How to hire in Costa Rica through an EOR

Fixed-term contracts in Costa Rica convert to indefinite if you renew them too often or let the work continue past the end date. For most hires, you'll want an indefinite contract. It matches what local companies do and reflects how labor law is written.

Indefinite contracts are the norm because Costa Rica prioritizes worker stability. Fixed-term contracts are the exception, and they're only justified when the role itself is genuinely temporary.

What has to be in the contract

Written contracts are required for most work, except short-term jobs under 90 days like occasional or agricultural tasks. Verbal agreements are allowed in those cases, but you must provide a payment receipt every 30 days if the employee asks. When in doubt, put it in writing.

Your contract needs to cover:

• Names, IDs, and addresses of both parties.
• Job title, duties, and work location.
• Work hours (day, night, or mixed), salary (at least minimum wage), and payment method and frequency.
• Duration type.
• Benefits, leave, social security, and any bonuses or telework arrangements.

There's no legal requirement to write contracts in Spanish, but you should. Employees and labor inspectors expect it, and it'll hold up better if there's ever a dispute.

Probation can last up to 3 months. During that window, you can end the contract without cause or severance. After that, terminations require just cause or a payout.

Contractor vs. employee

Misclassification is a real risk here. Courts apply the "primacía de la realidad" principle, which means the actual working relationship matters more than what your contract says. If you control someone's hours, provide their tools, or they're integrated into your team, they're likely an employee in the eyes of the law.

Key signs of an employment relationship:

• You set their schedule and how they work.
• They use your equipment.
• The work is ongoing and central to your business.
• They're registered with social security.

If someone you've classified as a contractor gets reclassified, you'll owe back social security contributions (roughly 26% of gross salary from you, plus the employee share), vacation pay, the 13th month bonus, and severance. Fines run from 1 to 13 minimum wages per violation, and employees can also sue for damages. Courts tend to side with workers in these cases.

Non-compete clauses are hard to enforce in Costa Rica. They need to be narrow in scope, compensated, and tied to a specific, demonstrable harm. Most don't hold up in court. IP assignment clauses do work, but only if they're clearly written into the contract from the start. Employees own their inventions by default unless you specify otherwise.

Use indefinite written contracts and spell out every detail. If you're new to hiring in Costa Rica, working with an EOR can help you manage classification risk and stay on the right side of local rules. Getting it wrong can mean paying years of benefits retroactively.

Costa Rica gives employees 12 paid vacation days after just 50 weeks on the job, plus 11 public holidays and solid family leave protections. The legal minimums are a starting point, but you'll need to go further if you want to attract strong candidates here.

Time off

Employees earn two weeks of paid annual leave (12 working days plus 2 rest days) after 50 weeks of continuous work. It accrues in one block, not day by day. If someone leaves before hitting 50 weeks, they're entitled to one paid day per full month worked.

You and the employee agree on timing, balancing their preferences with business needs. They need to take it within 15 weeks of earning it, or you pay it out. There's no carryover without a written agreement, and any unused days get paid out on termination.

All leave types

Here's what the law requires. In most cases, pay is split between you and social security (CCSS), and job protection applies across the board.

Mandatory benefits

By law, you're required to make social security contributions through CCSS. This covers health, pension, and more, and you carry the larger share as the employer.

There are no unusual mandates like meal vouchers or transport allowances. That said, 13th-month pay (Aguinaldo) is required: one month's salary, split between June and December.

What people actually expect

Legal minimums won't get you far with skilled workers. Most locals expect 20-25 vacation days, not 12, and many will push for 5-10 days of paternity leave even though it's not required by law.

Private health insurance is one of the most requested benefits. CCSS covers the basics, but experienced candidates often want faster access to care and English-speaking doctors. Offering private cover will help you stand out.

Remote work stipends are increasingly common, especially in tech: $50-100 per month for internet and home office setup. Flexible hours also matter more than ever. Stick to the bare minimum and you'll likely see slower hiring and higher turnover. Add a third week of vacation and private health insurance, and you'll be in a much stronger position.

Firing without solid proof of misconduct or redundancy often leads to severance obligations and labor court disputes. Costa Rica's legal system leans employee-friendly, so document everything carefully, or let your EOR handle the process.

Firing someone

You can terminate for just cause without paying severance or notice. Valid grounds include disclosing confidential information, negligence that endangers safety, unjustified absences (two consecutive days or more than 48 hours in a month), fraud about qualifications, a prison sentence, contract violations, or genuine position redundancy.

Serious misconduct also qualifies, including theft, insubordination, or drug and alcohol use at work. Courts increasingly favor employers who gave the employee a chance to correct the issue before terminating.

Terminating without cause means you owe severance and notice, or pay in lieu of notice. Costa Rica isn't at-will employment. If you skip documentation, employees can challenge the decision in labor court and potentially win reinstatement or additional pay. Courts also watch closely for bias tied to race, gender, age, disability, or union activity, even without an explicit list in the termination rules.

Notice periods

Notice requirements scale with how long the employee has worked for you. If an employee resigns, they owe you the same notice in return. The first three months are treated as probation, so no notice or severance applies during that period.

Severance

Severance only applies when you terminate without just cause. You don't owe it during probation, for just cause dismissals, resignations, or mutual separations. There's no statutory cap, and you calculate it based on years of service.

The formula is 20 days' pay per year of service, using the employee's average daily salary over the last six months. Prorate for any partial year worked. On top of that, you'll need to pay out unused vacation, a proportional aguinaldo (13th-month bonus), and any outstanding wages on the final day.

Work permits and visas

You can hire foreign nationals through an EOR. The EOR acts as the legal employer and sponsors the work permit directly. Foreign employees need a work visa tied to their specific role.

The main categories are a temporary work visa (valid 1-2 years, renewable) and permanent residency after meeting time requirements. There's also a rentista visa for those with passive income, and a digital nomad visa for remote workers not employed locally, which allows up to 2 years but doesn't permit working for Costa Rican companies.

You'll typically need a job offer, proof that the candidate's qualifications match the role, a clean criminal record, and a health certificate. The EOR manages sponsorship and INS registration. Approval generally takes 1-3 months, with the employee applying at immigration using documents provided by the EOR.

A few other things worth knowing

Data protection in Costa Rica falls under the Ley de Protección de Datos, which has strict consent requirements and fines of up to 5% of revenue. You'll need to register with PRODHAB, and larger operations should appoint a Data Protection Officer.

Trade unions carry real weight here, with around 10% of the workforce unionized and collective bargaining common in sectors like manufacturing. You can't dismiss union members without just cause, and you may need to negotiate agreements directly with the union.

One recent change to flag: Law No. 10771 (November 2025) prohibits salary deductions or withholding bonuses as a response to unauthorized absences. If you've been handling absences that way, it's worth reviewing your process. No other major legislative shifts have been noted for 2024-2026.

Always issue written termination notices that include the reasons for dismissal, provide final payslips and employment certificates, and arrange for the return of company property. If you're unsure about the paperwork, your EOR can handle it and help you avoid disputes.