Table of Contents
Employer of Record EOR in Costa Rica
The small island nation of Costa Rica in Central America has experienced record growth in its pharmaceutical, financial, and ecotourism sectors after establishing the Free Trade Zone. As a result, it is now home to a growing number of multinational corporations.
Despite language and cultural barriers, Costa Rica contains low crime rates, stable economic growth, and balanced regulations to encourage investment and business expansion. It presents ample opportunities for businesses looking to open new offices and subsidiaries, provided they can navigate the necessary local laws and paperwork.
An Employer of Record for Costa Rica such as SERVIAP, can help your business expand by handling the logistics of employee hiring, contracts, and HR logistics, helping your business stay compliant while keeping you in total control.
SERVIAP can help with your global expansion needs. Contact us today to learn how you can expand your business with an Employer of Record in Costa Rica.
What is an Employer of Record EOR in Costa Rica?
An EOR or Employment of Record will become an employer in the place of a company so they can take on the responsibilities and liabilities that would otherwise fall onto your business. This works well for expanding businesses, as they often won’t know the ins and outs of owning a business in every country. Hiring an EOR gives them space to expand in more advantageous ways, so they can take on more employees, and begin the circle again.
An EOR will take on payroll, compliance with the laws of the country, timekeeping, any claims on unemployment, the benefits to be paid and given, workers’ compensation in the case of accidents and otherwise, and more. You can also partner with a PEO, which is similar – they help with taxes, benefits, and HR.
SERVIAP functions as both a PEO and EOR, helping you in the most efficient way possible, so you can hand off the responsibilities for much of the employee operations. When you hire a company like us, we take on the responsibility and liability for any of the services mentioned above and handle the subsidiaries of the country, who could otherwise fine you or slow down operations. All you have to do is hand over the responsibilities and lease back your employees (whilst retaining all the control over your workforce).
Serviap serves as the client’s Employer of Record (EOR) handling all things human resources whilst freeing the client to focus on growth and expanding the business into new markets.
The tasks Serviap specializes in can include:
- Tax filing
- Workers’ compensation (if applicable)
- Unemployment claims
- Global hiring
- Talent acquisition (recruiting)
- Global HR management
How to Begin Hiring in Costa Rica
Costa Rica is a small nation of people who tend to be outgoing and talkative but not confrontational. Cultural values inform them to remain patient and diligent rather than risk-taking. Many businesses discover that in Costa Rica, talking about business is something that someone else has to initiate first.
If you can get a grip on the social protocol, Costa Rica’s main authority on the hiring process is the RPL or Labor Procedure Reform, which was passed in January of 2016. This document contains many new requirements for businesses in Costa Rica, including termination benefits like a personal dismissal letter, drawn up with official terms of severance, and the terms of employee/employer disputes. The reform states that two oral hearings will be held to settle such a dispute, rather than a written settlement.
Thankfully, the hiring process, including contracts and disputes, can be handled by an EOR who knows the relevant customs and legislation in Costa Rica.
The Labor Court interprets and verifies the required employment contracts in Costa Rica. Salary, taxation, and benefits must be enumerated explicitly in the local language (Spanish).
This includes the terms under which the employee is covered by the PAYE system, which stands for “pay-as-you-earn.” In this system, an employee’s pay is covered and taxed based on the contract. Contractors, on the other hand, are responsible for their own taxes.
Other specifics that must be in the contract include the employee’s salary, benefits, and termination requirements. Money should always be listed in the local currency (colón). The contract is one of the many aspects of employment handled by an Employer of Record in Costa Rica.
Onboarding in Costa Rica differs depending on whether you are hiring locally or internationally. Work visas in Costa Rica take two forms, including temporary residence permits and permanent residence visas for workers who have lived there for at least three years on the permit.
Unless prior authorization is obtained for international workers, your company will be limited to locals and permanent residence holders. Navigating these work permits can be a complicated process for foreigners, who are deemed “special category” workers and must meet the requirements of the Costa Rican Ministry of Labor.
In other words, work permits will only be authorized to specific categories of employees, including technical guests, artists and athletes, transferees, preventative maintenance service professionals, domestic workers, self-employed agricultural contractors, and temporary workers.
Figuring out who can be hired and when is complicated in Costa Rica, which is why an EOR experienced in the local legislation can help sort it out.
Workers in Costa Rica can work a maximum of 48 hours per week, usually from 5 am to 7 pm each day. Saturdays in Costa Rica are “Special Working Days,” which can only be assigned to domestic servants and other special categories, up to 12 hours. Overtime in Costa Rica is 1.5x the normal salary.
There are 9 public holidays in Costa Rica, for which workers receive the full day off at full pay. These include Good Friday, Labor Day, New Year’s Day, Maundy Thursday, Juan Santamaria Day, Mother’s Day, Independence Day, Christmas Day, and Annexation of Guanacaste Day.
Employees in Costa Rica are entitled to one vacation day per month of employment and two weeks of vacation days per 50 weeks of employment. Vacations cannot be taken on paid holidays. Sick days only have to be compensated for 50% of the worker’s salary by the company (the Social Security Administration pays the rest) for the first three days. After that, the ratio is 40/60.
Mothers receive a month of paid maternity leave before the birth and three months after. Employers once again pay 50% of the salary during this period while the SSA pays the other 50%. Private health insurance exists in Costa Rica, so your company will have to budget for health insurance benefits, including Medical Treatment and Obligatory Pension benefits.
The “aguinaldo” is another benefit worth mentioning, which is a required 13th-month salary expected to be paid in the first half of December.
SERVIAP is a leading Employer of Record (EOR) ready to help your business expand operations throughout the world. EOR is a model of co-employment, where we assume total responsibility for your talent, allowing you to focus on the strategic activities of your organization.
Contact us today to learn more about how you can expand your business with an employer of record in Costa Rica.