How to stay compliant

Employer-of-Record (EOR) in Costa Rica: Do You Need One?

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How to stay compliant

Employer-of-Record (EOR) in Costa Rica: Do You Need One?

So you want to hire someone in Costa Rica. Problem is, your company is located somewhere else.  

If you’ve done some research, you’ve probably been told you should be using an Employer-of-Record (EOR). Why? Well, if your company isn’t located in Costa Rica, using an EOR can help you bypass the traditional obstacles to hiring full-time employees.  

But there’s a catch: EOR solutions in Costa Rica are expensive—usually at least $500 per month per employee—and can take time to set up. And because you’re complying with a different set of labor laws, logistics and benefits can end up costing you lots of time and money. While they will save you time from setting up your own entity, they’re rarely cheap or fast.

The good news? There’s another way to hire remote workers in Costa Rica, and it doesn’t involve forking out huge amounts of money for an EOR.  

The solution: Hire your teammates in Costa Rica as contractors. If you’re hiring remotely and your teammates have autonomy, there’s a good chance you can make compliant contractor hires. You still have to use locally-compliant contracts, but the process is a lot easier, more affordable, and faster.

We built Thera to help you make contractor hires, in 150+ countries (like Costa Rica). So you can hire the people you want on your team, without paying thousands for an EOR. You can get set up in a couple of clicks—and you’ll only pay $49 per contractor per month.  

It’s just as easy as it sounds. No catch. Here’s what Thera looks like vs. an EOR in Costa Rica:

Everything you should know about using an EOR in Costa Rica

Are you considering expanding your business to Costa Rica? If so, you may have heard about the benefits of using an Employer of Record (EOR) to hire local independent contractors. However, before you make any decisions, it's important to understand the legal and regulatory conditions specific to Costa Rica. In this post, we'll break down everything you need to know about using an EOR in Costa Rica, and why hiring an independent contractor might be a better option.

What is an EOR?

An EOR is a third-party company that acts as the employer of record for your local hires. This means that the EOR takes care of all the legal and administrative tasks associated with hiring and managing employees, including payroll, taxes, benefits, and compliance with local labor laws. As the client company, you retain full control over the day-to-day work of your employees, while the EOR handles the back-office tasks.

Legal and regulatory conditions in Costa Rica

Costa Rica has a complex legal and regulatory framework that governs the employment relationship. Some of the key factors to consider when using an EOR in Costa Rica include:

- Labor Code: The Costa Rican Labor Code sets out the rights and obligations of employers and employees, including minimum wage, working hours, vacation time, and termination procedures. It's important to ensure that your EOR is fully compliant with the Labor Code to avoid any legal issues.

- Social Security: All employees in Costa Rica are required to contribute to the social security system, which provides healthcare, pensions, and other benefits. Your EOR should handle the social security contributions on behalf of your employees.

- Taxes: Costa Rica has a complex tax system that includes income tax, value-added tax, and other taxes. Your EOR should ensure that your employees are properly registered with the tax authorities and that all taxes are paid on time.

- Immigration: If you are hiring foreign workers in Costa Rica, you will need to obtain the appropriate work permits and visas. Your EOR should be able to assist with the immigration process.

Why hiring an independent contractor might be your best option

While using an EOR can be a convenient way to hire local employees in Costa Rica, it may not always be the best option. Here are some reasons why you might consider hiring an independent contractor instead:

- Flexibility: Independent contractors offer more flexibility than traditional employees — their contracts are typically easier to start and terminate, and there’s less legal red tape.

- Cost: Hiring an independent contractor can be more cost-effective than using an EOR, as you do not have to pay for benefits or other overhead costs.

What if I accidentally misclassify my contractors?

We’ve got two pieces of good news for you. For one, if you’re hiring remotely, it’s unlikely you’ll misclassify your contractors. Many of the things that qualify people as employees, such as company equipment and set working hours, don’t typically apply to remote work.

Still, it’s helpful to have the comfort of knowing you’re not at risk for misclassification. That’s why, at Thera, we’ve launched Misclassification Assurance: so you can hire contractors abroad, worry-free. Learn more about hiring with Thera below.

Hiring contractors? Thera can save you a ton of time

If you’re hiring contractors, you’re probably spending too much time on their payroll, contracts, and tax documents. Which is why we built Thera, which saves you 90% the time you spend on contractor paperwork each month.

With Thera, you can compliantly hire your contractors in 150+ countries, onboard them in minutes, and pay them all at once (in a click). It’s global contractor payroll, finally simplified.

Sound interesting? Click here to book a demo and see the platform firsthand

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