Nicaragua
International Employment Law Guide
This page outlines country-level details about the onboarding process when hiring employees, and touches upon the applicable rules when terminating employment contracts.
A. Hiring of employees (onboarding)
Mandatory employer requirements
When employing an individual in Nicaragua, some employer obligations are to be met. In general terms, it is required to:
- Sign an individual employment contract
- Register with the National Social Security Office and tax office
With regards to the individual employment contract, the employer must provide a copy to the employee at the start of his/her employment. The employment contract must contain a number of mandatory items such as place and date of signing, identification of the parties, description of the work to perform, shifts, duration, salary and payment date and signatures.
Foreigners are required to establish a Nicaraguan legal entity to hire someone to work in Nicaragua.
Probation periods
In contracts entered into for an indefinite period, the parties may agree to probation periods of no more than thirty days during which any of them may terminate the employment relationship without any liability to them.
Hiring checks
Medical examination
There is no legal requirement to conduct medical examinations upon hiring, except in specific circumstances, e.g., to those applicants for jobs where there is exposure to chemical substances, noise levels or extreme temperatures or where physical activity is intense.
Criminal background check
There is no legal requirement to conduct a criminal background check, however they are permissible. In practice, employers often ask for a certificate of good conduct showing recent convictions.
Reference and education checks
Reference and education checks are permissible with consent of the individual.
Diversity & inclusion
Any company that has 50 or more employees must include at least 2% of people with disabilities in their respective payrolls. In the case of companies with a payroll of more than 10 workers and less than 50, at least 1 person with a disability must be employed. Disability is understood as any limitation or alteration acquired or congenital that affects the mental, physical or sensory functions of a person.
Types of employment contracts
Employment contracts that do not mention a time limit are considered to be open-ended employment contracts. These contracts must be documented in writing and signed before the employee enters into service.
A fixed-term employment contract is an agreement mentioning a specific end date after which the parties are released from their mutual obligations. This contract must be documented in writing and signed before the employee enters into service. Successive fixed-term contracts can be renewed twice. If the term of the second extension expires and the employee continues working, it is considered to have changed into an open-ended employment contract. Similarly, if the term of the contract expires and the employee continues working for thirty more days.
The employment contract for a clearly defined job does not need to specify the exact duration, but it must specify the exact work to be performed in such a way that it should be possible to determine when the job is done and thus the contract is terminated. This type of contract must be concluded in writing and signed before the employee enters into service.
Specific rules for executives
There is no official category of executives under Nicaraguan law whose rights to some extent deviate from the labor law rules applied to employees.
Language requirements
The language in which HR-related documents (such as employment contracts) must be drawn up is Spanish, otherwise they are null and void.
Equal pay
Except for general non-discrimination measures, Nicaragua has no specific equal pay measures at the moment.
Remote work
Nicaragua has no specific remote work regulations at the moment.
B. Termination of employees (offboarding)
Kinds of dismissal
Except for serious causes (see below) the following principles apply:
- An employment contract for an open-ended term can be terminated by the employer at any time by paying an indemnity in which case the contract is terminated with immediate effect.
- The fixed-term employment contract ends automatically when the agreed term expires. If the employer and employee continue to execute the employment contract for thirty more days, the rules on open-ended employment contracts apply automatically.
- The project-based contract for a specific job automatically ends as soon as the agreed work is completed.
An employer can also terminate an employment contract with immediate effect without indemnity in the event of ‘serious cause’. A serious cause is a breach that definitively makes any further cooperation between the employer and the employee impossible but it has to be approved by the Ministry of Labor (examples: violence in the workplace, any violation of the obligations imposed by the individual contract or internal regulations, which have caused serious damage to the company etc.).
Dismissal motivation
It is not mandatory for employers to inform dismissed employees about the specific reasons that led to their dismissal.
Notice period
The notice period provided by law is fifteen calendar days, applicable for employees to inform their employer. There is no notice period applicable for employers.
Severance pay
In case the employer terminates the employment contract without just cause or when the employee gives a fifteen-day notice, the employer will pay the employee a compensation equivalent to:
- 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, up to a maximum of fivemonths.
In the case of trusted workers, the employer must pay as compensation (severance pay) an amount equivalent to between two months and up to six months of salary, as long as the worker has a minimum of one continuous year of work without prejudice to the payment of other benefits or compensation to which they might be entitled.
Dismissal formalities
If the employer terminates the employment contract with immediate effect there are no specific formalities.If termination is justified it needs to be approved by the Ministry of Labor and a formal written notification must be given.
Special dismissal protection
Union members enjoy union privileges, such as, not to be sanctioned or dismissed without just cause. The Ministry of Labor may decree the annulment of acts that violate trade union privileges.
Legal means of employees
During the year following his/her exit date, an employee can bring forward claims based on the termination or on some of the employer’s obligations, firstly before the administrative authority in the Ministry of Labor and depending on the result, before the courts.
Specific rules for executives
No specific rules for executives.
Collective dismissals
If an employer has the intention of terminating the contract of multiple people within a short timeframe, it must follow a specific consultation procedure before the Ministry of Labor, who is responsible of approving or denying the request.
The law does not provide further details regarding the timeframe or the number of employees involved. Each case will be evaluated depending on its characteristics.
The consultation procedure is a request for the Ministry of Labor to approve the collective dismissal after explaining the reasons. There is no right to additional indemnities.
Get in touch
Ricardo Guell
Nicaragua
riguell@deloitte.com
