Nicaragua is a country in Central America between Honduras by the North and Costa Rica by South. The country’s economy is primarily dependent on the agricultural sector. However, other sectors have emerged and contributed to the economy. Nicaragua has entered into Free Trade Agreements with several countries, such as Taiwan, Mexico, the USA, and the Dominican Republic. International trade is important to the country’s economy as reflected in the summary of its imports and exports, which is equal to 93% of the GDP.
Currency: Nicaraguan Córdoba
Principal language: Spanish
Government: Republic, Unitary state, Presidential System
Capital City: Managua
Major Cities: León, Granada, Jinotega, Matagalpa, Chinandega, and Masaya.
In Nicaragua, employer and employees can enter into determinate (fixed), indeterminate or professional services contract. It is mandatory to execute a written employment contract before commencing work. The contract must mention employees’ remuneration, benefits, and conditions of termination.
The indeterminate contract can be terminated at will by either of the parties, and when this happens, the employer needs to pay the applicable severance, cashed leave, and other benefits. Determinate or fixed-term contracts in Nicaragua must last for the period specified in it, and when an employer terminates it earlier, the dismissed employee is entitled to regular pay for the duration of the contract. A determinate contract becomes indeterminate after two renewals or if a worker continues to work after the term is over. However, courts can treat such a contract as indeterminate under certain circumstances.
The regular workweek in Nicaragua is for 48 hours, with 8 hours daily work for 6 days.
A maximum of 3 hours in excess of regular working hours is allowed as overtime. Total work schedule in a week must not be more than 9 hours. Payment for overtime is double the normal rate.
Nicaragua celebrates 9 national holidays:
- New Year’s Day
- Holy Thursday
- Good Friday
- Liberation Day
- Battle of San Jacinto
- Independence Day
- Indigenous Resistance Day
- Immaculate Conception
- Christmas Day
Employees are usually entitled to a leave of 15 days every 6 months that they are expected to take at once. Employees can also get into a different arrangement with their employer for taking leaves.
Employees who get sick or injured at work, receive a pension from Nicaragua’s Social Security Institute for 1 year (52 weeks). This reimbursement from social security starts after 3 days of absence due to sickness. The employer may reimburse for those 3 days. Social security pays for 60% of the average income during the previous 8 weeks. Employees become eligible for the leave only when there are at least 8 contributions to social security in the previous 22 weeks.
Women employees are entitled to 4 weeks of maternity leave before the expected date of birth and 8 weeks after childbirth. Social security pays 60% of employees’ salary while the employer needs to pay the balance 40%. In cases where an employee is not covered by the social security of the country, the employer needs to pay the entire 100%.
Pension and Social Security
It is mandatory for all employers to join the social insurance program and induct their employees to the mandatory saving. The self-employed are also allowed to join the optional program.
The membership of Nicaragua’s Institute of Social Security (INSS) includes sickness, disability, maternity, old age, professional risk, and death. The International Veterinary Program or IVM provides disability compensation, old age benefits, and death benefits (excluding health services).
Since December 2013, there has been a gradual increase in employers’ mandatory social contributions, and it is 19% for 2017, up from 13% in 2013. Employee contributions are constant at 6.25%. However, the ceiling is expected to increase. Mandatory contributions from both employer and employees are subject to a ceiling, which for 2017 was capped at a salary of 82,953.88 Córdoba.
These contribution percentages provide short, medium and long-term benefits which include medical services. Employers need to pay a 2% surcharge on the payroll for INATEC, a mandatory employer contribution for government training programs.
An employee who is 60 years old and has made contributions for 750 weeks are eligible for the old-age pension. The eligibility criteria for old-age pension are relaxed for employees who enrolled with INSS after 45 years of age, miners and workers in hazardous occupation, and teachers. Pensioners who are still employed need to continue paying their contributions to the INSS. The minimum pension is the statutory monthly minimum wage.
The minimum pension payable for permanent disability is the legal minimum wage. Average earnings, as well as contributions for each period of 52 weeks, are taken into account while calculating the exact pension amount. In case of partial disability, 50% of the total permanent disability pension is payable, on the condition that the pension amount must be higher than 133% of the minimum wage but not more than 150%.
A widow aged 45 or older is entitled to 50% of her deceased husband’s old-age pension; the widower is eligible for the same benefits when he is dependent and disabled, or 60 years or older. A widow or widower with 2 or more children may be entitled to 100% of the deceased’s old-age pension. Dependent relatives can also claim 50% of disability or old-age pension.
How GPS can Help
With our Global PEO/Employer of Record services, companies can expand into Nicaragua and hire their employees without having to establish a branch office or subsidiary in Nicaragua.
- Your candidate is hired via our Nicaragua PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
- Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Nicaragua laws.
- Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
- With no contractor risks, pass on the compliance burden to Global PEO Services.
Spin Off/M&A Support
- Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.
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When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Learn more about our end-to-end international expansion services.