Hiring Talent And Managing Payroll In Costa Rica

Agreements

• Collective bargaining agreements are negotiated between employers and labor unions, which represent workers in a particular industry or sector. These agreements can cover a range of employment-related issues, such as wages, benefits, and working conditions.
• Employers are required to comply with the provisions of collective bargaining agreements that apply to their workforce, regardless of whether they are members of the negotiating union.
• Costa Rican law prohibits discrimination in employment based on gender, age, race, or nationality.

Onboarding Process

• A written employment contract that outlines the terms and conditions of their employment.
• Submission of a variety of documents, such as a copy of their identification card, their social security number, and bank account information.
• Provision of necessary training or orientation to familiarize them with the company's policies, procedures, and expectations.

Minimum Wage

• The generic unskilled workers receive CRC 317,915.58
• The general semi-skilled worker gets CRC 342,027.40
• The minimum monthly wage of the generic skilled worker is CRC 359,544.27
• The general highly skilled employee gets CRC 403,764.18
• Technical worker with diversified education qualification receives CRC 376,776.77
• Technical worker with superior education is entitled to get CRC 464,335.93
• Technical workers with higher education diplomas receive CRC 501,500.15
• Technical worker with university bachelor gets CRC 568,819.86
• Technical worker with graduate qualification receives CRC 682,607.23

Payroll Cycle

Annual Bonus

• Employers are required by law to pay an annual bonus to their employees, known as the aguinaldo salary.
• The bonus is equivalent to one month's salary and should be paid within the first 20 days of December.
• This annual bonus is generally paid in December, ahead of the Christmas and New Year holidays.

Health Benefits

• Enrollment in the country's social security system
• Payment of premiums for private health insurance plans
• Access to paid sick leave, which allows employees to take time off from work for medical reasons without losing their pay or job security.

Working Hours and Overtime

• Work hours: The employees work 5 days a week from Monday to Friday for 8 hours a day and 40 hours a week.
• Break: Employees are entitled to a one-hour break for every six hours worked
• Overtime: If an employee works more than eight hours per day or 48 hours a week, they are entitled to receive overtime pay at a rate of 50% of their normal hourly rate.

Social Security

Taxes for Employees

• 5.5% is contributed toward Medical and maternity.
• 4.0% is contributed toward Disability, old age, and death benefits.
• 1% is contributed to workman savings banks.
• The income tax paid by the employees is as follows:

  • 0% - upto CRC 817,000
  • 10% - CRC 817,001 to 1,226,000
  • 15% - CRC 1,226,000 to CRC 2,103,000
  • 20% - CRC 2,103,000 to CRC 4,205,000
  • 25% - Over 4,205,000

Termination

• Termination with just cause: If an employee is involved in activities such as theft, violence, sexual harassment, or discrimination
• Termination without just cause: An employer must provide proper notice and pay severance according to the law.
• Mutual agreement
• Resignation

Severance Pay

• An employee is entitled to receive severance pay upon termination of their employment contract, except in cases where the employee has been terminated with just cause.
• The amount of severance pay varies depending on the duration of service, with the law specifying that an employee is entitled to receive one month's salary for each year of service.
• However, the maximum amount of severance pay that an employee can receive is eight years of salary.

Employees or Contractors

• There is no clear-cut legal definition of employees and contractors, and the distinction between the two can be subjective. However, there are guidelines established by the labor courts and the Social Security Administration that can help determine the classification of an individual.
• In general, an employee is someone who works under the direction and control of an employer and is provided with all necessary equipment and tools to perform the job. A contractor, on the other hand, is someone who operates independently, without supervision or control from an employer.
• If an employer misclassifies an employee as a contractor, they may be subject to penalties and fines from the labor authorities, including having to pay back taxes and social security contributions for the employee.
• If an employer misclassifies a contractor as an employee, they may be required to provide the contractor with benefits such as paid leave, overtime pay, and social security contributions.

Final Words