How to Hire Employees in Costa Rica: Company Incorporation or Professional Employer Organization (Peo)
With huge foreign investments taking place a year after, in Costa Rica, many companies are looking forward to gaining profits from the growing economy. Often these companies are anxious with hiring employees. Hiring can do by company incorporation or professional employer organisation (PEO). In this article, we will see what the difference between these two styles to hire employees in Costa Rica is:
Register Your Company
It is a relatively easy but vital process. Therefore, you can do it online through the national social security website, Caja Costarricense de Seguro Social (CCSS). The legal representative of your company must log in with an electronic signature and fill out relevant information for the authorities to go through. The registration may take up to a month to get approved. The documents you require for registration are:
- A Public Notary or National Registry gives company certificate
- Copy of the bylaws of the company
- Legal identification
- Employee ID
- Address proof for notifications
- Email address
- Both the employer and the employee pay social Security fees – Social Security fees. The employees pay 10.34% of their salary, and the employers pay 26.3% of their employees’ salary. The payment is going to the CCSS, the Instituto Nacional de Seguros (National Insurance Institute) and other various retirement funds. The employer deducts the percentage varying according to the employee and adds it to their payment at the end of the month
- Aguinaldo – Aguinaldo is the term used for the extra salary that gets credited in an employee’s account. They calculate by taking and an average of the salaries and bonuses received by the employee throughout the year. If an employee has worked only a few months in the year, the salaries and bonuses are added up and then divided by 12. Then, an employer has to credit Aguinaldo to his employees by the 20th of December.
Vacations and Leaves
Employees have a right to at least 14 days of vacation leave for every 50 weeks worked under the same employer. However, the employer and employee can come to a mutual agreement to grant more days. They cannot carry it over, transfer or encash, except in some special situations in particular industries or businesses. If they prearrange the terms, it should be done only once in three years. If they terminate the employment before 50 weeks, the employee has a right to one day leave for every completed month.
Firing an Employee
In case an employee is fired, the employer has to adopt the following terms in each situation:
With just cause: The employer would:
- Have to pay Aguinaldo proportional to the number of months worked from the beginning of the financial year
- Have to release vacations, if applicable
Without just cause: The employer would be responsible for terminating the employment and would have to:
- Pay Aguinaldo proportional to the number of months worked from the beginning of the financial year
- Release vacations, if applicable
- Give severance assistance depending on the length of employment
- Issue advance notice to the employee before termination of employment. They may substitute it for payment in some cases. The advance notice period depends on the length of work or what they mention in agreement terms.
Professional Employer Organization (PEO) Services
PEO services are an innovative solution for foreign companies to hire employees in Costa Rica. PEOs work with international companies and help them with the management of many HR tasks like payroll management, regulatory compliance, appointments of staff, among other duties. Therefore, partnering with PEOs makes it possible for you to handle your employees directly without worrying about the administrative aspects of hiring and maintaining an employee. A massive advantage of partnering with PEOs is that they allow you to employ people from abroad without going through bureaucratic procedures that happen while incorporating your company or setting up a branch.
Many PEOs have licenses that enable them to work with employees in different countries and have knowledge in hiring and handling such employees. Therefore, our advice for companies looking to hire employees in Costa Rica would be to look for a local group with ample corporate experience. If you require further information about company incorporation or PEOs in Costa Rica, contact Biz Latin Hub. Our expert team provides a range of tailored business services that assist companies looking to hire employees in Costa Rica and Latin America. Then, you can mail us at [email protected] for personalised information.