Costa Rica has coastlines on the Pacific Ocean and Caribbean Sea and has borders with Nicaragua to the north and Panama to the south. It is a prosperous and politically stable country in the Central American region, enjoying one of the highest standards of living in the area. Costa Rica’s rich biodiversity makes it a popular destination for eco-tourists who clock to it for its beaches, mountain ranges, volcanoes and varied wildlife. Traditionally a producer of agricultural goods such as coffee and bananas, its economy has diversified and tourism now ranks as the country’s number one contributor to the nation’s economy.
Employment contracts concluded for an indefinite term are considered permanent employment. If employment continues after a contract signed for a fixed duration expires and is not renewed, it is considered permanent employment.
Indefinite term contracts can be terminated without a just cause by giving prior notice. Permanent employees who are dismissed unjustly are entitled to severance pay.
An employment contract must be in writing, except in certain situations. Each party must receive a copy of the contract and an additional copy must be submitted to the Employment Office. Details must include the identity of parties, ID card number, duration of contract, remuneration, hours, etc.
The Supreme Court of Costa Rica has established the validity of non-compete or non-disclosure agreements after termination of employment contract if the employee is privy to sensitive knowledge that can harm employer's business during the course of employment. In order to be valid, such covenants must be made in writing, include compensation for employees, and must be time-bound (not exceeding 2 years). The purpose of such clauses must be to prevent unfair competition.
Employers can hire employees for occasional, seasonal, or piecework assignments. As a general rule, fixed-term contracts may be concluded for up to 1 year; however, when the services require special technical preparation, the duration may be extended up to 5 years. Temporary contracts not exceeding 90 days can be made verbally.
With only implied guidance, the de facto probationary period in Costa Rica lasts 3 months. Employees employed for less than 3 months with the same employer can be dismissed without a notice period or payment in lieu of notice. In addition, such employees are not eligible for a severance payment. The probationary period for domestic workers also lasts 3 months.
In Costa Rica, the labor law indicates that regular working hours are 8 hours per day, 6 hours for night shifts, and 7 hours for mixed shifts. The standard workweek is 48 hours. However, in jobs that are not unhealthy or dangerous, an ordinary day shift of up to 10 hours and a mixed shift of up to 8 hours may be stipulated, provided that the weekly work does not exceed 48 hours.
The daily work time limit for persons above 15 years and below 18 years of age is set at 7 hours (42 hours a week). The working hours for persons above 12 years and below 15 years of age cannot exceed 5 hours a day.
Employees receive paid annual leave of at least 2 weeks after 50 weeks of service, or 1 leave day per month if they have worked for less than 1 year. Employees are paid their regular wages during annual leave.
If there is a good reason for which an employee cannot enjoy their annual leave, they can accumulate the leave allowance up to 3 times and agree to take payment in lieu of leave. Annual leave can be divided into a maximum of 2 parts.
Part-time employees are also entitled to annual leave.
The Labor Code of Costa Rica states that a proven illness that incapacitates the employee from normally performing their duties for a period not exceeding 3 months is grounds for suspension of the employment contract, without liability for the employee.
The employer’s obligation is to grant the worker leave until full recovery, provided that recovery occurs within the indicated period, and in accordance with the following rules:
After continuous service of not less than 3 months and not more than 6 months, the employer must pay half salary for 1 month.
After continuous service of more than 6 months but less than 9 months, the employer must pay half salary for 2 months.
After continuous service of more than 9 months, the employer must pay half salary for 3 months.
In case of occupational illness, employees who have paid social security contributions for 6 months in the 12 months prior to the start of sickness are entitled to receive 50% of their salary for the first 3 days of sickness. The Social Security Institute pays the other 50%. From the fourth day, employees receive 60% of their salary for 45 days of sickness with funding from the Social Security Institute. The employee must submit a medical certificate to the Social Security Institute to receive payment. After 45 days, employees whose salary is less than CRC 100 (Costa Rican colones) per day receive 100% of their remuneration, and employees with a salary higher than CRC 100 per day are eligible to receive 67% of their salary. This benefit is paid for a maximum of 2 years. After 2 years, an assessment of permanent disability is made, and payment of temporary disability benefits is suspended.
When an employee is not entitled to the benefits but has contributed up to 2 installments and becomes disabled due to illness, they will receive financial assistance for up to a maximum period of 12 weeks.
Costa Rica's Labor Code provides 4 months of paid maternity leave to pregnant employees: 1 month before and 3 months after childbirth. To benefit from this leave, an employee must submit a medical certificate stating that the delivery will probably occur within 5 weeks from the certificate's date of issue.
The benefit amount for the entire duration of maternity leave is equal to the employee's salary. Benefits are funded equally by the employer and Costa Rica's Social Security Fund.
An employee who adopts a minor is also entitled to 3 months' paid leave immediately following the arrival of the child.
Costa Rica grants 2 days of paid paternity leave per week to biological fathers for the first 4 weeks after the birth of their child. In case of death of the mother during childbirth, the remaining maternity leave is transferred to the father.
The notice must be provided in writing, but if the contract is made verbally, notice can be given verbally in the presence of 2 witnesses. The duration of notice is as follows:
3 to 6 months of service – 1 week
6 to 12 months of service – 15 days
More than 1 year of service – 1 month
Depending on employment tenure, employees hired for an indefinite term who are involuntarily dismissed for causes other than disciplinary breach may receive severance benefits ranging from 7 days’ salary to 20 days’ salary per year worked. The maximum severance benefit is limited to 8 years of employment.
Fixed-term employees are also entitled to severance benefits if their contract is terminated unjustly before the term's expiry. For contracts of less than 6 months duration, the benefit is 7 days’ salary. For contracts of more than 6 months duration, the benefit is 22 days’ salary.
