What are Employee Benefits?
Employee benefits refer to the non-wage compensations employees receive in addition to their basic salaries. These benefits can be monetary or non-monetary and form a critical aspect of employee compensation. It boosts employee morale and productivity, helps to attract and retain talent and promotes job satisfaction.
Typical employee benefits and compensation packages include health insurance, life insurance, paid time off, sick leave, overtime pay, retirement plans, parental leave, disability insurance, and professional development opportunities. However, employee benefits vary based on the company’s size, industry, and location.
Compensation Laws in Costa Rica
Domestic and foreign employers hiring in the country must have a well-rounded knowledge of the compensation and benefits policy in Costa Rica. Employers must ensure compliance with the employee compensation policy in Costa Rica to guarantee fair wages for their employees and avoid penalties.
- Per Costa Rica’s Labor Law, pregnant female employees can apply for maternity leave provided they have a medical certificate.
- Costa Rica Labor Law Article 81 ensures terminated employees get compensated if there is no substantial reason to fire them.
- National Coalition Agreement 1988, Costa Rica Labor Code and specific Constitutional Articles ensure employees get a rightful salary. They are liable for the revised minimum wage.
- Per employment law in Costa Rica, employees are entitled to paid leaves when they complete 50 weeks of employment.
How to Design an Employee Benefits Program for Employees in Costa Rica
Employers must consider some critical factors before drawing up employee compensation and benefits in Costa Rica:
Step 1: Offer relevant and competitive benefits
- Before starting the process of drafting a compensation and benefits policy, employers should write down the objectives. These should cover the benefits that will help employees and fit into the company’s approved budget.
- Employers designing a compensation and benefits policy in Costa Rica must provide attractive employee benefits, including healthcare, paid time off, retirement plans, etc.
- These benefits should be relevant to the needs of the employees and competitive with industry standards.
Step 2: Conduct industry research
- While drafting employee benefits and compensation packages in Costa Rica, companies should thoroughly research the types of benefits competitors offer.
- As an employer, you can conduct an internal survey to know what benefits employees expect. Employee benefits should also align with the company’s culture, core values, and goals to remind employees of what the company stands for.
- Incorporating this aspect in the employee compensation policy in Costa Rica can be an excellent way to increase employee engagement and boost morale.
Step 3: Educate employees about the benefits program
- Employers must ensure employees understand how the benefits program fits the company’s core values, culture, goals, and rewards policy.
- This can enhance their appreciation of the company’s benefits program, increasing its value to the organization.
- You can also ask for employee feedback and incorporate that into the compensation package.
Step 4: Improve administrative efficiency
- Employers must analyse employee compensation and benefits in Costa Rica regularly to match the volatile business environment.
- Companies should work on administrative efficiency, which includes working with the right benefits provider, leveraging technology to streamline administrative tasks, and implementing effective communication channels.
Types of Guaranteed Benefits in Costa Rica
Below is a list of the mandatory or non-negotiable benefits employers must provide as part of the employee compensation package in Costa Rica:
Employers and employees are both required to contribute to the social security fund. Employees pay 10.5%, while employers contribute 26.5%. Benefits covered by social security include:
- Medical and Insurance
- Disability, retirement, old age, and death
- Compensation in case of an accident or injury
- According to Costa Rica’s Labor Code, employees are entitled to a paid annual leave of 14 days for 50 weeks of continuous service.
- Employees who have worked for less than 50 weeks get one paid leave per month.
- The employee compensation and benefits policy in Costa Rica guarantees 14 public holidays off, 11 with mandatory pay.
- Official public holidays in Costa Rica include:
- New Year’s Day
- Juan Santamaria Day
- Labor Day
- Annexation of Guanacaste Day
- Patron Saint Day
- Mother’s Day
- Independence Day
- All Souls Day
- Military Armed Force Abolition Day
- Christmas Day
- Maternity benefits in Costa Rica include a four-month paid maternity leave.
- Female employees can take maternity leave one month before the expected delivery date and three months following the baby’s birth.
- Fathers working in the public sector of Costa Rica receive eight days of paid paternity leave.
- The 13th-month bonus is one of the guaranteed employee benefits in Costa Rica.
- Employers must give the 13th-month pay within December 20 of each year.
- Under sick leave benefits in Costa Rica, employees are entitled to paid leave for the first three days of an illness.
- Employers and social security have a 50-50 contribution towards sick leave payments.
- But starting from the fourth day, social security pays 60% of the employee’s regular salary while the employer has no obligation.
- Bereavement leave benefits in Costa Rica include paid time off for three days in case of the death of an immediate family member.
Employee Benefits for Expatriates
Expats in Costa Rica are eligible for the same employee benefits that nationals get when employed. It includes medical access, paid leaves, bereavement leaves, insurance, etc. Expats can also avail of supplementary benefits that an employer offers. It includes meal vouchers, mobile payments, housing allowances, and gym memberships.
How Are Employee Benefits Taxed in Costa Rica?
The tax wedge in Costa Rica measures labor income, including employer and employee tax. For single employees, the tax wedge in Costa Rica was 29.2% in 2021. Married employees with children receive child-related benefits.
The income tax and employer social security contributions in Costa Rica account for 72% of the total tax wedge. As of 2021, employees in Costa Rica pay a net average tax rate of 10.5% (social security contributions).
Restrictions for Costa Rica Benefits and Compensation
Establishing a Costa Rican subsidiary is mandatory for hiring and dispersing employee compensation and benefits in Costa Rica. A subsidiary lets foreign investors and business owners legally operate in Costa Rica. However, the subsidiary setup process can be lengthy and elaborate.
Companies looking to provide employee compensation and benefits in Costa Rica can avoid the hassles of establishing a subsidiary by partnering with a global professional employer organization (PEO). The PEO will ensure compliance with local laws and regulations while companies can focus on building efficient teams.
Costa Rica Supplemental Benefits
Besides the mandatory benefits, the employee compensation policy in Costa Rica includes various supplemental or optional benefits that employers may provide.
The law does not mandate employers to provide these additional perks. However, many employers offer these to boost the company’s appeal and attract and retain employees seeking a work environment.
Here are some of the standard supplemental employee benefits in Costa Rica:
- Supplemental healthcare
- Meal and transportation vouchers
- Tuition reimbursements for professional development
- Voluntary pension plans
- Work-from-home stipends
- Cellphone bills
How Multiplier Can Help with Benefits Management in Costa Rica
Whether setting up a remote team or managing a hybrid workforce, companies can streamline their employee benefits administration with Multiplier.
Multiplier offers the infrastructure to help businesses hire talent abroad without the hassles of establishing a subsidiary.
Partnering with Multiplier means businesses can streamline employee insurance benefits administration, facilitate grants, and issue ESOPs through a robust, reliable, secure SaaS platform. Establishing a business in new markets and building cross-border teams becomes hassle-free, while experts at Multiplier take care of employees’ compensation and benefit formalities.