Hiring in Costa Rica: What Tech Employers Need to Know Before Expanding

Editor's note: This article is based on Talentuch HR Community's webinar featuring HR expert Cecilia Caraccioli. Talentuch HR Community organizes educational webinars that connect HR and talent acquisition professionals with regional experts to share practical hiring insights from markets around the world. We thank Talentuch HR Community for organizing and promoting this webinar. 

If you're considering hiring in Costa Rica, you're probably asking the same questions many international employers ask.

Can we find qualified people? How difficult is compliance? What should we know before making our first hire?

For IT consultancies and technology companies, these questions go beyond HR. A hiring mistake can delay client projects, increase delivery costs, and create legal risks.

During Talentuch's webinar, HR expert Cecilia Caraccioli explained that Costa Rica is an attractive hiring market, but one where understanding employment law before recruiting makes all the difference. The country's labor laws are designed to protect employees, so employers need solid documentation, realistic budgeting, and a clear understanding of their obligations from day one.

Why companies are hiring in Costa Rica

Costa Rica has become one of Latin America's strongest hiring markets for international employers, especially those looking for bilingual technical talent.

According to Cecilia, the market is relatively small, but the quality of candidates is high. Employers can expect experienced professionals with strong English skills, international exposure, and salary expectations that remain competitive compared to North America and much of Europe.

As she put it:

"The job market is active. It is small... You will find people who are highly qualified, have good experience, are not as expensive as hiring people in Europe or the United States or Canada, and they speak really good English."

For companies expanding delivery teams in Latin America, that's a compelling combination.

Costa Rica employment law puts documentation first

One message came up repeatedly throughout the webinar.

Documentation matters.

Costa Rica's labor framework was created to protect workers, and that philosophy still shapes employment relationships today. If an employment dispute reaches court and an employer cannot clearly document what happened, uncertainty is often interpreted in the employee's favor.

That doesn't mean employers are disadvantaged.

It means every stage of employment should be documented, from recruitment and contracts to performance reviews and disciplinary actions.

One of the strongest takeaways from the webinar was simple:

Documentation isn't bureaucracy. It's protection.

Costa Rica employment contracts

Many foreign employers assume that a signed contract creates an employment relationship.

In Costa Rica, the opposite can also be true.

The country recognizes de facto employment, meaning someone can legally become an employee based on the reality of the working relationship, even without a written agreement. If an individual works under the employer's direction, receives a salary, and remains employed for more than three months, courts generally consider them an employee.

Written contracts are therefore highly recommended. They should clearly define responsibilities, compensation, working hours, and remote or hybrid arrangements.

Employment is also considered permanent by default. Temporary contracts are limited and shouldn't be renewed repeatedly, as courts may reclassify them as indefinite employment.

The first 90 days serve as a probation period, allowing either party to end the relationship without notice or severance. After that, statutory protections apply.

For employers, this means probation isn't simply an onboarding milestone. It's the best opportunity to assess performance before long-term obligations begin.

Working hours, overtime, and payroll

Costa Rica's standard workweek is 48 hours, with different limits for day, night, and mixed shifts. Night work allows fewer hours, while overtime is generally paid at 1.5 times the regular hourly rate. Work on certain public holidays or a seventh consecutive working day may require double pay. Employees also shouldn't work more than 12 hours in a day.

Payroll costs extend well beyond salary.

Employees contribute roughly 10% of their income to social security, while employers contribute about 27%. Because contribution rates and reporting requirements change, Cecilia recommends working with a local payroll provider or Employer of Record, particularly for companies entering Costa Rica for the first time.

Another mandatory cost is the Aguinaldo, Costa Rica's 13th-month salary. Employers must calculate it based on the employee's annual earnings and pay it before December 20. If you budget only monthly salaries, you'll underestimate the real cost of employment.

Should you use an Employer of Record (EOR)?

For companies making their first hires in Costa Rica, managing payroll, statutory contributions, and employment compliance internally can be challenging. It is recommended working with a local payroll provider or an Employer of Record (EOR), especially when entering the market for the first time.

If your company doesn't yet have a legal entity in Costa Rica, an EOR can employ workers on your behalf while handling payroll, tax withholding, statutory benefits, and local compliance.

Talentuch regularly works alongside trusted global employment partners such as Deel, Engage Anywhere, and Oyster, helping clients combine compliant employment with specialized technical recruitment.

Benefits and leave employers should budget for

Salary isn't the only employment cost companies should plan for when hiring in Costa Rica.

Costa Rica labor law requires employers to provide several mandatory benefits that international companies sometimes overlook when calculating hiring costs.

Paid vacation begins after 50 weeks of continuous employment. Employees are generally entitled to two weeks of paid annual leave, and vacation cannot simply be replaced with additional pay except in limited situations.

Employees are also entitled to paid public holidays. If employees work on certain public holidays, employers typically must pay additional compensation.

Sick leave follows a shared-payment model. The Costa Rican Social Security Fund (Caja Costarricense de Seguro Social, or CCSS) covers part of the employee's salary after the initial waiting period, while employers remain responsible for specific payments depending on the circumstances.

Maternity protection is another area employers should understand before they hire employees in Costa Rica.

Cecilia emphasized that pregnant employees receive strong legal protection. Maternity leave generally lasts four months, divided between the period before and after childbirth. Dismissing an employee because of pregnancy can expose employers to significant legal consequences.

These requirements reflect a broader principle that runs throughout Costa Rica employment law: employee protections are designed to provide long-term stability rather than minimum compliance.

Costa Rica hiring compliance doesn't end after onboarding

Many companies focus heavily on employment contracts but spend less time thinking about what happens if the employment relationship ends.

According to Cecilia, that's often where employers face their biggest compliance risks.

Costa Rica hiring compliance requires employers to follow specific rules for notice periods, severance, final payments, and documentation when ending employment.

The amount of notice depends largely on the employee's length of service. Employees who have completed the probation period generally receive advance notice unless dismissal is based on legally recognized cause.

When termination occurs without cause, employers may also owe severance payments. These calculations depend on factors including years of service and salary history.

Because every termination is different, employers shouldn't assume the rules mirror those in other Latin American countries.

Documentation remains critical here as well. Performance discussions, disciplinary actions, warnings, and any attempts to resolve workplace issues should all be recorded. If an employment dispute reaches court, written records become one of the employer's strongest protections.

For companies scaling delivery teams, this isn't simply about legal compliance. Proper documentation reduces uncertainty, minimizes disputes, and helps avoid unexpected employment costs later.

Data protection also applies during recruitment

Hiring doesn't only involve employment law.

Recruitment itself creates obligations around candidate data.

Costa Rica has its own data protection legislation that governs how organizations collect, store, and process personal information. During recruitment, this includes CVs, interview notes, assessment results, identification documents, and other candidate records.

Cecilia advised employers to think about data protection from the beginning of the hiring process rather than treating it as an afterthought.

Good practices include:

• Collect only information that is necessary for recruitment.

• Store candidate information securely.

• Limit access to hiring records.

• Retain data only for appropriate periods.

• Be transparent about how candidate information will be used.

  
  

For technology companies working across multiple jurisdictions, aligning local hiring practices with broader privacy policies helps reduce compliance risks as international hiring expands.

What candidates expect when you hire employees in Costa Rica

Legal compliance gets employers into the market.

Competitive hiring helps them attract the right people.

Costa Rica's technology workforce has become increasingly attractive to international employers, which means experienced professionals often have multiple opportunities available.

Cecilia highlighted several factors candidates consistently value beyond salary:

Flexible work arrangements

Remote and hybrid work remain highly attractive, particularly for technology professionals.

Employers should clearly explain expectations around office attendance, equipment, working hours, and communication before extending an offer. Including these arrangements in Costa Rica employment contracts helps avoid misunderstandings later.

Career development

Many candidates evaluate employers based on long-term growth opportunities.

Training, certifications, mentorship, and opportunities to work on international projects can significantly strengthen an employer's value proposition.

Stability and transparency

Candidates appreciate employers who explain the hiring process clearly, communicate compensation openly, and provide realistic expectations about the role.

For international companies entering Costa Rica for the first time, local expertise often improves the candidate experience because salary expectations, interview practices, and market norms are communicated more effectively.

As Cecilia noted throughout the webinar, Costa Rica is a relatively small market. Employer reputation travels quickly, making professionalism during recruitment especially important.

Hiring in Costa Rica requires getting two things right at the same time: compliance and talent acquisition. Local employment law helps you hire legally, but finding experienced bilingual technical professionals in a relatively small market requires local recruiting expertise and an understanding of candidate expectations. Many international employers work with both an EOR for employment compliance and a specialized recruitment partner to accelerate hiring while reducing risk. 

Ready to talk about hiring in Costa Rica?

If you're planning to expand your engineering or IT team in Costa Rica, Talentuch can help you identify qualified candidates, navigate the local talent market, and build a recruitment strategy that supports your business goals.

Talk to us, we’re happy to help: https://www.talentuch.com/contact-us

Frequently Asked Questions

Is it difficult to hire employees in Costa Rica?

Not necessarily. According to the webinar, Costa Rica has a relatively small but highly qualified talent pool, particularly for technology roles. The bigger challenge is understanding local employment requirements before hiring

Are written employment contracts required in Costa Rica?

While employment relationships can exist without a written contract, written Costa Rica employment contracts are strongly recommended. They clearly define responsibilities, compensation, working hours, and employment terms, helping reduce future disputes.

What employer costs should I budget for besides salary?

Employers should account for social security contributions, the mandatory Aguinaldo (13th-month salary), paid vacation, public holidays, and other statutory employment benefits. Budgeting only for monthly salary can significantly underestimate total employment costs.

Can employers terminate employees during probation?

Yes. According to the webinar, the first 90 days generally function as a probation period during which either party can end the employment relationship without notice or severance obligations. After probation ends, additional statutory protections apply.

Why is documentation so important under Costa Rica labor law?

One of the webinar's biggest takeaways was that documentation protects employers. Employment contracts, performance reviews, disciplinary actions, and termination records all help demonstrate compliance if an employment dispute arises. Since Costa Rica's legal system places strong emphasis on employee protection, thorough documentation can make a significant difference during legal proceedings.