Last checked: April 2026. Numbers reflect January 1, 2026 changes to IVM contributions, income-tax brackets, and minimum wages.
TL;DR
Costa Rica payroll laws changed on January 1, 2026 in three important ways: IVM pension contributions rose to 5.58% for employers and 4.33% for employees, income-tax brackets were adjusted upward under Decree 45333-H, and private-sector minimum wages increased by 1.63% per the CNS/MTSS communiqué. If you run payroll in Costa Rica and haven’t updated your tables since December, you’re already generating variances. This guide walks through every major component, links to the governing law or decree, and flags the mistakes that catch foreign employers off guard.
If your company is evaluating Costa Rica as part of a broader Latin American hiring strategy, a comparative analysis of LATAM tech hubs can help frame the decision beyond just payroll costs.
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Talk to MismoWho Regulates Costa Rica Payroll? Five Institutions to Know
Understanding Costa Rica payroll laws starts with knowing which agencies set the rules and where to file.
MTSS (Ministerio de Trabajo y Seguridad Social) publishes and maintains the Labor Code (Código de Trabajo). This is the primary source for working hours, overtime, paid holidays, vacations, notice periods, and severance. When a vendor page and the Labor Code conflict, the Labor Code wins.
CCSS (Caja Costarricense de Seguro Social) administers both the health insurance regime (SEM) and the pension regime (IVM). Employers register and submit monthly payroll filings (“planillas”) through the CCSS Patronos portal. The CCSS also sets the Base Mínima Contributiva floors that affect part-time and low-wage calculations.
INS (Instituto Nacional de Seguros) handles mandatory workers’ compensation insurance (Riesgos del Trabajo). Premiums vary by economic activity and risk class, published in SUGESE-authorized tariff tables. Every employer must maintain an active INS policy.
SUPEN/OPC oversees complementary pension funds, including the ROP (Régimen Obligatorio de Pensiones) and the FCL (Fondo de Capitalización Laboral). Workers can withdraw FCL balances at termination or every five years with the same employer, per SUPEN fund rules.
Hacienda (Dirección General de Tributación) sets the annual income-tax withholding brackets for salaried workers. The 2026 bracket PDF is the definitive source for configuring payroll tax tables.
For teams building remote operations across the region, a white paper on remote teams offers a step-by-step framework covering admin setup beyond just legal basics.
Working Hours and Overtime Under Costa Rica Payroll Laws
The Labor Code (Articles 135-139) defines three shift types with different maximum hours:
- Day shift: 8 hours/day, 48 hours/week
- Night shift: 6 hours/day, 36 hours/week
- Mixed shift: 7 hours/day. A mixed shift becomes a night shift if 3.5 or more hours fall in the nighttime period.
An “accumulative day shift” is allowed, where employees work up to 10 hours per day as long as the weekly total stays at or below 48 hours. This is the legal basis for compressed schedules, not the widely discussed 4x3 arrangement.
Overtime rules
Overtime pays at a 50% premium over the ordinary rate. Combined ordinary and overtime hours cannot exceed 12 in a single day. Fixed overtime, meaning pre-scheduling overtime as a permanent arrangement, is prohibited.
Exempt categories (managers and positions of trust) are still capped at 12 hours with a mandatory 1.5-hour rest break.
The 4x3 schedule is not law
A 4-day, 12-hour schedule bill was approved in 2023 but declared unconstitutional on procedural grounds. Subsequent legislative attempts have stalled. Do not design 4x3 schedules assuming a legal basis. Current limits (8/6/7 and the 10-hour accumulative day) remain in force.
Pay Frequency and Pay-Slip Requirements
Costa Rica payroll laws set maximum intervals between pay periods based on role type:
- “Intellectual” (professional/office) roles: Monthly pay is permissible
- Manual workers: Must be paid at least biweekly
- Domestic workers: May be paid monthly
Pay slips should itemize ordinary wages, extraordinary pay, each social security deduction, income-tax withholding, and any other legally mandated deductions. The Labor Code’s definitions of “ordinary” and “extraordinary” pay matter because they determine the base for vacation pay, aguinaldo, and severance calculations.
Mandatory Benefits and Time Off
Paid public holidays (feriados de pago obligatorio)
Article 148 of the Labor Code (as amended in 2021) lists the holidays where employers must pay workers who don’t work, and pay double time to those who do:
- January 1, April 11, Holy Thursday, Good Friday, May 1, July 25, August 15, September 15, December 25
Other dates (August 2, August 31, December 1) are “non-obligatory” holidays. Many vendor pages list different sets. Always default to Article 148 and MTSS holiday guidance.
Vacation
Every employee earns a minimum of two weeks of paid vacation for each 50 weeks of continuous service (Article 153). If employment ends before 50 weeks, the employee is owed one day of vacation pay per month worked. Vacation pay is calculated using the average of ordinary and extraordinary remunerative pay, per Article 157.
Aguinaldo (13th-month bonus)
Law 2412 requires employers to pay the aguinaldo between December 1 and December 20. The amount equals one-twelfth of all salary-nature payments earned from December 1 of the prior year through November 30 of the current year. MTSS reiterates the December 20 deadline annually. There are no exceptions for small employers or probationary periods.
Building a team culture that goes beyond compliance, with good leave policies and engagement practices, is just as important as getting the legal minimums right. Practical strategies appear in this guide to remote team building in Latin America.
Social Security and Payroll Contributions (2026 Rates)
This section is where Costa Rica payroll laws get expensive, and where mistakes happen most often.
The 2026 IVM increase
As part of a pre-scheduled CCSS reform, IVM (pension) contributions rose by 0.16 percentage points for both employer and employee on January 1, 2026. The new rates are employer 5.58% and employee 4.33%, up from 5.42% and 4.17% in 2025.
Multiple Costa Rica payroll practitioners flagged on LinkedIn that SMBs missed this update in their first January payroll run, generating under-withholding variances that required correction. Build a January compliance checklist.
Full contribution breakdown (2026)
Employer-side charges (before workers’ comp):
| Component | Employer Rate |
|---|---|
| CCSS SEM (health) | 9.25% |
| CCSS IVM (pension) | 5.58% |
| FODESAF | 5.00% |
| INA | 1.50%* |
| IMAS | 0.50% |
| Banco Popular | 0.25% |
| FCL | 1.50% |
| Approximate total | ~26.8% |
*INA is waived for employers with fewer than 5 employees.
Employee-side deductions:
| Component | Employee Rate |
|---|---|
| CCSS SEM | 5.50% |
| CCSS IVM | 4.33% |
| Banco Popular | 1.00% |
| Approximate total | ~10.83% |
Add the variable INS workers’ compensation premium on top (typically 1-5% depending on risk class). Check your CIIU economic-activity mapping against the SUGESE tariff tables for the exact rate.
Source: BDO Costa Rica; CCSS; community payroll calculators at conyfin.com
Worked example: employee on ₡1,200,000 gross/month
Employee deductions:
- SEM 5.50% = ₡66,000
- IVM 4.33% = ₡51,960
- Banco Popular 1% = ₡12,000
- Total: ₡129,960 (10.83%)
Income tax then applies to the excess above ₡918,000 (see Section 9 below).
Employer charges (before INS):
- SEM 9.25% = ₡111,000
- IVM 5.58% = ₡66,960
- FODESAF 5% = ₡60,000
- INA 1.5% = ₡18,000 (if 5+ staff)
- IMAS 0.5% = ₡6,000
- Banco Popular 0.25% = ₡3,000
- FCL 1.5% = ₡18,000
- Total: ₡282,960 (~26.8%)
Add INS on top. For a low-risk office environment, budget around 1-2% additional.
Base Mínima Contributiva (BMC) floors
CCSS sets minimum contribution floors. If an employee’s reported salary falls below the BMC, contributions are still calculated on the floor amount. For 2026, the published floors are approximately: SEM ₡346,789 and IVM ₡324,590 (CCSS Patronos portal).
This matters for part-time workers. If your part-timer earns ₡200,000/month, you still pay employer contributions on the BMC floor, significantly inflating the percentage cost. Budget accordingly when structuring part-time roles.
Planilla filing window
Employers submit CCSS planillas from the 26th of each month to the 4th business day of the following month via the SICERE/Oficina Virtual system. Late filings trigger surcharges. Foreign workers with lawful immigration status follow the same enrollment process as nationals (CCSS Patronos).
Statutory Leaves and Sick Pay
Maternity leave
Four months total: one month before the expected birth date and three months after. During leave, the CCSS pays 50% and the employer pays the remaining 50%, so the worker receives her full salary. The CCSS also covers both sides of social contributions on its subsidized portion (MTSS labor topics).
Paternity leave
Since June 2022, private-sector fathers are entitled to 2 paid days per week for 4 weeks following the birth of a child. Public-sector employees have a separate one-month scheme. Employers must grant this, it is not discretionary.
Sick leave (common illness)
This is one of the most misunderstood areas of Costa Rica payroll laws. Here’s how it actually works:
- Days 1 to 3: The employer pays 50% of wages. CCSS does not subsidize these days (with rare regulatory exceptions).
- Day 4 onward: CCSS pays a cash subsidy equal to 60% of the reference wage.
Source: CCSS Health Insurance Regulation
Practitioners on Reddit’s r/Ticos forum show recurring confusion about whether CCSS covers the first three sick days. It doesn’t. HR teams that assume otherwise end up either overpaying or underpaying employees for short absences. Set your internal policy and employee communications clearly.
Termination: Notice Periods and Severance
Notice (preaviso)
For indefinite-term contracts, either party may terminate with notice. Required notice periods scale with tenure (Labor Code):
| Tenure | Notice Required |
|---|---|
| 3 to 6 months | 1 week |
| 6 to 12 months | 15 days |
| 12+ months | 1 month |
If notice is not given, the terminating party must pay in lieu.
Severance (auxilio de cesantía)
When the employer terminates without just cause (or for causes not attributable to the worker), severance is owed based on this schedule:
| Tenure | Severance |
|---|---|
| 3-6 months | 7 days’ pay |
| 6-12 months | 14 days’ pay |
| Year 1 | 19.5 days |
| Year 2 | 20 days |
| Year 3 | 20.5 days |
| Years 4-5 | 21 days |
| Year 6 | 21.5 days |
| Year 7+ | 22 days (tapering to 20 from year 13) |
The critical detail most vendor pages miss: severance is capped at a maximum of the last 8 years of service. An employee with 15 years of tenure gets severance calculated on 8 years, not 15. The calculation base is the average of the last 6 months of wages.
FCL at termination
The FCL (Fondo de Capitalización Laboral) is a separate 1.5% monthly employer deposit into a fund managed by approved operators like BCR. Workers can withdraw at termination or every 5 years with the same employer. In practice, many employers treat FCL as a cushion that partially offsets the severance obligation, but legally they are distinct.
Worked example: termination without cause at 3 years, no notice given. The employer owes: 1 month of preaviso (pay in lieu) plus severance for years 1-3 (19.5 + 20 + 20.5 = 60 days of pay), calculated on the average of the last 6 months. The employee also accesses accumulated FCL.
Income-Tax Withholding on Wages (2026 Brackets)
Effective January 1, 2026 under Decree 45333-H, the monthly brackets for the salary tax (impuesto al salario) are:
| Monthly Gross (₡) | Rate |
|---|---|
| Up to 918,000 | 0% |
| 918,001 to 1,347,000 | 10% |
| 1,347,001 to 2,364,000 | 15% |
| 2,364,001 to 4,727,000 | 20% |
| Over 4,727,000 | 25% |
Family credits (monthly): ₡2,590 per spouse, ₡1,710 per child.
Source: Hacienda 2026 brackets PDF
The legal tax base is monthly gross, but social security contributions reduce the taxable amount per the governing law and decree. Configure your payroll system to deduct CCSS and Banco Popular before applying brackets.
For additional context on cross-border tax considerations when employing remote workers, see this guide to remote employee taxes.
Payroll Operations: Registration and Monthly Cycle
Running compliant payroll in Costa Rica requires these baseline steps:
- Register as an employer with CCSS through the Patronos portal. Obtain your employer number.
- Secure an INS Riesgos del Trabajo policy. Your risk class and premium depend on your economic activity code. Keep this updated if your operations change.
- Enroll each employee, including foreign workers with lawful immigration status, in the CCSS system.
- Submit planillas monthly during the 26th-to-4th-business-day window via SICERE/Oficina Virtual.
- Pay CCSS by the due date to avoid surcharges.
- Withhold and remit income tax per Hacienda’s 2026 tables.
- Accrue for aguinaldo monthly (1/12 of salary-nature payments) and pay between December 1-20.
For U.S. companies that want compliant Costa Rica operations without building an in-country HR function from scratch, working with a partner that handles payroll, benefits, and compliance locally can eliminate most of this overhead. Mismo helps companies build nearshore development partnerships that include full lifecycle admin, from hiring through payroll and retention.
Contractor vs. Employee: A Brief Warning
Costa Rica’s Labor Code defines an employment relationship based on subordination, not on what the contract says. If someone works fixed hours, uses your tools, reports to your manager, and can’t substitute themselves, they are an employee regardless of how the agreement is labeled.
Misclassification exposes employers to back-pay for all missed benefits (aguinaldo, vacations, social security contributions, severance) plus penalties. CCSS actively audits for under-reported workers. The reclassification risk is real, and it applies to foreign companies operating through intermediaries just as much as to local firms.
If you’re weighing the advantages and disadvantages of nearshore outsourcing, contractor-vs-employee classification should be part of that analysis.
Common Pitfalls That Catch Employers
These come from practitioner experience, forum discussions, and real compliance failures observed in the field.
“Update IVM in January.” Multiple local accountants and auditors flagged on LinkedIn that teams forgot to bump IVM rates from 5.42/4.17 to 5.58/4.33 on January 1, 2026. The result was under-withholding that required retroactive correction. Build a standing January checklist that includes rate updates.
“BMC floors bite part-time arrangements.” If your part-timer earns below the Base Mínima Contributiva, employer contributions are still calculated on the floor. This can mean you’re paying 26.8% on ₡346,789 even though the employee only earns ₡200,000. Either budget for this or set nominal salaries above the BMC.
“First 3 sick days are not 100% covered.” CCSS pays from day 4. Employers owe 50% for days 1-3. Practitioners on Reddit’s r/Ticos confirm this is a persistent source of confusion, both for employers and employees. Write it into your employee handbook and onboarding materials.
“The holiday list varies across vendor sites.” Some list 11 paid holidays, some list 9. The correct set comes from Article 148 of the Labor Code. There are 9 days of mandatory paid holidays (counting Holy Thursday and Good Friday separately). Don’t copy a vendor list without checking.
“The 4x3 schedule is not legal.” Despite ongoing public interest, the 4-day workweek bill was struck down and has not been re-enacted. Do not build 12-hour, 4-day schedules assuming a legal basis exists.
Quick-Reference Glossary
CCSS (Caja Costarricense de Seguro Social): Administers health insurance (SEM) and pensions (IVM). Every employer must register and file monthly planillas. CCSS Patronos portal.
SEM (Seguro de Enfermedad y Maternidad): The health insurance component of CCSS. Employer rate 9.25%, employee 5.50%.
IVM (Invalidez, Vejez y Muerte): The pension component. 2026 rates: employer 5.58%, employee 4.33%. BDO confirmation.
MTSS: The Ministry of Labor. Publishes the Labor Code, sets minimum wages, and enforces labor standards. Labor Code PDF.
CNS (Consejo Nacional de Salarios): Sets minimum wage adjustments. The 2026 increase was +1.63% for private-sector minimum wages, effective January 1.
INS (Instituto Nacional de Seguros): Sole provider of mandatory workers’ compensation insurance. Premium rates vary by risk class per SUGESE-published tables.
FODESAF, INA, IMAS, Banco Popular: Statutory employer contributions mandated under the Worker Protection Law (LPT). They fund social development, vocational training, social assistance, and worker savings respectively. INA’s 1.5% is waived for employers with fewer than 5 employees.
FCL (Fondo de Capitalización Laboral): Employer deposits 1.5% monthly. Workers withdraw at termination or every 5 years. Managed by pension operators under SUPEN oversight.
Aguinaldo: The mandatory 13th-month bonus. Total salary-nature earnings from Dec 1 to Nov 30, divided by 12. Must be paid by December 20.
Preaviso: Notice period required before termination. Ranges from 1 week (3-6 months tenure) to 1 month (12+ months). Pay in lieu if not given.
Cesantía: Severance pay for termination without just cause. Calculated on the average of the last 6 months’ wages. Capped at the last 8 years of service.
Your 2026 Costa Rica Payroll Compliance Checklist
Use this to audit your setup or configure a new payroll:
- [ ] Update IVM rates to 5.58% (employer) and 4.33% (employee)
- [ ] Load 2026 income-tax brackets from the Hacienda PDF
- [ ] Confirm minimum wage increase (+1.63%) is reflected
- [ ] Verify BMC floors for SEM (₡346,789) and IVM (₡324,590)
- [ ] Check CCSS planilla submission window (26th to 4th business day)
- [ ] Confirm active INS Riesgos del Trabajo policy with correct risk class
- [ ] Set the 2026 holiday calendar (9 obligatory paid holidays per Article 148)
- [ ] Configure aguinaldo accrual (1/12 monthly) with December 20 pay deadline
- [ ] Confirm severance table and 8-year cap are documented for HR
- [ ] Brief employees on sick-pay rules (employer 50% days 1-3, CCSS 60% from day 4)
Companies exploring Costa Rica for the first time can learn more in Mismo’s guide to hiring offshore talent in Latin America, which covers the full process from sourcing through compliant onboarding.
Frequently Asked Questions
How much do Costa Rica payroll taxes cost the employer in 2026?
Employer-side social charges total approximately 26.8% of gross salary before adding workers’ compensation insurance (INS), which varies by risk class from roughly 1% to 5%. The main components are CCSS SEM (9.25%), IVM (5.58%), FODESAF (5%), INA (1.5% if 5+ employees), IMAS (0.5%), Banco Popular (0.25%), and FCL (1.5%). Source.
When is the aguinaldo due, and how is it calculated?
The aguinaldo must be paid between December 1 and December 20. It equals total salary-nature earnings from December 1 of the prior year through November 30 of the current year, divided by 12. There is no exemption for new employees; prorate based on months worked.
Does CCSS cover sick pay from day one?
No. For common illness, the employer pays 50% of wages for days 1-3. CCSS begins paying a 60% subsidy starting on day 4. This is one of the most frequently misunderstood aspects of Costa Rica payroll laws, and practitioners on Reddit’s r/Ticos confirm the confusion is widespread.
Is the 4-day workweek (4x3) legal in Costa Rica?
No. The bill was declared unconstitutional in 2023 on procedural grounds, and no replacement legislation has passed. The current maximum remains 8 hours/day and 48 hours/week for day shifts, with a 10-hour accumulative option as long as the weekly cap holds.
What is the Base Mínima Contributiva and why does it matter?
The BMC is a minimum salary floor the CCSS uses to calculate contributions. If an employee’s actual salary is below the BMC, contributions are still calculated on the BMC amount. For 2026, the SEM floor is approximately ₡346,789 and the IVM floor is ₡324,590. This significantly impacts the cost of part-time employees.
How much severance does an employer owe in Costa Rica?
Severance (cesantía) applies when the employer terminates without just cause. The amount scales from 7 days’ pay (3-6 months tenure) up to 22 days per year for longer tenures. The critical cap: severance is calculated on a maximum of the last 8 years of service, using the average salary of the last 6 months.
Can foreign workers be added to Costa Rica payroll?
Yes. The CCSS confirms that foreign workers with lawful immigration status follow the same enrollment and contribution process as Costa Rican nationals. They must be registered in CCSS and covered by an INS workers’ compensation policy.
What happens if the employer misses the CCSS planilla filing window?
The filing window runs from the 26th of each month to the 4th business day of the following month. Late submissions trigger surcharges from CCSS. Repeated non-compliance can result in enforcement actions. CCSS Patronos portal.
Costa Rica’s payroll rules are manageable once you have the primary sources loaded and your January parameters updated. The complexity isn’t in any single rule, it’s in the number of agencies, contribution lines, and annual adjustments that need to stay synchronized. For U.S. companies building engineering teams in the region, understanding these obligations upfront prevents expensive surprises later. To see how the evolution of remote work in Latin America is making compliant nearshore hiring more accessible, or to explore how Mismo handles payroll and compliance for clients like Revinate, start with a conversation about your team’s specific needs.
