2026. It's a small bump, but if you're onboarding a new father on your Costa Rican team, your offer letter and internal leave policy both need to reflect the current entitlement, not last year's number.
Annual leave and public holidays confirmed for 2026
Costa Rica's statutory framework for 2026 locks in 12 days of annual leave and 11 public holidays. Neither of these changed dramatically from prior norms, but they're worth restating because they're the two figures HR teams get wrong most often when building out a Costa Rican leave calendar. Build your PTO tracker around these numbers now rather than guessing.
Social security contributions stay put, for now
Employer social contributions remain at 24.6% of gross pay, with employees contributing 9.8% on their end. These rates were last set at the start of 2025 and have carried through into 2026 without adjustment. That's good news for budgeting, since it means the payroll math you ran last year still holds this year.
Corporate tax and VAT reconfirmed mid-2026
As of mid-2026, Costa Rica's corporate tax rate sits at 30% and VAT remains at 13%. Neither moved, but both were reconfirmed partway through the year, which matters if you're modeling entity costs or pricing out contractor invoices that include VAT.
What this means if you're hiring now
None of these updates are dramatic, but they add up. A paternity leave miscalculation, an outdated PTO policy, or a payroll run based on stale contribution rates can all trigger compliance headaches you don't need. This is exactly the kind of detail an EOR tracks automatically. With Hire with Columbus, you don't have to monitor Costa Rica's statutory updates yourself. We build them into every contract and payroll run the moment they take effect, so you're never the one explaining to a new hire why their leave balance looks off.
Frequently asked questions
An Employer of Record in Costa Rica through Hire with Columbus starts from $179 per employee per month, with no setup fees and no deposits. This covers drafting compliant contracts, running payroll, calculating the mandatory 13th salary, remitting social security contributions, and keeping everything aligned with Costa Rican labor law.
Yes. An Employer of Record legally employs the worker on your behalf in Costa Rica, handling contracts, CCSS registration, payroll, and compliance, so you can hire without setting up your own local entity. You still manage the employee's day-to-day work while the EOR carries the legal employment relationship.
Hiring through an EOR in Costa Rica typically takes 2-3 days to get someone hired and paid legally, and onboarding through Columbus can happen in as little as 48 hours once a worker is qualified and compliant. This is much faster than setting up your own entity, which takes several months at minimum.
On top of gross salary, employers in Costa Rica pay employer social contributions of 24.6% of gross salary to CCSS. They must also budget for the mandatory 13th salary, known as the aguinaldo, paid once a year on top of the normal 12 months of pay. Together these push total employment cost to roughly 33% above base salary in the guide's illustrative example.
Notice periods in Costa Rica are tied to an employee's tenure, with longer service requiring longer notice. The statutory benchmark across tenure bands averages 4.3 weeks, or about a month, though the exact figure should be confirmed against the specific employee's tenure and contract terms.
Yes, a 13th-month salary is mandatory in Costa Rica. It is known as the aguinaldo, paid once a year on top of the normal 12 months of salary, and it is a legal requirement rather than a discretionary bonus.
Employees in Costa Rica are entitled to 12 days of paid vacation per year as of 2026. On top of that, the country has 11 public holidays in 2026, and working on a holiday triggers extra pay obligations under Costa Rican labor law.
Costa Rica recognizes contractors and employees as distinct categories, and the choice affects speed, cost, and risk. Contractors can start almost immediately with low upfront cost and work well for short, defined projects under 6 months, but labor authorities look at how the work actually happens, so setting hours, providing equipment, and directing daily tasks can make a contractor look like an employee. Misclassification exposes a company to back taxes and mandatory benefits it should have been paying, while proper employees, whether through an entity or an EOR, come with full statutory protections like social contributions, aguinaldo, and notice and severance rules.