Costa Rica Labor Laws:
Essential Insights for Employers and Employees

Costa Rica’s Labor Code ensures justice and clarity for both companies and workers.
This comprehensive guide details formal contracts, working hours, wage law, mandatory bonuses, social security, leave, and the exact compliance steps every business and HR leader must know.

1. What is Costa Rica’s Labor Code, and Why is it Important?

The Labor Code forms the backbone of employment relations in Costa Rica. It regulates:

• Work hours (day/night), overtime, breaks, and minimum wage rates
• Social security/retirement, maternity/paternity leave, and vacation
• Legal severance, termination, documentation, and anti-discrimination measures

Compliance with labor law is mandatory and protects both the business and the employee.

2. How Do Employment Contracts Work in Costa Rica?

An employment contract formalizes rights and duties—both verbal and written contracts are valid, but a written contract is strongly advised. Contracts must specify:

• Work hours, duties and wage (never below legal minimum)
• All leave and social security arrangements

Contract types:
– Indefinite-term: default and best for job stability.
– Fixed-term: only for special projects, up to 1 year (5 years for some roles); continuous renewals convert it to indefinite.

Employers must ensure contracts always comply with wage and leave laws to avoid later disputes or claims.

3. Legal Work Hours and Overtime Rules

• Work week: Max 48 hours, 6 days (Mon–Sat).
• Day shift: Up to 9.2 hours daily (5 days role). Night shift: Max 6 hours/day, 36/week.
• Overtime: Paid at 1.5x regular wage. Max 4 hours/day overtime.
• Breaks: At least 1 hour meal break in full shift.

4. Minimum Wage Requirements

Minimum wage is updated annually by the Ministry of Labor per occupation/sector.
Example: 2025 Receptionist (private sector): ₡399,203.69/month.
Employers must never pay less than the official wage for the applicable position, and must document all payments.

Aguinaldo (13th Salary) & Annual Bonus

The aguinaldo is a mandatory, tax-free bonus paid by December 20th each year. It equals 1/12 of total annual earnings, covering all wages/overtime/bonuses. Missing this payment triggers legal penalties.

5. Leave Entitlements: Vacation, Maternity, and Paternity

• Vacation: 2 paid weeks/year after 50 weeks of service.
• Maternity Leave: 4 months paid (1 before, 3 after the birth), 100% salary, employer & CCSS.
• Paternity Leave: 8 paid days (2/week over 4 weeks after birth), split 50/50 employer/CCSS, plus extra leave if mother passes away.

Compliance with these rules is mandatory and demonstrates best practices in equal opportunity and family support.

6. Employer Obligations: Social Security & Insurance

Employers must contribute to the CCSS (health/welfare/pension) and INS (workplace risks).
Requirements:

• Register all employees with CCSS within 8 days of hiring
• Pay salary-based contributions (also for disability/retirement)

Non-registration or late payments are heavily penalized.

7. Severance, Termination & Health Incapacity

Severance: If terminated without cause, employer owes severance based on years worked, paid per official formula.
Termination: Must follow protocol (just cause, notice, severance if applicable).
Health incapacity pay:

• First 3 days: Employer pays 50% of salary
• Day 4+: CCSS pays 60% of average last 3 months’ salary to employee (with doctor’s note and up-to-date payments)
• INS (not the CCSS) pays if incapacity is due to workplace injury/disease

Key: Employers must promptly notify CCSS and maintain accurate records.

8. Key Steps for Employers to Comply

1. Draft clear, written employment contracts for all workers (in Spanish or bilingual, but Spanish governs disputes).
2. Register all employees in the CCSS within 8 days of contract start.
3. Ensure payroll meets/exceeds current legal minimum wages for every post.
4. Maintain detailed payroll, social security and leave records for audits.
5. Pay overtime, benefits (vacation/aginaldo), and severance as needed.
6. Report any incapacity/accident promptly (to CCSS or INS as required).
7. Stay up to date: Wage tables and labor rules change annually. Check every January.

Risks & Penalties of Non-Compliance

• Fines and forced back-pay if you pay less than minimum wage, don’t pay overtime, or skip mandates.
• Social security fraud = very high penalties, plus claims for medical expenses.
• Employee lawsuits can lead to workplace freezes, audits, and reputational harm.
• Leaving out leave pay (vacation, maternity, etc.) triggers fines and may bar public contracts for your business.

Key Takeaways: Costa Rica’s Labor Laws in Action

• The Labor Code mandates written contracts, fair wages, paid leave and social security.
• Documentation is your shield—keep accurate and up-to-date records.
• Compliance is strictly enforced; violations result in swift penalties.
• Expert legal guidance minimizes risk and ensures workplace well-being.