Payroll & Employment Guide Costa Rica

Employment contracts in Costa Rica can be agreed in writing or orally, but must include key terms of the employment relationship and comply with local labour laws. Written contracts are recommended for greater legal certainty.

Notice periods: Typically range from one week to one month, depending on the employee’s length of service.

Termination of employment: Termination can occur by mutual agreement, resignation, contract expiration, or employer dismissal. Either party may terminate an indefinite contract without cause by providing notice or payment in lieu.

Employers in Costa Rica must provide mandatory benefits in compliance with the country’s labour laws and social security system. These benefits ensure employee protection, while additional perks are often offered to stay competitive in the job market.

Mandatory benefits:

• Health insurance: Public healthcare coverage through CCSS, funded by employer and employee contributions
• Pension (retirement): Mandatory contributions through the social security system (IVM)
• Social security: Covers health, maternity, disability, and retirement benefits
• Workers’ compensation: Mandatory insurance through INS for workplace accidents and occupational illnesses
• Unemployment protection: Provided through severance (cesantía) and employer-funded savings (FCL)
• 13th-month salary (aguinaldo): Mandatory annual bonus paid to employees

Common perks: This includes private health insurance, life and disability insurance, meal or transport allowances, and additional paid time off and performance bonuses

Leave policies:

• Paid annual leave (2 weeks after 50 weeks of service, with pro-rata entitlement on termination)
• Paid sick leave supported by CCSS (up to 26 weeks, subject to conditions)
• Maternity leave (4 months, shared cost between employer and CCSS) and paternity leave (2 days per week for 4 weeks)
• Additional parental, adoption, and special care leave options.

Costa Rica has a territorial tax system, meaning taxes are applicable only on locally sourced income, not foreign income (applies to both employees and employers). Employers are responsible for withholding income tax and social security contributions.

Individuals are considered tax residents if they spend 183+ days in Costa Rica within a year or have their main economic interests there.

Personal income tax: Progressive tax rates ranging from 0% to 25%. Income tax is typically withheld monthly by employers. Here are the tax brackets for employees:

• Up to ₡918,000: 0%
• ₡918,001 – ₡1,347,000: 10%
• ₡1,347,001 – ₡2,364,000: 15%
• ₡2,364,001 – ₡4,727,000: 20%
• Over ₡4,727,000: 25%

Withholding and contributions: In Costa Rica, the standard withholding rates are:

• Dividends: 15%
• Interest: 15% (with some reduced rates in specific cases)
• Capital gains are generally taxed at 15%

Tax allowances and non-taxable benefits:

• 13th-month salary (aguinaldo) is fully tax-exempt
• Relocation expenses may be non-taxable if properly documented
• Monthly tax credits apply to dependents (children and spouse)

Deductions and tax reliefs: Social security contributions (CCSS), optional simplified tax regime for independent workers, exemptions for primary residence capital gains, and double taxation relief through limited international agreements.

Employers in Costa Rica must manage payroll in compliance with local regulations, including salary payments, tax withholdings, and social security contributions. Salaries are typically paid monthly or biweekly, and income tax is withheld at source.

Salary payment deadline:

• Monthly: No later than one month after the period worked
• Weekly/biweekly: Payment intervals must not exceed 15 days

Taxes and contributions payment deadline:

• Income tax (D-103): By the 15th of the following month
• Social security (CCSS): Based on the assigned schedule, typically between the 15th and 26th
• Workers’ compensation (INS): Within the first 10 working days of the following month

Payroll declarations deadline:

• Monthly declarations required for CCSS (SICERE), income tax (D-103), and INS
• No quarterly payroll reporting require

Payroll currency: Costa Rican Colón (CRC)

Costa Rica’s labour law is defined by the country’s Labour Code, which outlines key aspects of employment, including contract types, working conditions, minimum wages, probation practices, and termination rules. Employers must comply with these regulations, as well as payroll, tax, and social security obligations.

Total employment cost: 45% – 47% of gross salary

• Employer’s social security contributions: 26.83% (CCSS) + 1%–2.5% workplace risk insurance (INS)
• Employees’ social security contributions: 10.83%

Minimum wage: Varies by role and skill level, with a general increase applied annually (e.g. 1.63% in 2026). For 2026, key reference rates include:

• Domestic workers: ₡268,731 per month
• Unskilled workers: ₡373,092 per month
• Semi-skilled workers: ₡405,710 per month
• Skilled workers: ₡419,755 per month

Probation period: Typically around 3 months in practice, although not explicitly regulated by law

EOR services in Costa Rica enable you to legally employ individuals in the country without opening legal entities. Your EOR will take over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

PEO services in Costa Rica provide HR and administrative support, while you remain the legal employer for your team. They are ideal for employers who already have legal entities in Costa Rica but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams’ payroll calculators are adjusted to 95+ countries’ local labour laws, including Costa Rica. Using our calculator, you can easily estimate net and gross salaries, employer/employee contributions, and other mandatory deductions in the country.