Employer of Record in Nicaragua

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

Businesses can only operate smoothly in Nicaragua if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Nicaragua below, to avoid any compliance issues.

Employment Contract Requirements

In Nicaragua, contracts can be verbal for specific jobs or written as per the Labour Code. However, for legal validity in court, the contract must be translated into Spanish, even if originally in another language. Typical documents should include:

• Identification of both parties
• Commencement date
• Job responsibilities and duties
• Employee's compensation and extra benefits

Onboarding Process

We can help you get a new employee started in Nicaragua quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Nicaragua

The regular workweek in Nicaragua consists of 48 hours, with 8 hours per day. However, for night-time work, it is reduced to 45 hours per week, with 7.5 hours per day.

Overtime in Nicaragua

In Nicaragua, overtime is compensated at 200% of the regular salary for work beyond 48 hours a week. Employees must receive a 24-hour rest period for weekend or holiday work. Overtime should not exceed 3 hours per day or 9 hours per week as per employment contracts or agreements.

Probation Period in Nicaragua

In Nicaragua, there's a 30-day probation period during which either party can terminate the employment agreement for any reason.

Employment laws in Nicaragua can be intricate, and even unintentional mistakes in contracts, benefits, or termination processes can carry legal and reputational consequences. With an Employer of Record, you gain a local partner that ensures every hire is compliant. The EOR takes care of drafting compliant contracts, processing accurate payroll, managing contributions to statutory benefits, and handling lawful terminations if needed, all according to local employment standards.

This level of protection is especially valuable when expanding into new or unfamiliar regions. Instead of using time and resources to build in-house legal knowledge, you gain immediate access to local expertise. The EOR keeps you ahead of regulatory updates and shields your company from potential compliance gaps, so you can confidently hire and manage employees while minimizing risk. For hiring managers and founders, it's the difference between hiring with uncertainty and building your team on a legally sound foundation.

Fiscal Year in Nicaragua

January 1st - December 31st is the 12-month accounting period that businesses in Nicaragua use for financial and tax reporting purposes.

Payroll Cycle in Nicaragua

The payroll cycle in Nicaragua is usually Monthly, with employees being paid by the 15th of the month.

Minimum Wage in Nicaragua

As of 1 March, 2025, Nicaragua's minimum wage rates range between NIO5,950.02 – NIO13,315.61 per month according to industry. The industry rates are as follows:

‍

‍

These rates represent a 4% increase from the previous minimum wage rates, as agreed by the National Minimum Wage Commission. The minimum wage rates are reviewed annually, with adjustments typically implemented on March 1st each year.

Bonus Payments in Nicaragua

Employers are required to make a 13th-month payment, which involves paying an extra month's salary within the first ten days of December. If an employee has worked less than a full year, they are entitled to the proportional part corresponding to the period worked.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 24.5% on top of the employee salary in Nicaragua.

Employee Payroll Tax Contributions

In Nicaragua , the typical estimation for employee payroll contributions cost is around 7%.

Individual Income Tax Contributions

In Nicaragua, income tax follows a 'Pay As You Earn' system with progressive rates ranging from 0% to 30%, depending on an individual's income.

Pension in Nicaragua

In Nicaragua, the pension system is managed by the Nicaraguan Social Security Institute (INSS). Employees contribute a percentage of their salary to the INSS, and upon retirement, they receive pension benefits based on their contributions and years of service.The standard retirement age for the INSS pension is 60 for men and 55 for women.

When you’re scaling quickly, setting up local payroll systems in each new country slows you down. In Nicaragua, the administrative load can include government registration, benefits management, and accurate, on-time payment delivery. An EOR gives you a plug-and-play solution that handles all of this while your internal team stays focused on growth, not red tape.

Key Ways an EOR Supports Payroll in Nicaragua:

• Rapid Payroll Setup: Onboards employees quickly with ready-to-go infrastructure.
• End Administration: Handles salary, tax, and benefits with no extra internal resources.
• Vendor Simplicity: Consolidates payroll across countries for centralized oversight.
• No Entity Required: Operates legally, saving your business the time and resources needed for local incorporation.

In Nicaragua, work permits and visas are essential for employers hiring foreign workers. The process involves submitting applications, paying fees, and meeting specific eligibility criteria. The key visa types include the Work Permit, Temporary Residence Visa, and Permanent Residence Visa. Employers must provide justification for hiring foreign nationals, submit necessary documentation, and ensure compliance with Nicaraguan labor and immigration laws when sponsoring a visa. Processing times typically take four to eight weeks, though they can extend longer depending on the visa type, completeness of documentation, applicant background checks, and local office capacity. Employers must also be prepared for renewal requirements for work permits and address challenges such as bureaucratic processes and demonstrating labor market needs. Digital nomads may utilize tourist or temporary residence visas for extended stays, though formal employment requires proper authorization. Nicaragua now offers a specific Digital Nomad Visa valid for 12 months and renewable for another 12 months, with an income requirement of $37,000 annually and a visa cost of $1,500 per person or $2,000 for a family with three dependents.

Mandatory Leave Entitlement in Nicaragua

The annual leave entitlement in Nicaragua is 15 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Nicaragua

Nicaragua has 10 recognised holidays in a year

Paid Time Off in Nicaragua

After six months of continuous employment, employees in Nicaragua receive 15 days of paid leave, and upon completing one year, they become eligible for 30 days of vacation. Additionally, employees can earn an additional 15 days of leave for every six months worked.

Maternity Leave In Nicaragua

Pregnant employees in Nicaragua receive 13 weeks (91 calendar days) of paid maternity leave, following a constitutional amendment effective February 18, 2025. In the case of multiple births, the leave period extends to 14 weeks. During maternity leave, the employer covers 40%, while Social Security covers 60%

Paternity Leave In Nicaragua

Employees in Nicaragua are entitled to up to 5 business days of paid paternity leave. This is paid at full salary.

Sick Leave In Nicaragua

Employees in Nicaragua are entitled to up to 26 weeks of sick leave, paid at 60% of regular wages. This is paid by Social Security from the 4th day of illness. The initial three days are unpaid, unless the company policy determines otherwise, or as stipulated in the employment contract. However, the unpaid period is waived in cases of hospitalization, work-related illness, or injury.

Parental Leave In Nicaragua

Nicaragua does not have a separate shared parental leave policy. The current framework provides distinct leave entitlements for each parent.

For startups and small teams, managing global employee benefits isn’t just complex, it’s a full-time job. In Nicaragua, understanding what benefits are required, how to deliver them, and how to stay compliant can be overwhelming, especially without local HR expertise. An Employer of Record removes that pressure by taking complete ownership of benefits administration, so you don't have to become an expert in local employment law.

Whether it’s healthcare contributions, pension enrollment, or statutory leave, the EOR ensures everything is delivered accurately and on time. They navigate any country-specific nuances, keep up with legal changes, and ensure each benefit is properly tracked and documented. For founders, that means fewer distractions and more time to focus on growth. Your employees get the security and support they expect from a local employer, and you get to scale your team in Nicaragua without building complex infrastructure or worrying about compliance missteps.

Termination Process in Nicaragua

Terminating an employee in Nicaragua depends on the employment and collective agreements, as well as the contract type and reason for termination. Employers need approval from the labour inspection department to dismiss an employee. After termination, the employee receives any outstanding vacation pay and their annual bonus.

Notice Period in Nicaragua

For indefinite contracts, employees can terminate by giving a written 15-day notice to the employer, except during the probation period when no notice is required. Contracts of indefinite duration may include a trial period of up to 30 days, during which either party can end the employment without obligations.

Severance in Nicaragua

In Nicaragua, unjustly dismissed workers receive severance pay calculated as one month's salary for the initial three years of service, followed by 20 days' wages for each subsequent year. This amount cannot exceed five months' wages.