Global PEO Services (GPS) helps companies hire employees in Nicaragua without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Nicaragua, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Nicaragua labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Nicaragua. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Nicaragua - Country Overview
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 96.7% of the GDP.
Republic, Unitary State, Presidential System
León, Granada, Jinotega, Matagalpa, Chinandega, and Masaya.
Employment Contracts in Nicaragua
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.
Working Hours in Nicaragua
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.
Employee Leave in Nicaragua
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%.
Employee Benefits in Nicaragua
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. Employee contributions are constant at 6.25%. However, the ceiling is expected to increase.
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.