Labor Law Compliance Guide for Costa Rica

Costa Rica's economy is recognized for its stability and growth, with a GDP of approximately $102.6 billion USD in 2025 and GDP per capita of around $19,104. The economy grew 3.6% in 2025, with Q3 accelerating to 5.2% year-over-year, and is forecast to grow 3.5% in 2026 (OECD). The country's economy is driven by various sectors, including tourism, agriculture, and technology. Ecotourism plays a significant role, drawing visitors from around the globe, while agricultural products such as bananas, pineapples, and coffee remain crucial exports. Additionally, Costa Rica is becoming a hub for technology and services, with many multinational companies establishing operations in the country.

Category	Details
Minimum Wage	CRC 373,092/month (unskilled); varies by occupation
Overtime Wage	1.5x of regular pay; 2x on public holidays
Meal Breaks	1 hour
Rest Breaks	15 minutes
Working hours	8 hours per day, 48 hours per week
Salary Payment Cycle	Weekly, bi-weekly, or monthly
Payroll Taxes	Employer ~26.33% (CCSS + other mandatory contributions)
Paid Vacation	2 weeks after 50 weeks of work
Overtime Hours	More than 48 hours per week
Night Shift Hours	6 hours/day, 36 hours/week max; paid at 1.35x
Holidays	12 (9 paid, 3 unpaid)
No Work Days	Sunday
Minimum Wage	Costa Rica uses an occupation-based minimum wage system set by the National Wage Council. As of January 2026, the unskilled worker rate is CRC 373,092/month, semi-skilled ~CRC 405,690, skilled ~CRC 419,730, and specialized (TOEG) ~CRC 487,335. The 2026 general increase was 1.63%, with higher differential increases for domestic workers (+3.96%) and specialized categories.

The official currency of Costa Rica is the Costa Rican Colón (CRC).

Hiring Laws

Hiring employees in Costa Rica requires businesses to establish a legal presence in the country. This typically involves registering a local company, which can cost around CRC 500,000 to CRC 1,000,000 depending on the type of entity and legal fees. The process to incorporate a business usually takes 4 to 6 weeks. Employers must sign a written employment contract with each employee. This contract should clearly outline the terms of employment, including job responsibilities, salary, working hours, leave entitlements, and termination procedures. The contract must comply with Costa Rican labor laws, which protect both employees and contractors, though contractors are generally governed by civil contracts rather than employment contracts. Employees and contractors are treated differently under the law, with employees entitled to more protections and benefits. Exceptions to the minimum wage include specific types of contracts, such as apprenticeship contracts, which may have lower rates. The minimum wage applies uniformly across the country, with no regional variations. Employers are also required to pay employees a “13th-month” bonus, equivalent to one month’s salary, typically paid in December.

Working Hours

The standard working hours in Costa Rica are 8 hours per day and 48 hours per week. Overtime is permitted but must be compensated at 150% of the regular hourly rate, with a maximum of 4 extra hours per day (total workday cannot exceed 12 hours). Work on public holidays is paid at 200% (double pay), or 300% (triple pay) if no compensatory rest is given. Night shifts are limited to 6 hours per day and 36 hours per week, and are paid at 135% of the regular hourly rate.

The minimum legal working age in Costa Rica is 15 years, with strict regulations against child labor. Workers aged 15 to 18 are subject to reduced working hours and cannot work in hazardous conditions.

Payroll and Taxes

Employers in Costa Rica are required to make several payroll deductions:

• Social Security (Caja Costarricense de Seguro Social - CCSS): Employers contribute approximately 26.33% of the employee's salary. The CCSS employer share is 14.83%, comprising SEM (Health/Sickness & Maternity) at 9.25% and IVM (Disability, Old Age, Death) at 5.58%. Additional mandatory contributions include Banco Popular, FCL, INA, IMAS, FODESAF, and INS workers' compensation insurance.

• Employee CCSS contributions: 9.83% total (IVM increased from 4.17% to 4.33% effective January 1, 2026).

• Income Tax Withholding: Employers must withhold income tax based on the employee's salary.

The current income tax regime for salaried employees in Costa Rica is progressive, with the following rates (2026, Decree 45333-H):

Income Level (CRC per month)	Tax Rate
Up to 918,000	Exempt
Over 918,000	10%
Higher brackets	15%, 20%, 25% (progressive)

For self-employed and independent workers, annual brackets apply:

Annual Income (CRC)	Tax Rate
Up to 6,244,000	Exempt
Up to 8,329,000	10%
Up to 10,414,000	15%
Up to 20,872,000	20%
Over 20,872,000	25%

New for 2026: Self-employed workers can deduct 25% of gross income without receipts (Law 10667).

Statutory Leave Policies

Costa Rican labor laws mandate various types of leave:

• Paid Vacation: Employees are entitled to 2 weeks of paid vacation after completing 50 weeks of continuous work.

• Maternity Leave: 4 months of paid maternity leave, which includes 1 month before and 3 months after childbirth.

• Paternity Leave: Although not mandated by law, some companies may offer a few days of paternity leave.

• Sick Leave: Paid sick leave is covered by the CCSS, with the employer paying the first 3 days and the CCSS covering the rest.

The following table lists the mandated holidays in Costa Rica for 2026:

Paid Holidays (Pago Obligatorio) -- 9 days:

Holiday	2026 Date	Day
New Year’s Day	January 1	Thursday
Holy Thursday	April 2	Thursday
Good Friday	April 3	Friday
Juan Santamaria Day	April 11	Saturday
International Labor Day	May 1	Friday
Annexation of Nicoya	July 25	Saturday
Mother’s Day	August 15	Saturday
Independence Day	September 15	Tuesday
Christmas Day	December 25	Friday

Unpaid Holidays (Pago No Obligatorio) -- 3 days:

Holiday	2026 Date	Day
Virgin of Los Angeles	August 2	Sunday
Afro-Costa Rican Culture Day	August 31	Monday
Army Abolition Day	December 1	Tuesday

Note: Four holidays fall on weekends in 2026 (April 11, July 25, August 2, August 15).

Employee Benefits

Employers in Costa Rica are required to provide several benefits to their employees:

• Social Security: Covers healthcare, pensions, and other social services.

• 13th-Month Bonus: A mandatory annual bonus equivalent to one month’s salary.

• Severance Pay (Cesantía): Employees who are terminated without just cause are entitled to severance pay based on their years of service.

• Healthcare: Provided through the CCSS, funded by employer and employee contributions.

Employee Termination

Costa Rica does not follow At-Will Employment laws. Termination must be justified under the country's labor laws, and employers must follow a specific procedure. This includes providing a written notice and offering severance pay if the termination is without just cause.

• Notice Period: Employers must provide at least 1 month of notice for employees who have worked for more than 3 years. For employees with less than 3 years of service, the notice period is proportional to their length of service.

• Termination Benefits: If an employee is terminated without just cause, they are entitled to severance pay (Cesantía) based on their length of service.

• Legal Challenges: Employees can challenge their termination in labor courts. If the court rules in favor of the employee, they may be awarded additional compensation or reinstatement.

Employers can legally terminate employees for just cause, which includes poor performance, misconduct, or redundancy. However, the reasons must be clearly documented, and the employer must adhere to the legal termination process.

This guide provides a comprehensive overview of the labor laws in Costa Rica, helping businesses navigate the complexities of hiring and managing employees in the country.