Payroll and Benefits Guide Nicaragua
Last updated: May 14, 2023
Employer Payroll Contributions
|up to 24.5%||Total Employment Cost|
Pension and Disability (fewer than 50 employees)
Pension and Disability (more than 50 employees)
Training Fund (INATEC)
Employee Payroll Contributions
|7.00%||Total Employee Cost|
|4.75%||Pension & Disability|
Employee Income Tax
100,001 NIO – 200,000 NIO
200,001 NIO – 350,000 NIO
350,001 NIO – 500,000 NIO
500,001 NIO +
The national minimum wage in Nicaragua is dependent on the employee’s industry. The national minimum wage ranges from 5,196.34 NIO per month for the agriculture industry and 11,628.95 NIO per month for construction, financial institutions, and insurance.
MINIMUM WAGE (PER MONTH)
In Nicaragua, the payroll frequency is stipulated in the employment contract. Employees are typically paid on a weekly or monthly basis. Those paid monthly receive payment on the 15th day of the cycle.
In Nicaragua, 13th-month payments are mandatory and the employer must pay an additional month’s salary within the first 10 days of December.
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.
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.
Paid Time Off
Employees are entitled to 15 days of paid leave following six months of consecutive employment. After one year of work, an employee is entitled to 30 days of vacation leave. Employees receive 15 days of leave for every six months in service.
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 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 ten 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.
The father/partner is entitled to five business days of paid paternity leave after the child’s birth.
There are no provisions in the law regarding parental leave.
There are no provisions in the law regarding other leave.
The termination process varies according to the employment agreement and collective agreement in place and is based on the type of contract and reason for termination. To dismiss an employee, an employer must request permission from the labor inspection department. Following termination, an employee is entitled to any remaining vacation pay and their annual bonus.
Employees in Nicaragua must provide employers with 15 days’ notice. During the probation period, no notice is required to terminate.
Severance pay is according to the length of employment:
Up to 3 years of service, 1 month’s salary per year worked is required
4 to 6 years of service, 20 days’ salary per year worked is required
7+ years of service, 5 months of salary is required
The probation period is 30 days, during which either party can terminate the employment agreement for any reason.
Nicaragua’s immigration system provides several options for employers of foreign nationals. Requirements, processing times, employment eligibility, and benefits for accompanying family members vary by permit type.
Visa-exempt nationals (also referred to as Category A nationals) can travel to Nicaragua without an entry visa and stay for a period of up to 90 days, extendable in the country for an additional 90 days at the discretion of immigration authorities. Category B visa nationals can secure a visa at a Nicaraguan consular post or on arrival at the Nicaraguan port of entry. Category C visa nationals must obtain a Consulted Visa from a Nicaraguan consular post with prior authorization from the Immigration Department of Nicaragua. These visas typically involve an extended processing time.
Foreign nationals who will engage in work or remunerated activities in Nicaragua for less than one year can obtain a work permit. The work permit’s validity usually corresponds to the length of time the foreign national will perform work activities in Nicaragua. Foreign nationals who will engage in work or remunerated activities in Nicaragua for more than one year either hired by a company in Nicaragua or independent workers who wish to perform a paid activity in Nicaragua, must obtain temporary residence. Temporary residence can be issued for up to one year, renewable for the period of the original issuance. After three years in Nicaragua, the foreign national may apply for a permanent resident status that can be issued for up to five years.
The standard rate of VAT in Nicaragua is 15.00%
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Payroll and Benefits Guide
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
Public Holidays Calendar
|Sunday||Jan-1||New Year's Day|
|Wednesday||Jul-19||Sandinista Revolution Day|
|Thursday||Sep-14||Battle of San Jacinto|
|Friday||Dec-8||Feast of the Immaculate Conception|
Thank you for the infos! I have a question regarding the 13th month pay: As far as I know it’s only for fulltime contracted employees, right? What if an employee’s contract started on 1st December. Is he or she then entitled to a 13th month pay even though the fulltime contract has only been going for one month? Thank you in advance!
Hi Kara, thank you for your question. This is correct, 13th salary is for full-time regular employees. If an employee has not completed a full year of employment by the time the 13th salary is due, then the payment to them is prorated based on the length of employment they have completed.
We have an employ that works 3 days a week, 7 hrs a day. We have a contract stating all this. He might quit because we can’t give him more work. If he quits what are we obligated to pay him?
Hi Joan, thank you for your question. You are required to pay the employee for the time that they have worked based on what is written in the contract.
Hello, we have an employee that has quit his job. He has worked for us for more than 5 years and was being paid $140/month, but for the last year of his work he was being paid $80 due to him sharing responsibilities with someone else. In calculating his severance we are giving him 140 x 4 and 80×1 for a total of 640. Is this correct?
Thank you for your help!
Hi Ryan, according to Nicaragua labor law, the following is the formula for calculating severance.
•one month’s salary for each of the first three years of work;
•twenty days of salary for each year of work from the fourth year.
Compensation cannot be less than one month or more than five months. The fractions between the years worked must be settled proportionally.
Yes, so, I guess I’m confused as to what to pay him for severance when his salary changed at the end of employment when he quit. Was my thinking correct above for the proportionality of the years worked? Could you explain how i “settle,” this? Do you mean make an agreement with the employee for the ratio of what he os to be paid? Thanks for helping. Confusing to figure out what sum he deserves.
I have an employee with dual citizenship in US and Nicaragua. She works in Nic a few weeks a year. How do their employment laws apply to her in this situation?
Employment terms are determined based on the country of the employment contract. Regarding taxation, the worker should seek expert tax advice on what her tax requirements are unique to her setup.
Thank-you very much for the extremely helpful and concise article. It is clearly written and answered several important questions I had about managing employee wages.
Hi there. Does anyone know what kind of severance should be paid out to an employee who has worked less than a year and quit? Thank you.
Hi! Payment made to workers upon termination is a rate of 1 month salary for each of the first three years of service. A worker with less than 1 full year service will have a pro rated amount paid aligned to the number of months worked.