Employer of Record Guide in Nicaragua
Expanding your team into Nicaragua opens doors to exceptional talent in a growing Central American market, but navigating local employment laws requires careful attention to detail. Our comprehensive guide helps you hire compliantly while tapping into Nicaragua's skilled workforce across tech, agriculture, and renewable energy sectors.
Capital City
Currency
Languages
Population size
Services available in this country:
Key stats and facts
Nicaragua's economy is experiencing steady growth, with major hubs like Managua and León offering diverse talent pools in software development, customer service, and emerging green energy fields. Understanding the local market dynamics—from the C$6,518 monthly minimum wage to the 30% top tax rate—sets the foundation for successful hiring decisions.
Major economic hubs
Skills in demand
Currency
Language
GDP per Capita
Standard Tax Rate
Your EOR guide in Nicaragua
Getting payroll, benefits, and compliance right in Nicaragua means understanding everything from the country's progressive tax system to mandatory social security contributions. This detailed breakdown covers the essential employment regulations, leave policies, and onboarding requirements you need to hire with confidence.
Minimum Wage
Nicaragua's minimum wage is set annually and varies by economic sector. As of 2024, the general minimum wage is C$6,518.28 per month (approximately $177 USD).
The minimum wage applies to all sectors unless specifically exempted, with some industries having slightly different rates based on economic activity classifications.
Payroll Cycle
Nicaraguan labour law requires employees to be paid at least monthly. Most employers follow these common patterns:
- Monthly: Most common, typically on the last working day
- Bi-weekly: Allowed but less common
- Weekly: Permitted for certain industries
Individual Income Tax
Nicaragua uses a progressive income tax system with the following brackets for 2024:
| Annual Income (C$) | Tax Rate |
|---|---|
| Up to C$100,000 | 0% |
| C$100,001 to C$200,000 | 15% |
| C$200,001 to C$350,000 | 20% |
| C$350,001 to C$500,000 | 25% |
| Over C$500,000 | 30% |
Tax Residency Criteria
Individuals are considered Nicaraguan tax residents if they:
- Reside in Nicaragua for more than 183 days in a calendar year
- Have their centre of vital interests in Nicaragua
- Are Nicaraguan nationals living abroad but maintain economic ties to Nicaragua
Employer Payroll Contributions
Note: Research shows conflicting information - please verify current rates
Employers in Nicaragua must contribute to the National Social Security Institute (INSS):
- Social Security: 19% to 22.5% of employee salary (rate varies by company size)
- Professional Risk Insurance: 0.5% to 8.5% (varies by industry risk level)
- Severance Fund: 2% of salary
Estimated Total Employer Cost: 21.5% to 33% above base salary
Working Hours
Nicaragua's standard working arrangements include:
- Regular work week: 48 hours maximum (8 hours per day, 6 days per week)
- Night work: 7 hours maximum per day (10 PM to 6 AM)
- Mixed shifts: 7.5 hours maximum per day
Certain professional and managerial positions may be exempt from standard hour limitations under specific circumstances.
Overtime Pay
- Overtime rate: 2x the regular hourly wage
- Overtime threshold: Hours worked beyond the standard 48-hour work week
- Maximum overtime: 3 hours per day, 9 hours per week
- Sunday work: 2x regular pay (if not part of regular schedule)
Employment Classifications
- Permanent employees: Full-time workers with indefinite contracts
- Fixed-term contracts: Maximum 2 years, renewable once
- Part-time: Less than 48 hours per week with proportional benefits
- Probationary period: Up to 30 days for most positions
Vacation Leave
- Entitlement: 15 calendar days after completing one year of service
- Accrual: Proportional accrual throughout the year
- Payout: Must be paid at termination if unused
- Timing: Can be taken after 6 months of employment (proportional)
Sick Leave
- Paid sick leave: Covered by social security after 3 days
- Employer responsibility: First 3 days at 60% of salary
- Medical certification: Required for absences over 3 days
- Maximum coverage: Up to 52 weeks through social security
Maternity Leave
Note: Research shows conflicting duration - please verify current requirements
- Duration: 12 weeks (extendable to 14 weeks for multiple births)
- Payment: 60% of salary paid by social security
- Job protection: Position guaranteed upon return
- Pre-natal leave: 2 weeks before expected delivery
Paternity Leave
- Duration: 5 working days
- Payment: 100% of salary
- Timing: Must be taken within 30 days of birth
- Adoption: Same benefits apply for adoptive fathers
Other Statutory Leave
- Bereavement leave: 3 days for immediate family members
- Marriage leave: 5 days for employee's wedding
- Study leave: Available for work-related education (unpaid)
- Jury duty: Paid leave for civic obligations
Summary
| Leave Type | Duration | Paid? | Funding |
|---|---|---|---|
| Vacation | 15 days/year | Yes | Employer |
| Sick Leave | Up to 52 weeks | Partially | Social Security |
| Maternity | 12-14 weeks | Yes (60%) | Social Security |
| Paternity | 5 days | Yes | Employer |
| Bereavement | 3 days | Yes | Employer |
| Marriage | 5 days | Yes | Employer |
Termination Types
Termination With Cause (Just Cause):
- No severance or notice required
- Must involve serious misconduct or breach of contract
- Requires proper documentation and due process
Termination Without Cause:
- Requires advance notice or payment in lieu
- Severance pay obligations apply
- Must comply with anti-discrimination laws
Notice Period Requirements
| Length of Employment | Notice Period |
|---|---|
| 30 days to 1 year | 15 days |
| 1 to 3 years | 30 days |
| 3 to 5 years | 45 days |
| Over 5 years | 60 days |
Severance Pay
Employees terminated without cause are entitled to:
- One month's salary for each year of service
- Minimum: One month's salary regardless of tenure
- Calculation: Based on average salary of last 6 months
- Maximum: No legal maximum specified
Probationary Periods
- Duration: Up to 30 days for most positions
- Termination: Either party can terminate without notice during probation
- Benefits: Probationary employees still entitled to proportional vacation pay
Final Pay Requirements
Employers must provide final payment within:
- Immediate termination: Within 24 hours
- Resignation with notice: On the last working day
- Components: Base salary, unused vacation, proportional 13th month bonus
Legal Protections
Employees cannot be terminated for:
- Pregnancy or maternity leave
- Union activities or membership
- Filing labour complaints
- Discrimination based on protected characteristics
National Holidays (2025)
| Holiday | Date |
|---|---|
| New Year's Day | January 1 |
| Maundy Thursday | April 17 |
| Good Friday | April 18 |
| Labour Day | May 1 |
| Liberation Day | July 19 |
| Battle of San Jacinto | September 14 |
| Independence Day | September 15 |
| Immaculate Conception | December 8 |
| Christmas Day | December 25 |
Regional Holidays
Some municipalities may observe additional local patron saint days or regional celebrations. These vary by location and may not be mandatory for all employers.
Holiday Pay Rules
- Eligibility: All employees regardless of tenure
- Payment: Regular daily wage
- Work requirement: If an employee works on a holiday, they receive 2x regular pay plus the holiday pay
- Substitute days: If a holiday falls on a rest day, the following Monday typically becomes the observed holiday
Required Documentation
Employment Contract Requirements:
- Job title and description
- Salary and payment terms
- Working hours and location
- Probationary period (if applicable)
- Termination clauses
- Benefits and leave entitlements
Employee Documentation:
- National identity card (cédula de identidad)
- Tax identification number (RUC)
- Social security registration
- Educational certificates (if required for position)
- Bank account information for salary deposits
Work Authorization
For Foreign Employees:
- Work permit (permiso de trabajo) required
- Temporary or permanent residence status
- Professional licence validation (for regulated professions)
- Apostilled documents from country of origin
Legal Compliance
Mandatory Registrations:
- Ministry of Labour (MITRAB) employment registration
- Social security (INSS) enrolment
- Tax authority (DGI) registration
- Municipal business licence (if applicable)
Background Checks
- Criminal record check: Commonly requested
- Reference verification: Standard practice
- Educational verification: Required for professional positions
- Medical examinations: May be required for certain industries
Data Protection
Nicaragua follows basic data protection principles:
- Employee consent required for personal data collection
- Secure storage of employee records
- Limited sharing of personal information
- Right to access and correct personal data
Onboarding Timeline
| Step | Timeline |
|---|---|
| Job offer accepted | Day 0 |
| Employment contract signed | Day 1-3 |
| Work permit processing (if needed) | 15-30 days |
| Social security registration | Day 3-5 |
| Ministry of Labour registration | Day 5-7 |
| Payroll setup completed | Day 7-10 |
| First day of work | Day 10-14 |
Worker Classification
Nicaragua distinguishes between employees and independent contractors based on:
- Control: Level of supervision and direction
- Integration: How integral the work is to the business
- Economic dependence: Whether the worker depends on one employer
- Tools and equipment: Who provides work materials
Misclassification can result in penalties, back payments of social security contributions, and labour law violations.
Unionisation Rights
- Right to organise: Protected under Nicaraguan constitution
- Collective bargaining: Recognised for groups of 20+ workers
- Strike rights: Legal with proper procedures and notice
- Union dues: Typically 1-2% of salary if employee joins
Cultural Workplace Norms
Communication Style:
- Formal address (usted) common in professional settings
- Personal relationships important for business success
- Indirect communication style, especially regarding criticism
Work-Life Balance:
- Family obligations highly respected
- Extended lunch breaks common (1-2 hours)
- Religious observances accommodated
- Punctuality expectations vary by region and industry
Remote Work Considerations
Remote work regulations in Nicaragua are still developing:
- Equipment: Employer typically provides necessary tools
- Work hours: Must still comply with maximum hour limits
- Health and safety: Employer responsibility extends to home office
- Tax implications: May affect income tax calculations
Cross-border considerations:
- Work performed outside Nicaragua may affect tax residency
- Social security contributions still required for Nicaraguan employees
- Labour law protections apply regardless of work location
What Borderless AI Handles
When you hire through Borderless AI in Nicaragua, we manage:
- Employment contract drafting and compliance
- Payroll processing and tax withholdings
- Social security registrations and contributions
- Ministry of Labour compliance
- Local HR support and employee relations
- Termination procedures and severance calculations
Built-in benefits packages for Nicaragua
When the world is your competition, it pays to incentivize new hires and existing alike. Borderless AI benefits packages typically inlucde:
Medical Insurance
Dental Insurance
Retirement Contribution
Life Insurance
Vision Insurance
Explore other countries
Unlock global hiring potential
Simplify your payroll and hiring processes today.
