Offering the right benefits and compensation package is particularly important during expansion to Costa Rica. Companies must learn the country’s compensation laws, discuss guaranteed and supplemental benefits, and understand cultural norms and expectations.
G-P can help establish a compliant and competitive Costa Rica benefits management plan. Here are a few best practices to get started.
Costa Rica compensation laws
The typical workweek in Costa Rica is 48 hours a week. Overtime in normal working days is paid at time and a half, or the hourly wage plus an additional 50%.
According to Costa Rica’s compensation laws, employees must receive a Christmas bonus (also referred to as a 13-month salary) called aguinaldo. The Christmas bonus is the sum of the total earned by the worker during the 12 months from December 1 of the previous year to November 30 of the year in question (including ordinary and extraordinary salaries and overtime), divided by 12. The amount thus calculated is the amount to be paid as the Christmas bonus. It must be given to the employee on or before December 20 of the year it is applicable.
Guaranteed benefits in Costa Rica
A Costa Rica benefits management plan must include statutory benefits required by law. The country has 12 paid public holidays that employees get off. Costa Rica’s Labor Code states that employees receive 1 day of vacation for every month they work and 2 full weeks of vacation after 50 weeks of work.
Pregnant employees must receive 1 month of paid maternity leave before the birth of a child and 3 months after the birth. Employers need to pay 50% of the employee’s salary for those 4 months of leave while the Social Security System will pay the remaining half. Biological fathers are entitled to a paternity leave of 2 days per week for the first 4 weeks following the birth of the child.
Costa Rica benefits management
Another important aspect of benefits management plan is providing supplemental benefits that will encourage employees to stay in their roles and attract top talent. Many companies budget 26% on top of an employee’s gross salary for additional benefits the employee may need.
A company can choose what kind of supplemental benefits they would like to offer their employees. One popular option is private healthcare
Restrictions for benefits and compensation
Before offering benefits and compensation in Costa Rica, companies must establish their own subsidiary in the country. A subsidiary allows a company to hire employees and begin other key business operations. Another option is partnering with an Employer of Record like G-P. We’ll manage payroll, benefits, compensation, and more in compliance with the local laws, and you can skip the lengthy subsidiary setup process.
Costa Rica employee benefits plans
A strategic benefits plan is one of many factors that contributes to a company’s growth. Designing a benefits plan according to the market can improve recruitment results and persuade more job seekers to apply for vacancies.
Attractive benefits also increase morale and retention rates within the workplace, lowering training costs for new employees and keeping workers dedicated to the company’s mission.
Supplemental benefits beyond the legal requirements will make businesses stand out. Possible offerings include:
- Meal vouchers.
- Transportation stipends.
- Holiday bonuses.
- Tuition reimbursement.
- Supplemental healthcare.
- Voluntary pension plans.
- Work from home allowance.
- Telephone allowance.
Legal obligations for benefits
Before considering fringe benefits, employers must consider their legal obligations. The required benefits in Costa Rica include:
- Paid annual leave
- Paid maternity leave
- Public holidays off
- Social security contributions
Designing Costa Rica employee benefits plans
It is important to consider 2 perspectives when starting the design process — the company and their employees. While the company needs to remain within the organization’s financial abilities, the plan should also meet workers’ needs and expectations. It’s best to begin the process with a few best practices in mind.
1. Gauge company resources and determine goals.
Benefits require budgeting. The company should be aware of their financial resources to understand which benefits they are able to offer their teams. They should assess projected revenue and expenses for the year and designate funding for the benefits plan.
This initial stage can also be used to evaluate a company’s goals. For example, if the goal is to focus on building revenue, the company should consider how factors like higher retention rates can improve the business and save money in the long term.
2. Understand the local labor market.
Understanding the labor market can help with selecting benefits that will ensure a competitive advantage within the industry. Research other businesses in the area, focusing on those in the industry. These standards will inform employees’ expectations.
Companies can also speak with employees directly to understand their needs. They can also conduct interviews or distribute surveys to learn what workers want from their benefits packages and which offerings they value most.
3. Create a plan based on findings.
With all the information gathered, a company can design a benefits plan that balances their resources with market standards. They can start by distributing funds to any required benefits and allocate the remaining budget to the priority benefits discovered in their research.
Average cost of benefits
Benefits costs will vary between businesses. Several factors, like size and industry, can affect a company’s benefits and how much they spend. For this reason, it’s essential that companies create a benefits budget according to their unique needs rather than focusing on a national average cost. This approach makes it easy to scale benefits during business growth, and it will help companies anticipate costs early in the process.
How to calculate benefits
Calculations for benefits can be direct or more complex depending on the provision. For example, if companies are offering holiday bonuses, they can divide a predetermined amount evenly among their teams. Tuition reimbursements, on the other hand, might vary.
Social security contributions are one of the benefits that require a specific calculation. Employers are responsible for contributing 26.5% to the social insurance fund, while employees must pay 10.5%. These rates are outlined in the country’s labor laws.
How are employee benefits taxed in Costa Rica?
The tax laws classify income as any earnings derived from goods located, assets used, or services rendered within the territory. This definition includes fringe benefits, so the company should include them in income tax calculations.
Employers are responsible for deducting income tax from employee paychecks. Some fringe benefits may already have a cash value, like a holiday bonus. Other benefits, like company cars, require an assigned monetary value.
Employee health benefits
Costa Rica’s social insurance system funds a majority of the public healthcare sector. This coverage allows residents to receive low-cost or free care in any public facility. The country also has many private operations that accept cash or voluntary insurance schemes.
Employers and employees are obligated to contribute to Social Security to cover public healthcare costs.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.