Employer of Record in Nicaragua

Businesses can only operate smoothly in Nicaragua if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Nicaragua below, to avoid any compliance issues.

Employment Contract Requirements

In Nicaragua, contracts can be verbal for specific jobs or written as per the Labour Code. However, for legal validity in court, the contract must be translated into Spanish, even if originally in another language. Typical documents should include:

• Identification of both parties
• Commencement date
• Job responsibilities and duties
• Employee's compensation and extra benefits

Onboarding Process

We can help you get a new employee started in Nicaragua quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Nicaragua

The regular workweek in Nicaragua consists of 48 hours, with 8 hours per day. However, for night-time work, it is reduced to 45 hours per week, with 7.5 hours per day.

Overtime in Nicaragua

In Nicaragua, overtime is compensated at 200% of the regular salary for work beyond 48 hours a week. Employees must receive a 24-hour rest period for weekend or holiday work. Overtime should not exceed 3 hours per day or 9 hours per week as per employment contracts or agreements.

Probation Period in Nicaragua

In Nicaragua, there's a 30-day probation period during which either party can terminate the employment agreement for any reason.

Fiscal Year in Nicaragua

January 1st - December 31st is the 12-month accounting period that businesses in Nicaragua use for financial and tax reporting purposes.

Payroll Cycle in Nicaragua

The payroll cycle in Nicaragua is usually Monthly, with employees being paid by the 15th of the month.

Minimum Wage in Nicaragua

The minimum wage for employees in Nicaragua is typically 27.50 NIO per hour, amounting to ~5,721 NIO per month for a typical 48 hour work week.

Bonus Payments in Nicaragua

Employers are required to make a 13th-month payment, which involves paying an extra month's salary within the initial 10 days of December.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 24.5% on top of the employee salary in Nicaragua.

Employee Payroll Tax Contributions

In Nicaragua , the typical estimation for employee payroll contributions cost is around 7%.

Individual Income Tax Contributions

In Nicaragua, income tax follows a 'Pay As You Earn' system with progressive rates ranging from 0% to 30%, depending on an individual's income.

Pension in Nicaragua

In Nicaragua, the pension system is managed by the Nicaraguan Social Security Institute (INSS). Employees contribute a percentage of their salary to the INSS, and upon retirement, they receive pension benefits based on their contributions and years of service.The standard retirement age for the INSS pension is 60 for men and 55 for women.

Mandatory Leave Entitlement in Nicaragua

The annual leave entitlement in Nicaragua is 15 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Nicaragua

Nicaragua has 10 recognised holiday in a year

Paid Time Off in Nicaragua

After six months of continuous employment, employees in Nicaragua receive 15 days of paid leave, and upon completing one year, they become eligible for 30 days of vacation. Additionally, employees can earn an additional 15 days of leave for every six months worked.

Maternity Leave In Nicaragua

Pregnant employees in Nicaragua receive 12 weeks of paid maternity leave, starting four weeks before the due date. In the case of multiple births, the leave period extends to 14 weeks. During maternity leave, the employer covers 40%, while Social Security covers 60%

Paternity Leave In Nicaragua

Employees in Nicaragua are entitled to up to 5 business days of paid paternity leave. This is paid at full salary.

Sick Leave In Nicaragua

Employees in Nicaragua are entitled to up to 26 weeks of sick leave, paid at 60% of regular wages. This is paid by Social Security from the 4th day of illness. The initial three days are unpaid, unless the company policy determines otherwise, or as stipulated in the employment contract. However, the unpaid period is waived in cases of hospitalization, work-related illness, or injury.

Parental Leave In Nicaragua

Nicaragua does not have a separate shared parental leave policy. The current framework provides distinct leave entitlements for each parent.

Termination Process in Nicaragua

Terminating an employee in Nicaragua depends on the employment and collective agreements, as well as the contract type and reason for termination. Employers need approval from the labour inspection department to dismiss an employee. After termination, the employee receives any outstanding vacation pay and their annual bonus.

Notice Period in Nicaragua

For indefinite contracts, employees can terminate by giving a written 15-day notice to the employer, except during the probation period when no notice is required. Contracts of indefinite duration may include a trial period of up to 30 days, during which either party can end the employment without obligations.

Severance in Nicaragua

In Nicaragua, unjustly dismissed workers receive severance pay calculated as one month's salary for the initial three years of service, followed by 20 days' wages for each subsequent year. This amount cannot exceed five months' wages.