Payroll in Costa Rica

Costa Rican law caps the pay interval at a fortnight for manual workers and a month for intellectual workers and domestic employees. A monthly salary budget does not always mean one payment a month, so confirm the worker category before you set the cycle.

Payday and payslips

Put the payment basis and the payment dates in the written contract, and give the employee a copy. Calculate overtime and deductions for the correct pay period. Keep a Spanish version of the contract for local administration.

The dossier does not set out a statutory payslip format, so check the required payslip content with the local employer or labour ministry. As a working standard, show salary, overtime and other pay components on separate lines from the deductions.

Employee deductions for ordinary salaried work are 5.50% for health, 4.33% for IVM and 1% for the Banco Popular allocation, a total of 10.83% before income tax or other lawful deductions. Do not pass the employer's own contribution on to the employee as an extra deduction.

Aguinaldo: the December bonus

The aguinaldo is mandatory. Private-sector employees who complete at least one continuous month with the same employer qualify. Add ordinary and overtime earnings from 1 December to 30 November and divide by twelve. Pay it during the first twenty days of December. For a full year at unchanged salary and without extra earnings, it equals one monthly salary. For part-year workers, divide their qualifying earnings by twelve as well. Accrued aguinaldo is also payable when employment ends.

Remitting tax and contributions

You must register the employee and report salary accurately. The standard 2026 employer schedule totals 26.83%, covering health, IVM, family allowances, INA, IMAS, Banco Popular allocations, FCL and pension allocations. Aguinaldo, occupational-risk insurance through INS, provider fees and exit costs are budgeted separately.

Health contributions can use a statutory minimum base even where reported earnings are lower, so do not apply a headline percentage to part-month or low-paid work without checking the base. The dossier does not give remittance deadlines or form names for contributions or salary tax. Ask the provider to show the bases, employee and employer shares, reporting period and proof of payment, and confirm the current filing calendar with the authorities before your first pay run.

In 2026, gross monthly employment income up to CRC 918,000 is outside the salary-tax charge. The excess is taxed at 10% up to CRC 1,347,000, 15% up to CRC 2,364,000, 20% up to CRC 4,727,000 and 25% above that. Each rate applies only to the income in its band. Eligible child and spouse credits can reduce the result.

Working time that affects pay

The ordinary daytime limit is eight hours a day and forty-eight a week. An agreed accumulated schedule can extend daytime work to ten hours while keeping the weekly limit at forty-eight, for work that is neither dangerous nor unhealthy. Night work is limited to six hours a day and thirty-six a week, and mixed work is normally limited to seven hours a day and forty-two a week. A shift with at least three and a half hours in the night period counts as night work, so classify the whole schedule before calculating pay.

Work beyond the applicable limit generally attracts a 50% premium. Ordinary work plus overtime normally cannot exceed twelve hours in a day, subject to the statutory emergency exception. A continuous working day must include at least thirty minutes of rest counted as working time.

Employees are entitled to a full rest day after six consecutive working days. Working on the designated rest day can require double pay. For holidays, monthly and fortnightly pay already includes them. If the employee works a holiday, add one ordinary day's pay to reach double pay. Overtime on a holiday paid at the double rate is paid at three times the ordinary hourly rate.

Costa Rica taxes employment income through a banded salary tax, and employees also pay social contributions out of gross pay. Both are withheld by the employer. The figures below apply to 2026.

Salary tax bands

Gross monthly employment income up to CRC 918,000 is outside the salary-tax charge. Income above that is taxed in bands, and each rate applies only to the income that falls inside its band.

How withholding works

The employer calculates the tax each pay period and deducts it from the employee's salary. Because the rates apply band by band, a flat percentage of gross pay will not match the real withholding. Run each employee's gross income through the bands for the period being paid.

Eligible child and spouse credits can reduce the calculation. The dossier does not give the credit amounts, so check the current credit values and the documents an employee must supply with the tax authority or your payroll provider before applying them.

Employee deductions

For ordinary salaried employment, three social contributions come out of gross pay. They are separate from salary tax.

• Health insurance: 5.50%
• IVM (invalidity, old age and death pension): 4.33%
• Banco Popular allocation, which feeds the mandatory supplementary pension system: 1%

Together these are 10.83% before income tax or other lawful deductions. Contribution-base rules can affect lower or partial-month earnings, and health contributions can use a statutory minimum base even where reported earnings are lower. The employer's own contribution must not be passed on to the employee as an extra deduction.

Worked example

For a full month at CRC 1,000,000 gross, standard employee contributions of 10.83% are CRC 108,300. Salary tax before credits is CRC 8,200, which is 10% of the CRC 82,000 above the exempt band. That leaves an illustrative CRC 883,500 before other deductions. Credits, benefits and payroll adjustments can change the final amount.

Business taxes are separate

The corporate tax rate is 30% and VAT is 13%. These are business and transaction taxes, not deductions from an employee's salary.

For a standard salaried hire in Costa Rica, the 2026 employer schedule totals 26.83% of reported monthly salary. Employees have 10.83% withheld from pay. Occupational-risk insurance, aguinaldo, provider fees and exit costs are budgeted separately.

Employer and employee contribution rates

The employee share is withheld from pay before income tax or other lawful deductions. The employer's own contribution must not be passed on to the employee as an extra deduction.

Overlaps to avoid

The mandatory supplementary pension system receives 4.25% of reported salary: 1% from the employee and 3.25% from employer-funded allocations. These are already inside the standard schedule, so do not add another 3.25% on top. The state contributes 1.75% to the IVM pension system, and that is not an extra employer charge.

Contribution base and minimums

Contributions are calculated on reported salary, so the employer must register and report employment and salary accurately. Health-insurance contributions can use a statutory minimum base even where reported earnings are lower, with specific exceptions. Ordinary pay, extra remuneration and pay in kind can all enter the health base. The dossier does not give a ceiling for the base, so ask the provider to show the bases, the employer and employee shares, the reporting period and payment evidence. Do not apply the headline percentage to part-month or low-paid work without checking these rules.

What is not included

• Aguinaldo, the mandatory December payment. Budget around one twelfth of qualifying earnings.
• Occupational-risk insurance through the INS system. The 1% line labelled INS in the pension collection schedule does not set the price of this policy. Confirm the premium for the actual activity.
• Provider fees, extra benefits, overtime and exit costs.

Worked cost example

Take an illustrative salary of CRC 1,000,000 a month and the standard 26.83% employer schedule.

This budget still excludes occupational-risk insurance, provider fees, extra benefits, overtime and exit costs. Paid-leave planning should avoid counting ordinary salary twice.

Annual leave

Employees earn at least two weeks of paid annual leave after fifty weeks of continuous service with the same employer. Part-time staff have the same right. The ministry also describes the standard entitlement as twelve working days plus two weekly rest days, so confirm how the contract states it and check for any better contractual entitlement.

For monthly or fortnightly payroll, two weeks of leave is paid as fourteen days, including weekly rest. For ordinary non-agricultural work, the statutory calculation uses average ordinary and overtime pay over the preceding fifty weeks. The employer must schedule leave within the fifteen weeks after the qualifying period ends and record leave taken. Splitting, accumulating or replacing leave with cash is restricted. Termination is one of the permitted cash-payment cases. If employment ends before fifty weeks, the minimum accrued settlement is one day for each month worked.

Public holidays

Nine holidays carry compulsory pay: New Year, 11 April, Maundy Thursday, Good Friday, 1 May, 25 July, 15 August, 15 September and Christmas. The other holidays are 2 August, 31 August and 1 December, and payment for those depends on whether pay is monthly, fortnightly or commercial. October 12 is a commemoration, not a statutory holiday.

For monthly or fortnightly pay, and weekly pay in commerce, normal pay already includes holidays. If the employee works the holiday, add one ordinary day's pay to reach double pay. Overtime on a holiday paid at the double rate is paid at three times the ordinary hourly rate. Check the year's calendar before running payroll.

Sick pay

For ordinary CCSS-certified sickness, payment is split between you and CCSS.

A new incapacity within thirty days of the previous one has a different starting rule. CCSS calculates the subsidy from the preceding twelve reported salaries, excluding salaries affected by earlier incapacity or leave. Check eligibility and any agreed top-up.

Maternity, paternity, parental and adoption leave

Maternity leave is four paid months: one before birth and three after. The payment equals salary and is shared equally by the employer and CCSS. Contributions and employment benefits continue under the prescribed arrangements, and medical certification is required. Breastfeeding workers also get paid feeding time of one hour per nursing child during an ordinary working day. A separate paid expression break of at least twenty-five minutes every three working hours applies under the 2026 rules.

Paternity leave is two days each week during the first four weeks after birth, eight days in total. It is not eight consecutive days, and the payment procedure is agreed with the employer and CCSS. An individual adopter receives three months of paid leave. In a joint adoption, the three months can be divided by agreement.

The OECD family database records 0 weeks of statutory parental leave for Costa Rica. Treat any longer childcare absence as contractual and document who pays.

Benefits that affect payroll

The aguinaldo is mandatory. It is calculated from ordinary and overtime earnings from 1 December to 30 November, divided by twelve, and paid during the first twenty days of December. Accrued aguinaldo is payable when employment ends. Check how leave payments feed into it, and avoid counting ordinary salary twice when budgeting for paid leave.

Compliance risk in Costa Rican payroll sits mainly in the written contract, social security reporting, occupational-risk insurance, pay periods and the exit process. The dossier does not give registration form names, filing deadlines or payment dates for social security contributions, so confirm those with the employer or provider and ask to see payment evidence.

Registration and contributions

The employer must register and report employment and salary accurately. Ask the provider to show the contribution bases, employee and employer shares, reporting period and proof of payment. Health-insurance contributions can use a statutory minimum base even where reported earnings are lower, with specific exceptions, so do not apply a headline percentage to part-month or low-paid work without checking.

The standard 2026 employer schedule totals 26.83%. Employee deductions are 10.83% before income tax or other lawful deductions. Do not pass the employer's own contribution to the employee as an extra deduction. Occupational-risk insurance through the required INS system is separate. Cover applies from the start of employment, including work for only part of a day or week.

Contracts and written terms

Written contracts are the general rule, with limited exceptions. Record the parties, role, place of work, duration, hours, salary, payment arrangements and agreed terms, and give the employee a copy. Arrange a Spanish version suitable for local administration and make sure the employee understands it. Statutory rights apply even when an employer fails to document the contract.

A fixed term must fit the temporary nature of the work. Permanent work can create an indefinite contract even when a document states an end date. The ordinary fixed-term limit is one year, and services needing special technical preparation can run up to five years.

The pay interval cannot exceed a fortnight for manual workers or a month for intellectual workers and domestic employees. Put the payment basis and dates in the contract.

Records

The dossier does not set a statutory retention period, so check it with the employer. Keep the signed contract, any probation arrangement, leave taken, overtime recorded separately from ordinary wages, and evidence of contribution payments. Where you send employee records abroad, document the permitted purposes, security and access, and obtain informed consent unless a legal exception applies.

Notice and termination

For indefinite employment ended without just cause, notice is at least one week for three to six months of service, fifteen days for more than six months up to one year, and one month after one year. Notice can be replaced by the corresponding pay. During notice the employee receives one paid day each week to seek work. Statutory notice and severance generally begin after three months of continuous service.

A dismissal based on alleged employee fault requires a written letter describing the specific facts clearly and in detail. Give it at dismissal and document receipt. If the employee refuses it, the employer must submit it to the labour ministry within ten calendar days. Pregnancy, breastfeeding, specified family leave and union protection can restrict dismissal or require special procedures. A notice payment or probation label does not bypass them.

Final pay covers outstanding wages, accrued aguinaldo, unused leave and any notice or severance due. Provide the required employment certificate and explain the separate FCL withdrawal process. Do not assume a universal thirty-day grace period for final payment.