Nicaragua, the largest country in Central America, is an emerging destination for tourism and business, known for its stunning natural landscapes, colonial architecture, and rich cultural heritage. The economy is diverse and growing, with key sectors in agriculture, mining, and manufacturing, alongside recent expansions in renewable energy, tourism, and free-trade zones. With a strategic location and an increasingly skilled workforce, Nicaragua presents promising opportunities for global employers and foreign investment.

Job Title Restrictions

There are no restrictions on job titles that we can hire in Nicaragua.

Working Hours

The standard working week in Nicaragua consists of 48 hours per week 8 hours per day, except in the case of night-time work, which drops to 45 hours per week, 7.5 hours per day.

Employees are entitled to a 30-minute paid rest break within their workday, which generally occurs after four hours of continuous work. Additionally, the labor code mandates a minimum of 24 consecutive hours of rest each week, usually on Sundays.

Overtime

All work above the standard working hours is paid as overtime and regulated by employment contracts/collective agreements. When an employee is requested to work overtime or work on holidays, there is a limit of 9 hours per week.

All overtime hours in excess of 48 hours a week are paid at an overtime compensation rate of 200% of the employee’s regular salary. For work performed on a weekend or holiday, employees are entitled to a 24-hour rest period in lieu. Overtime must not exceed 3 hours per day and 9 hours per week.

Minimum Wage

The national minimum wage in Nicaragua is dependent on the employee’s industry. The national minimum wage ranges from NIO 5,196.34 per month for the agriculture industry and NIO 11,628.95 per month for construction, financial institutions, and insurance.

13th Salary

The annual remuneration in Nicaragua is divided by 13, corresponding to:

• 12 months salary
• 1 month Vacation Allowance (13th Salary), usually paid in December

Probation Period

The probation period is 30 days, during which either party can terminate the employment agreement for any reason.

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Taxes & Local Employment Costs

Employee Taxes

Social Security Contribution (INSS): Employees contribute 7% of their monthly salary to the Nicaraguan Social Security Institute (INSS). This contribution helps fund pensions, healthcare, and other social benefits.

Income Tax Withholding (IR): Employees are subject to a progressive income tax, ranging from 10% to 30% based on monthly income. Employers are responsible for withholding this amount from employees' salaries and remitting it to the tax authority (DGI).

Employer Taxes & Contributions

Employer taxes in Nicaragua typically cover the following:

• Social Security
• INATEC
• Severance
• 13th salary
• Vacation

Employers are required to enroll employees in Nicaragua’s social security system, administered by the Nicaraguan Institute of Social Security (INSS). This insurance covers health benefits, maternity leave, work-related injury compensation, and pensions.

Employers must also contribute 2% of each employee’s salary to the National Technological Institute (INATEC). This contribution funds vocational and technical training programs, helping to upskill the Nicaraguan workforce.

Annual Leave

Employees are entitled to 30 days of annual leave per year, accruing at a rate of 2.25 days per month. Employees receive 15 days of leave for every six months in service. Employees are entitled to their full salary during the annual leave period, calculated based on their usual pay. Unused annual leave does not expire, it rolls over into the next year.

Sick Leave

Employees are entitled to up to 26 weeks of sick leave paid at 60% of the regular wages by Social Security from the 4th day of sickness. The first three days of sick leave are unpaid (unless the company has established a practice of paying for those days and it is stipulated within the employment contract). However, if the employee is hospitalized or it is a work-related illness or injury, the three-day waiting period/unpaid leave is waived.

Maternity Leave

Maternity leave in Nicaragua is 12 weeks of paid leave. An employee must take four weeks of leave before the birth of the child and eight weeks following the birth. In the case of multiple births, an employee is entitled to 14 weeks of paid leave, four weeks of leave to be taken before the child’s birth, and 10 weeks following the birth.

Social Security compensates all maternity leave at 60% of the employee’s regular salary and 40% from the employer resulting in a fully paid maternity leave. Employees who have contributed to Social Security for a minimum of 16 weeks preceding childbirth receive a maternity leave benefit of 12 weeks at 100% of the employee’s average weekly income. If an employee has not contributed to social security, then the compensation falls to the employer.

Paternity Leave

The father/partner is entitled to five business days of paid paternity leave after the child’s birth.

Public Holidays

Nicaragua observes 11 public holidays each year. These holidays are typically non-working days, and employees required to work may be entitled to overtime pay​.

Process

Employers in Nicaragua can terminate an employee for just cause or without cause. The Nicaraguan labor law is protective of workers, so unjust or arbitrary dismissal can lead to severe financial consequences for the employer.

For a lawful termination, the employer must follow a clear process:

• The employer should provide written notice to the employee outlining the reason for termination (if for just cause).
• If severance pay is required, it should be calculated and paid immediately after termination.
• Employers should keep documentation of the dismissal to defend against any potential claims of wrongful termination.

Just Cause for Termination: ‍

The law defines just cause as serious misconduct or failure to comply with contractual obligations. Common grounds for dismissal with just cause include:

• Repeated poor performance or failure to meet work requirements.
• Theft, fraud, or dishonesty.
• Workplace violence or threats against coworkers or supervisors.
• Absenteeism without justification for a significant period.
• Breach of confidentiality or non-compete clauses.

Important: The employer must prove that the dismissal was for just cause, and the burden of proof lies with the employer.

Termination Without Just Cause: ‍

An employer can also dismiss an employee without cause, but this type of dismissal requires the employer to provide severance pay to the employee, which is regulated by the law. If an employer does not have a valid reason for termination, the employee is entitled to severance, calculated based on their years of service.

Notice Period

The employer must provide 15 days’ notice to the employee before terminating the contract. If the employer fails to provide this notice, they are required to compensate the employee with an additional 15 days of pay.

Severance Pay

When an employee is terminated without just cause, the severance pay is calculated based on the employee’s salary and length of service. Severance includes:

• Days worked in the last month.
• Any unpaid benefits or bonuses.
• Additional compensation for work-related expenses or overtime (if applicable).

The severance pay for termination without just cause is structured as follows:

• 1 month’s salary for employees with 1 to 5 years of service.
• 2 months’ salary for 5 to 10 years of service.
• 3 months’ salary for 10 to 15 years of service.
• 4 months’ salary for 15 to 20 years of service.
• 5 months’ salary for 20+ years of service.

In Nicaragua, 13th month salary payments are mandatory and the employer must pay an additional month’s salary within the first 10 days of December.