Employer of Record in Nicaragua

An Employer of Record, or EOR, is a company that legally hires employees on your behalf in another country. If you want to hire someone in Nicaragua, but you don’t have a legal entity there, you can use an EOR. The EOR handles all the local HR tasks. This includes payroll, taxes, benefits, and making sure you follow all of Nicaragua's labor laws. It’s a way to build a team in Nicaragua without the time and expense of setting up your own local company. For companies like Rivermate, the goal is to make global hiring simple.

How an Employer of Record (EOR) Works in Nicaragua

Using an EOR in Nicaragua simplifies the process of hiring employees. You find the talent, and the EOR legally hires them for you.

Here is how it generally works:

• You Choose Your Candidate: You recruit and select the person you want to hire in Nicaragua.
• The EOR Hires Them: The EOR provider, as the legal employer, drafts a compliant employment contract that meets Nicaraguan labor standards.
• Onboarding: The EOR manages the entire onboarding process, making sure all necessary paperwork is completed correctly.
• Payroll and Benefits: The EOR handles all salary payments, tax withholdings, and social security contributions. They also manage employee benefits according to local laws.
• Ongoing Compliance: The EOR stays up-to-date with any changes in Nicaraguan labor law to ensure you remain compliant. You manage your employee’s day-to-day work, while the EOR handles the legal and administrative HR functions.

Why use an Employer of Record in Nicaragua

Using an EOR in Nicaragua can save you time and reduce risk, especially if you are new to the market. It allows you to focus on your business goals instead of navigating complex local regulations.

Here are some key reasons to use an EOR:

• Avoid Setting Up a Legal Entity: You can hire employees in Nicaragua without the cost and complexity of establishing a local branch or subsidiary.
• Ensure Legal Compliance: EORs are experts in Nicaraguan labor law. They make sure your employment contracts, benefits, and termination procedures are all compliant, reducing your legal risks.
• Simplify Payroll and HR: An EOR manages all aspects of payroll, including taxes and social security contributions, which in Nicaragua involves employer contributions of around 24.5%. This saves your team from having to learn and manage a foreign payroll system.
• Hire Talent Faster: You can onboard new employees quickly and efficiently. This allows you to enter the Nicaraguan market and start operations much faster than if you were to set up your own entity.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Nicaragua includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Nicaragua.

Hiring in Nicaragua requires understanding of local labor laws. The process involves specific requirements for employment contracts, working hours, and benefits. Navigating these regulations helps you build a compliant and successful team.

Employment contracts & must-have clauses

You must provide employees in Nicaragua with a written employment contract in Spanish. While verbal agreements are recognized, a written contract is highly recommended to avoid disputes.

Make sure to include these key details in your employment contracts:

• Both your and the employee's full name and address.
• A clear description of the job and responsibilities.
• The start date and duration of the contract (fixed-term or indefinite).
• Workplace location.
• Working hours.
• Salary, benefits, and how you will pay the employee.
• Termination requirements and notice periods.

All salary and compensation amounts should be in Nicaraguan córdobas.

Probation periods

For indefinite contracts, you can include a probation period of up to 30 days. During this time, either you or the employee can end the employment agreement without cause or notice. Probation periods are not allowed in fixed-term contracts.

Working hours & overtime

The standard workweek in Nicaragua is up to 48 hours, typically spread over six days.

Any work done beyond these hours is overtime. You must pay employees double their normal rate for overtime hours. Overtime is limited to three hours per day and nine hours per week.

Public & regional holidays

Employees in Nicaragua are entitled to paid time off for national holidays. The official public holidays are:

• New Year's Day (January 1)
• Holy Thursday (Varies)
• Good Friday (Varies)
• Labor Day (May 1)
• Sandinista Revolution Day (July 19)
• Battle of San Jacinto (September 14)
• Independence Day (September 15)
• Immaculate Conception Day (December 8)
• Christmas Day (December 25)

Hiring contractors in Nicaragua

Hiring independent contractors in Nicaragua can give you flexibility and access to specialized skills without the need to set up a local entity. This is a good way to test the market or complete specific projects.

However, you need to be careful about worker classification. If you treat a contractor like an employee, Nicaraguan authorities could reclassify them. This is known as misclassification risk.

Factors that can lead to misclassification include:

• Control: Telling the worker how and when to do their job.
• Economic Dependence: The worker relies solely on your company for income.
• Integration: The worker is highly integrated into your company's operations.

If a worker is misclassified, you could be responsible for back pay, social security contributions, unpaid benefits, and fines.

An Employer of Record (EOR) can help you avoid these risks. An EOR legally employs workers on your behalf, ensuring compliance with all local labor laws. This lets you build your team in Nicaragua without the legal and financial risks of misclassification.

In Nicaragua, managing compensation and payroll means understanding a few key rules. The average monthly salary is around $320 USD, but this changes based on the industry and location. You also need to account for a legally required 13th-month bonus, which is an extra month's salary paid in December.

Payroll cycles & wage structure

In Nicaragua, you typically pay employees monthly. Manual laborers are often paid weekly. A key part of the wage structure is the 13th-month salary. You must pay this bonus to employees within the first ten days of December.

Overtime & minimums

The standard work week is 48 hours, with an 8-hour day. Any work done beyond these hours is overtime. Overtime pay is double the normal rate. There's a limit of 9 overtime hours per week.

As of March 2025, the minimum wage in Nicaragua varies by sector, ranging from NIO 5,950.02 to NIO 13,315.61 per month. For example, workers in the construction and financial sectors have a higher minimum wage than those in agriculture.

Employer taxes and contributions

As an employer in Nicaragua, you are responsible for several contributions to social security and other funds.

Employee taxes and deductions

Employees also contribute to social security and pay income tax. The income tax is progressive. The first NIO 100,000 earned annually is not taxed.

In Nicaragua, providing the right benefits and leave is key to attracting and keeping a great team. It’s not just about following the rules. It’s about showing your employees you value them. Understanding the local labor laws is the first step. This ensures you are compliant and competitive.

Statutory leave

Nicaraguan law outlines several types of mandatory leave for employees.

• Annual Leave After six months of continuous work, employees get 15 days of paid vacation. This equals 30 days per year.
• Sick Leave Employees can take up to 26 weeks of sick leave. The Social Security Institute (INSS) pays 60% of the employee's salary starting from the fourth day of illness. The employer pays the remaining 40%. The first three days are typically unpaid unless your company policy states otherwise.
• Maternity Leave Expectant mothers receive 12 weeks of paid maternity leave. This is usually taken four weeks before the due date and eight weeks after. For multiple births, this extends to 14 weeks. The INSS covers 60% of the salary, and the employer pays 40%.
• Paternity Leave Fathers are entitled to five paid days of leave following the birth of their child.

Public holidays & regional holidays

Employees in Nicaragua are entitled to paid days off for national holidays. If an employee works on a public holiday, they must be paid double their usual rate.

Typical supplemental benefits

Beyond the legal requirements, many employers offer extra benefits. This helps to attract and retain top talent. Here’s a look at both statutory and common non-statutory benefits.

How an EOR can help with setting up benefits

Setting up a benefits plan in a new country can be complex. An Employer of Record (EOR) simplifies this process for you. An EOR handles the legal and administrative burdens of managing employee benefits.

Here’s how an EOR can help:

• Ensure Compliance An EOR understands local labor laws. They make sure your benefits packages meet all legal requirements.
• Save Time You avoid the lengthy process of setting up a legal entity in Nicaragua. This means you can hire and onboard employees much faster.
• Offer Competitive Benefits EORs can provide access to attractive benefits packages. This helps you compete for the best talent in the local market.
• Manage Administration An EOR takes care of payroll, contributions, and all benefits-related paperwork. This frees you up to focus on your business.

Letting an employee go is tough, no matter the reason. In Nicaragua, it's important to handle the process with care and follow the local labor laws. This ensures you are fair to your departing team member and protects your company from legal problems. The process involves specific steps, from giving notice to calculating final pay.

Notice periods

When you end an employment contract without just cause, you need to give the employee advance notice. The length of this notice period depends on how long the employee has worked for you.

You must give this notice in writing. If you don't provide notice, you will have to pay the employee the wages they would have earned during that time.

If an employee decides to leave, they must give you 15 days' notice. During a probation period, which is typically 30 days, either you or the employee can end the contract without any notice.

Severance pay

When you terminate an employee without just cause, you owe them severance pay, also known as a seniority bonus. This payment is based on their length of service.

Here is how severance pay is calculated:

• Up to 3 years of service: One month's salary for each year.
• 4 to 6 years of service: 20 days' salary for each year.

The total severance payment cannot be more than five months' salary. In addition to severance, you must also pay any outstanding wages, vacation pay, and their proportional annual bonus, known as "Aguinaldo".

To dismiss an employee, you must get permission from the labor inspection department. You will need to provide the employee with a formal written notification, especially if the termination is for just cause.

How Rivermate handles compliant exits

Navigating the details of Nicaraguan labor law can be complex. We make sure every step of the offboarding process is handled correctly.

Here’s how we help:

• Documentation: We prepare all necessary documents, including the written notice and any paperwork required by the Ministry of Labor.
• Calculations: We calculate all final payments, including severance, unused vacation, and the annual bonus, to ensure your former employee receives everything they are entitled to.
• Communication: We can help you communicate the decision clearly and respectfully, ensuring the employee understands the reasons for the termination if it is for just cause.
• Compliance: We ensure the entire process follows Nicaraguan law, protecting you from potential legal issues.

By managing the process for you, we help make a difficult situation smoother for everyone involved.

Navigating visas and work permits in Nicaragua can feel complicated. The process involves specific steps and documents. If you plan to hire someone to work in Nicaragua, they will likely need a temporary residency permit. This permit allows them to live and work in the country for a year. After three years of temporary residency, they can apply for permanent residency.

Employment visas & sponsorship realities

An Employer of Record (EOR) can help you hire employees in Nicaragua. An EOR acts as the legal employer for your workers. This means they handle payroll, benefits, and taxes. They can also sponsor work visas.

Here is what an EOR can typically sponsor:

• Full-time employees: An EOR can sponsor visas for full-time employees with a formal job offer.
• Temporary Residence Visas: This is the most common route for foreign workers and is valid for one year.

There are some things an EOR may not be able to sponsor:

• Independent contractors: Contractors are not eligible for visa sponsorship through an EOR. They need to apply for a self-employment visa separately.
• Positions that can be filled locally: Your company must provide a letter explaining why a local candidate could not fill the position.

Practical Routes

The most common way to employ someone in Nicaragua is to sponsor a temporary residence visa. Here are the basic steps:

1. Justify the hire: You will need to show why you are hiring a foreign national instead of a local worker.
2. Gather documents: The employee will need to provide a range of documents.
3. Submit the application: The application is submitted to the Nicaraguan embassy or consulate in the employee's home country.

Here is a list of some of the documents required for a temporary residency visa:

• A valid passport with at least six months of validity
• Two passport-sized photos
• A completed visa application form
• A formal letter from the employer proving the applicant's income
• An original birth certificate
• A criminal background check
• A medical certificate

Business travel compliance

For short-term business trips, you may not need a formal business visa. Many nationalities can enter Nicaragua with a tourist card for up to 90 days. This is suitable for activities like:

• Attending meetings
• Negotiating contracts
• Conducting market research

You cannot work on a tourist card. It is for temporary business-related activities only.

To ensure compliance, you should:

• Pre-register your trip: It is recommended to pre-register your trip with the Nicaraguan authorities, especially for business purposes.
• Have the right documents: You should carry a valid passport and proof of your business activities.
• Do not overstay: Be sure to leave the country before your 90 days are up.

If you are unsure about any of the requirements, it is always best to check with the nearest Nicaraguan embassy or consulate before you travel.