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Employer of Record (EOR) in Nicaragua

Employer of Record in Nicaragua

Skuad’s Nicaragua Employer of Record (EOR) solution helps you expand your business in Central America without any entity setup. Our unified and automated global human resource (HR) platform enables you to expedite the onboarding of your global team and manage their payroll and benefits compliantly. We help companies streamline the global expansion process with the able assistance of our international network. Talk to Skuad experts now to know how you can expand your business in Nicaragua with ease.

Nicaragua at a Glance

Official name: Republic of Nicaragua

Location: Central America

Population: 6.6 million (2020)

Currency: Nicaraguan córdoba (NIO)

Capital city: Managua

Languages: Spanish (official), English, and indigenous languages such as Miskito 

Gross Domestic Product (GDP): 12.52 billion USD (2019)

Employment in Nicaragua

What You Must Know Before Employing in Nicaragua

Nicaraguan labor laws have special provisions such as mandatory full month payment as Christmas bonus known as the Aguinaldo, and a separate contract for professional services, which caters to self-employed individuals. There are serious legal implications if the employer misses out on any defined payment.

Historically, most employment-related lawsuits have been in favor of employees. Moreover, many provisions are primarily in Spanish, making it even harder for employers to start a business using their in-house HR team.

Due to the complex provisions, understanding Nicaragua’s employment regulations can be a labor-intensive, expensive, and time-consuming task for your HR team. Hence, it is highly recommended to partner with an EOR service such as Skuad while establishing your business in Nicaragua. Skuad experts can help you with all hiring and payroll-related activities without the need to set up an entity.

The following table contains critical aspects of Nicaraguan employment laws.

Entitlements Explanation
Employment contracts in Nicaragua
  • Both verbal and written employment contracts are allowed as per the labor laws.
  • There are three types of contracts: definite term, indefinite term, and contract for professional service.
  • Employment contracts define monthly and hourly pay instead of annual pay.
  • Verbal contracts are valid for any agreement of work less than 10 days, typically seasonal work.
Standard working hours
  • Regular week hours are 48 hours, that is, eight hours per day.
  • Employees get a paid rest day after six consecutive workdays.
Minimum wage Nicaragua doesn’t have a standard minimum wage. However, the labor department decides an industry-wise minimum salary across nine sectors such as agriculture, fishing, mining and quarrying, and manufacturing industries.
Overtime rules
  • Overtime of three hours per day is allowed; however, it should not exceed nine hours in a week.
  • Overtime is calculated at 200% of the regular pay rate.
Bonus
  • Employees are entitled to an entire month’s salary as a bonus after every 12 months.
  • The employer must pay the 13th-month bonus within the first 10 business days of December or the termination of the contract.
Nicaraguan national holidays The following national holidays are observed in Nicaragua.
  • New Year’s Day
  • Holy Thursday
  • Good Friday
  • Easter Sunday
  • Labor Day
  • The Sandinista Revolution Day
  • Battle of San Jacinto
  • Independence Day
  • Immaculate Conception Day
  • Christmas Day
Paid vacations in Nicaragua Employees get 15 days of paid vacation days every six months. Employers must work with employees to finalize the vacation days.
Sick leave
  • Employees are entitled to paid sick leaves for up to six months.
  • Sick leaves are covered through Social Security, and there is a three-day waiting period before payment begins.
  • In case of hospitalizations, there is no waiting period for payments.
  • Employees are entitled to 60% of their regular pay during sick leave.
Maternity Leave
  • Female employees must get 12 weeks of maternity leaves.
  • In the case of multiple births, they are entitled to 14 weeks of maternity leaves.
  • Maternity leaves are fully paid. The employer pays 40% of the wage, while 60% of the wage is covered through Social Security.
  • Employers cannot dismiss an employee during maternity.
Employee health benefits in Nicaragua Employers may need to provide health insurance to employees through private or public institutions or a combination of both.
Payroll cycle
  • Employees involved in manual work are paid weekly.
  • Full-time employees are paid bimonthly.
Financial year-end date The calendar year, which means December 31, marks the end of the financial year.
Data protection and information confidentiality Nicaragua’s laws guarantee basic rights regarding privacy and data protection. The main law for the same is the Personal Data Protection Law (number 787).

To learn more about Nicaragua’s employment policies to ensure your expansion efforts fall within the legal requirements, book a demo with Skuad experts today.

Contractors vs. Full-time Employees

Most companies struggle to decide the best option while hiring foreign employees: contractors or full-time employees. Nicaraguan employment law has provisions for short-term and long-term contracts, and employers need to choose the contracts based on their business needs. Short-term contracts are preferred as the liability and cost involved are significantly lower compared to hiring full-time employees.

Nicaraguan employment law also defines a third type of contract, specifically designed for professional workers. If you want to hire remote knowledge workers or professionals with specific skill sets for short-term projects, such as web development, you should hire employees on a professional contract. The contract gives freedom to employees to work anywhere and anytime and saves money for the employer who is not liable to pay benefits.

Advantages of Hiring Contractors

  • Flexibility: Since contractors are hired on a short-term basis, you are free to determine the scope of their work temporarily. If new needs arise, further contracts can be drafted in the short term.
  • Independence: Short-term contractors usually work independently and on their own timeline. They do not require close supervision, and your resources can be transferred elsewhere, as needed.
  • Cost: Hiring contractors may be cheaper in the long run although their individual rates are higher than those of full-time employees. This is because such employees are not entitled to employment benefits such as bonuses and tax compensations.

Advantages of Hiring Full-time Employees

  • Loyalty and organizational commitment: Full-time employees are likely to be more loyal as they exclusively work for your company. As their individual success depends on the performance of your firm, they are likely to invest more effort into their work.
  • Knowledge: All employees undergo training when they join a firm. The skills and knowledge gained by a full-time employee, however, stay within the organization.
  • Legal freedom: Since full-time employees are defined as such in their contracts from the outset, misclassifications can be avoided completely. When hiring full-time employees, you determine the terms of the contract and entitlements, and these are not liable to change unless mutually decided by both parties.

While the contract provisions are clearly defined, they can be complex to interpret. Learn more from Skuad experts about hiring the best Nicaraguan talent on both a contractual and full-time basis.

Hiring in Nicaragua

Hiring employees in Nicaragua can be challenging, and companies must be aware of Nicaragua's labor law and dispute jurisdictions to avoid any legal hurdles. The hiring process includes posting jobs online, tapping into your local network of headhunters, and outsourcing recruitment services. Companies that want to hire knowledge workers rely upon local and international job search portals for finding resources. The two most popular job portals in Nicaragua are,

While posting jobs on employment portals is a good way to start the hiring process, it doesn’t solve your worries completely. You still need to manage the interviews, selection, onboarding, and entire employment life cycle.

Hiring in Nicaragua can be difficult, especially when you don't have an entity set up. Skuad’s Nicaragua EOR service makes the hiring process hassle-free by removing significant financial risks. Talk to Skuad experts now to expedite your expansion.

Probation & Termination in Nicaragua

Probation Period

Nicaraguan employment law defines a standard probation period of a month (30 days) to check an employee’s performance and job suitability. Both parties may end the contract within the probationary period for valid reasons. After 30 days of service, the employee becomes entitled to benefits, and the employer is liable to pay the severance amount.

Termination of Service

Employees retain their annual bonus and vacation pay amount upon termination. The employer needs to produce a Notice of Termination or Finiquito while terminating any employee. This final document must contain all necessary details, including the reason for termination, pay rate, and calculations of other liable amounts such as vacation pay and annual bonus. Employers must pay this amount within 10 days of termination.

Notice Period

Employees must serve 15 days of notice.

Severance Pay

The employee is entitled to severance if they are terminated due to unfair reasons or without a notice period. The severance amount cannot exceed five months’ pay. Further,

  • Employees are eligible for a full month’s salary after three years of service 
  • They are eligible for 20 more days’ salary per year for four to six years of service
  • They must get five months’ salary for over seven years of service

To learn more about how probation and termination work in Nicaragua, connect with Skuad experts.

EOR Solution in Nicaragua

Global companies have to keep themselves up-to-date with both local and international compliances. Nicaragua offers an excellent market for global businesses looking to expand in Central America. However, its employment laws have some elements that can make the implementation hard. While you can set up payroll internally, taking the help of an EOR service is more efficient.

Outsourcing Employment through an Employer of Record

Skuad’s EOR Nicaragua solution ensures smooth and compliant payroll processing and other employment responsibilities, including preparing customized contracts, work permits, and taxation, without setting up a local entity. Some of Skuad’s primary functions are,

  • Talent discovery: We discover exceptional talent and skill to onboard the employees for the companies.
  • Updated EOR: The tech-enriched HR platform enables seamless and easy control over the hiring procedure, including onboarding, paying, and managing the hiring process.
  • Local compliance: Not limited to the hiring process only, we release you from the hassle of complying with the local laws to create entities and manage tax.
  • Conducting formalities: We help in creating a suitable employment contract, following all the legal provisions of the land, and ensuring an easy collection of documents for taxation.

Talk to us now to know more about Skuad’s EOR solutions for Nicaragua.

Types of Visas in Nicaragua

An employer should ensure that employees have valid visas and work permits prescribed by the Nicaraguan authorities. Obtaining visas and work permits is a tedious task that needs local assistance and expertise. The problem doesn’t end at getting work visas; they need to be renewed at regular intervals.

Skuad can help you with all sorts of visas, work permits, and other employment-related compliances, expediting your business expansion in Nicaragua.

Interestingly, 92 countries are considered visa-free in Nicaragua, and people from these countries can visit Nicaragua for 90 days. Here’s a list of some of them.

  • All European Union (EU) countries
  • The United States of America
  • Japan
  • Australia
  • Argentina
  • Canada
  • Hong Kong
  • Qatar
  • Taiwan
  • Kuwait
  • Singapore
  • The United Arab Emirates
  • Chile

Let’s look at various types of visa requirements in Nicaragua.

Visa Category Explanation
Tourist Visa Nicaragua provides a 90-day Tourist Visa, which can be extended through the Office of Immigration, Managua, by providing the following documentation.
  • Extension request application
  • Copy of passport
  • Extension fees
Temporary Residence Visa
  • A Nicaraguan Temporary Residency Visa is valid for one year.
  • People who have an employment contract can apply for a Temporary Residence Visa.
  • Upon three consecutive renewals, a Permanent Residence Visa valid for the next five years is offered automatically.
  • Employers need to apply for this type of visa for their employees.
Permanent Residence Visa
  • A Nicaraguan Permanent Residence Visa is valid for five years.
  • Expatriates who are married to Nicaraguan citizens are eligible for the same.
  • Employees with work agreements can get Permanent Residence Visas after three consecutive renewals.
Foreign Investor Visa
  • The Ministry of Development, Industry, and Commerce, Nicaragua approves foreign investor visas to any person who invests USD 30,000 or more in any industry in the country.
  • A foreign investor visa is valid for five years.
  • Spouses, dependents, and company shareholders also get the visa.

Talk to us and get more information and guidance related to types of visas and work visa requirements in Nicaragua. Skuad can handle all your visa requirements and ensure the expansion process is not delayed.

Work Permits

To live and work in Nicaragua, foreigners must obtain a one-year Temporary Residence Visa, which is issued based on valid employment in the country. An applicant can apply for it at the Nicaraguan embassy in their home country and or through their employers in Nicaragua.

For work commitments of more than one year, the employees need to apply for visa renewal every year or appeal for a Permanent Residence Visa that allows them to stay and work for five years in Nicaragua.

Nicaraguan work permit/work visa requirements Foreign nationals who want to work in Nicaragua need to provide the following documents to apply for a Temporary Residence Visa for a stay of one year.
  • Visa application form
  • Two passport photographs
  • A valid passport
  • Letter of employment containing the compensation details
  • A criminal background check by the police
  • A medical certificate that certifies the good health of the applicant
  • A medical certificate that certifies the good health of the applicant
  • Security cash deposit in case of possible future deportation
Steps required to get a work visa in Nicaragua A Temporary Residence Visa is sufficient for foreigners to work in Nicaragua.
  • The employer has to apply for a work visa on behalf of workers.
  • The employer has to provide a valid reason to the authorities to justify hiring foreign nationals; since the local citizens get priority in employment.
  • Once a temporary visa is approved, workers can stay and work in Nicaragua.
  • The visa needs renewal after 12 months. Three consecutive renewals make workers eligible for a Permanent Residence Visa for five years.
Other considerations
  • Contrary to its name, a Permanent Residence Visa is valid only for five periods and needs renewals every five years.
  • If ex-pats marry a Nicaraguan citizen, they can apply for a Permanent Residence Visa by producing their marriage certificate.

To know more about work permits in Nicaragua and how Skuad can secure them for you, speak to our experts today and kick-start your expansion.

Payroll & Taxes in Nicaragua

Setting Up Payroll in Nicaragua

As a foreign company that doesn't have any prior presence in Nicaragua, you must clearly understand local tax compliances such as personal income tax, business tax, corporate tax, employee health insurance liability, and social security costs.

There are four ways to handle payroll and taxation in Nicaragua.

  1. Set up an in-house team to manage the payroll in Nicaragua
  2. Set up a remote payroll that is managed by your parent company in your country while meeting Nicaragua’s compliances.  
  3. Partner with a local payroll company in Nicaragua and use their existing HR and payroll infrastructure. 
  4. Outsource payroll in Nicaragua to a global EOR service such as Skuad and focus on your core job of running the business without worrying about complex payroll management.

Taxes in Nicaragua

Nicaragua has a progressive income tax rate, which means that employee’s income tax depends on how much money they earn. Employer payroll taxes and corporate tax are applicable and standard across industries. Skuad experts can help manage payroll and local taxation for your business while ensuring 100% compliance with Nicaraguan employment laws.

Let us take a look at various taxes applicable in Nicaragua.

Tax Applicable in Nicaragua Explanation
Individual income tax The maximum individual income tax rate is 30%. The tax breakdown based on the salary range is as follows.
Income Range (NIO) Tax Rate (%)
Less than 100,000 0
100,001 to 200,000 15
200,001 to 350,000 20
350,001 to 500,000 25
Over 500,001 30
Employee taxes The employee pays a total of 7% payroll tax, of which 4.75% is contributed towards pension and disability, while 2.25% is applied to health insurance.
Employer payroll taxes Employers may have to pay up to 22.5% of income toward payroll taxes.
Employer Payroll Tax Rate (in %) Particulars
12.5 Pension and disability (if the employer has less than 50 employees)
13.5 Pension and disability (if the employer has 50 or more employees)
6 Health insurance
1.5 Labor healthcare
1.5 War victims
Corporate tax 30%
Sales tax/value-added tax 15%
Property tax (real estate tax) 1%
Financial tax year January 1 to December 31
Tax returns Tax returns must be filed within two months after the financial year-end date.

To understand how payroll and taxes are managed in Nicaragua and expedite your expansion process, talk to Skuad experts and book a demo.

Incorporation: How to Set Up a Subsidiary in Nicaragua

Nicaragua is a free economy and hence, it provides excellent business opportunities. While setting up business in Nicaragua, the first thing you must consider is whether you want to employ foreign professionals or locals. Nicaraguan employment laws strictly state that the first preference should be given to local citizens; if you hire ex-pats and apply for a work visa, you need to justify to the authorities that a local citizen cannot do the work.

Other essential factors involve deciding upon the type of entity you want to set up. The three most common choices include setting up a corporation, a joint-stock company, or a branch office. However, you must be aware of variations in subsidiary laws depending on location; otherwise, you may end up in legal trouble.

Setting up an entity in Nicaragua may involve various steps such as,

  • Creating and submitting an act of incorporation
  • Registering as a trade association
  • Obtaining a foreign investor certificate
  • Buying and registering account books
  • Getting and submitting a single registration

Setting up an entity and creating your legal presence can be a complicated process in a foreign country. Skuad’s Nicaragua EOR solution offers a team of expert lawyers, accountants, and consultants who can help with the incorporation process. Book a Demo to know more.

Professional Employer Organization (PEO)

A professional employer organization (PEO) enters into a joint-employment relationship with an employer by leasing their employees to the partner employer. Many global companies take the help of PEO to expand their businesses as it allows the PEO to share and manage employee-related responsibilities and liabilities. It takes care of HR tasks such as hiring, onboarding, payroll, taxation, probation, termination, employment contracts, and visas.

You must remember that your company will be held liable for the penalties imposed on any unwarranted employment-related actions executed by the PEO. On the other hand, an EOR service takes care of all compliance-related liabilities. This means that your company is not held responsible for the contravention of local laws.

Partnering with a PEO works well if you already have a legal entity in a foreign country. However, an EOR service does not require an entity establishment; it can take care of incorporation for you.

Skuad can help you with both EOR and PEO services. Our team of experts handles all HR-related services with efficiency and dedication. We strive to understand your needs and end-goal to help grow and expand your business. Our bespoke services will save you precious time and money. Book a demo with Skuad experts to know more about our EOR solution for Nicaragua.

Conclusion: What Gives Skuad’s Nicaragua Solutions an Edge?

Expanding your business globally is challenging. Skuad can help you by providing a well-established global HR platform to manage the entire employment life-cycle without setting up a legal entity in Nicaragua.

Skuad has an extensive network in 150+ countries across the globe and provides a single interface to onboard and manage employees and contractors. It offers consistent prices, irrespective of the location, and manages the payment of your team through a single invoice.

We can take care of all HR tasks for you, including recruitment, hiring, onboarding, payroll, taxation, probation, termination, visa, work permits, and setting up a subsidiary. Talk to Skuad experts to learn about key aspects of hassle-free global business expansion in Nicaragua.

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