Payroll and Benefits Guide Nicaragua
Last updated: Mar 03, 2026
Contribution
| Employer Payroll Contributions | |
|
12.50%
|
Pension and Disability (fewer than 50 employees)
|
|
13.50%
|
Pension and Disability (more than 50 employees)
|
|
6.00%
|
Health Insurance
|
|
1.50%
|
Labor Healthcare
|
|
1.50%
|
War Victims
|
|
2.00%
|
Training Fund (INATEC)
|
| up to 24.50% |
Total Employment Cost |
| Employee Payroll Contributions | |
|
4.75%
|
Pension & Disability
|
|
2.25%
|
Health Insurance
|
| 7.00% |
Total Employee Cost |
| Employee Income Tax | |
|
0-100,000 NIO
|
0%
|
|
100,001 NIO – 200,000 NIO
|
15%
|
|
200,001 NIO – 350,000 NIO
|
20%
|
|
350,001 NIO – 500,000 NIO
|
25%
|
| 500,001 NIO + | 30% |
Employer taxes
Employee taxes
Minimum Wage
General
The national minimum wage in Nicaragua is dependent on the employee’s industry. The national minimum wage ranges from 5,196.34 NIO per month for the agriculture industry and 11,628.95 NIO per month for construction, financial institutions, and insurance.
MINIMUM WAGE (PER MONTH)
Payroll
Payroll Cycle
In Nicaragua, the payroll frequency is stipulated in the employment contract. Employees are typically paid on a weekly or monthly basis. Those paid monthly receive payment on the 15th day of the cycle.
13th Salary
In Nicaragua, 13th-month payments are mandatory and the employer must pay an additional month’s salary within the first 10 days of December.
Working Hours
General
The standard working week in Nicaragua consists of 48 hours per week 8 hours per day, except in the case of night-time work, which drops to 45 hours per week, 7.5 hours per day.
Overtime
The maximum legal working hours depend on the shift classification (Labour Code):
| Shift Type | Time Period | Maximum Daily Limit | Maximum Weekly Limit |
| Day Shift (Diurna) | 6:00 AM to 8:00 PM | 8 hours | 48 hours |
| Night Shift (Nocturna) | 8:00 PM to 6:00 AM | 7.5 hours | 45 hours |
| Mixed Shift (Mixta) | Combines day and night work | 7 hours | 42 hours |
-
Overtime Threshold: Overtime is defined as any hour worked beyond the maximum daily or weekly limits for the respective shift type.
-
Hazardous Work: In unhealthy or dangerous workplaces, regular working hours must not exceed 6 hours per day.
Overtime Limits and Caps
| Aspect | Regulation Details |
| Daily Overtime Cap | Overtime is strictly limited to a maximum of 3 hours per day. |
| Weekly Overtime Cap | Overtime must not exceed 9 hours per week. |
| Exemptions | Managerial and supervisory employees who exercise functions of direction, inspection, or vigilance may be exempt from the working hours and overtime limitations. |
Mandatory Overtime Pay Rates
Nicaragua mandates a high, non-negotiable minimum premium rate for all standard overtime.
| Day/Condition | Minimum Compensation Rate (Statutory) | Total Pay Rate | Notes |
| Standard Overtime (Working Days) | 2 times the employee’s regular hourly salary (Double Pay). | 200% | Applies to all hours worked beyond the standard weekly limit (e.g., beyond 48 hours for day shift). |
| Weekly Rest Day/Holiday Work | 2 times the regular daily wage. | 200% | Overtime hours and hours worked on a rest day or official holiday are paid at double the rate. |
Compensation Method:
-
Monetary Pay: The payment of the 200% premium is mandatory for all overtime.
-
Compensatory Rest: For work performed on a Weekend or Public Holiday, employees are entitled to a 24-hour rest period in lieu of payment, or the 200% premium, depending on whether the holiday is one that is normally compensated (paid holiday). In most cases, the employee is entitled to the 200% premium plus the rest period. The Labour Code states that hours worked on a rest day or holiday will be paid 100% more than what is stipulated for the respective normal day.
Leave
Annual Leave (vacation)
Employees are entitled to 15 days of paid leave following six months of consecutive employment. After one year of work, an employee is entitled to 30 days of vacation leave. Employees receive 15 days of leave for every six months in service.
Public Holidays
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 1 January 2026 | Thursday | New Year’s Day | Standard holiday |
| 2 April 2026 | Thursday | Maundy Thursday | Standard holiday |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 1 May 2026 | Friday | Labour Day | Standard holiday |
| 19 July 2026 | Sunday | Sandinista Revolution Day | Standard holiday |
| 20 July 2026 | Monday | Sandinista Revolution Day Holiday | |
| 14 September 2026 | Monday | Battle of San Jacinto | Standard holiday |
| 15 September 2026 | Tuesday | Independence Day | Standard holiday |
| 8 December 2026 | Tuesday | Feast of the Immaculate Conception | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Sick Days
Employees are entitled to up to 26 weeks of sick leave paid at 60% of the regular wages by Social Security from the 4th day of sickness. The first three days of sick leave are unpaid (unless the company has established a practice of paying for those days and it is stipulated within the employment contract).
However, if the employee is hospitalized or it is a work-related illness or injury, the three-day waiting period/unpaid leave is waived.
Maternity Leave
Maternity leave in Nicaragua is 12 weeks of paid leave. An employee must take four weeks of leave before the birth of the child and eight weeks following the birth. In the case of multiple births, an employee is entitled to 14 weeks of paid leave, four weeks of leave to be taken before the child’s birth and ten weeks following the birth.
Social Security compensates all maternity leave at 60% of the employee’s regular salary and 40% from the employer resulting in a fully paid maternity leave. Employees who have contributed to Social Security for a minimum of 16 weeks preceding childbirth receive a maternity leave benefit of 12 weeks at 100% of the employee’s average weekly income. If an employee has not contributed to social security, then the compensation falls to the employer.
Paternity Leave
The father/partner is entitled to five business days of paid paternity leave after the child’s birth.
Parental Leave
There are no provisions in the law regarding parental leave.
Other Leave
There are no provisions in the law regarding other leave.
PAID MATERNITY LEAVE (DAYS)
Termination
Termination Process
The termination process varies according to the employment agreement and collective agreement in place and is based on the type of contract and reason for termination. To dismiss an employee, an employer must request permission from the labor inspection department. Following termination, an employee is entitled to any remaining vacation pay and their annual bonus.
| Salary payment interval / date | Final payment on termination | Bank account/payment-method requirement |
|---|---|---|
| Pay period varies by role: for manual workers, the wage period cannot exceed 7 days; for employees up to 15 days; for others typically monthly. Wages must be paid in legal tender at the workplace. | Upon termination without just cause, the employer must pay wages owed, accrued vacation/bonus (aguinaldo) and a severance benefit: for the first 3 years of service one monthly salary per year, thereafter 20 days’ salary per year, capped at 5 months’ salary. | Wages must be paid in national currency (córdobas) and in cash/monetary form at the workplace. The law does not clearly require payment only into an employee’s bank account in all cases. |
Notice Period
Employees in Nicaragua must provide employers with 15 days’ notice. During the probation period, no notice is required to terminate.
Severance Pay
Severance pay is according to the length of employment:
Up to 3 years of service, 1 month’s salary per year worked is required
4 to 6 years of service, 20 days’ salary per year worked is required
7+ years of service, 5 months of salary is required
Probation Period
The probation period is 30 days, during which either party can terminate the employment agreement for any reason.
Immigration
Nicaragua’s immigration system provides several options for employers of foreign nationals. Requirements, processing times, employment eligibility, and benefits for accompanying family members vary by permit type.
Visa-exempt nationals (also referred to as Category A nationals) can travel to Nicaragua without an entry visa and stay for a period of up to 90 days, extendable in the country for an additional 90 days at the discretion of immigration authorities.
Category B visa nationals can secure a visa at a Nicaraguan consular post or on arrival at the Nicaraguan port of entry.
Category C visa nationals must obtain a Consulted Visa from a Nicaraguan consular post with prior authorization from the Immigration Department of Nicaragua. These visas typically involve an extended processing time.
Foreign nationals who will engage in work or remunerated activities in Nicaragua for less than one year can obtain a work permit. The work permit’s validity usually corresponds to the length of time the foreign national will perform work activities in Nicaragua. Foreign nationals who will engage in work or remunerated activities in Nicaragua for more than one year either hired by a company in Nicaragua or independent workers who wish to perform a paid activity in Nicaragua, must obtain temporary residence.
Temporary residence can be issued for up to one year, renewable for the period of the original issuance. After three years in Nicaragua, the foreign national may apply for a permanent resident status that can be issued for up to five years.
VAT
General
The standard rate of VAT in Nicaragua is 15%.
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Payroll and Benefits Guide
in Nicaragua
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
And more...
Public Holidays Calendar
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 1 January 2026 | Thursday | New Year’s Day | Standard holiday |
| 2 April 2026 | Thursday | Maundy Thursday | Standard holiday |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 1 May 2026 | Friday | Labour Day | Standard holiday |
| 19 July 2026 | Sunday | Sandinista Revolution Day | Standard holiday |
| 20 July 2026 | Monday | Sandinista Revolution Day Holiday | |
| 14 September 2026 | Monday | Battle of San Jacinto | Standard holiday |
| 15 September 2026 | Tuesday | Independence Day | Standard holiday |
| 8 December 2026 | Tuesday | Feast of the Immaculate Conception | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Thank you for the infos! I have a question regarding the 13th month pay: As far as I know it’s only for fulltime contracted employees, right? What if an employee’s contract started on 1st December. Is he or she then entitled to a 13th month pay even though the fulltime contract has only been going for one month? Thank you in advance!
Hi Kara, thank you for your question. This is correct, 13th salary is for full-time regular employees. If an employee has not completed a full year of employment by the time the 13th salary is due, then the payment to them is prorated based on the length of employment they have completed.
We have an employ that works 3 days a week, 7 hrs a day. We have a contract stating all this. He might quit because we can’t give him more work. If he quits what are we obligated to pay him?
Hi Joan, thank you for your question. You are required to pay the employee for the time that they have worked based on what is written in the contract.
Hello, we have an employee that has quit his job. He has worked for us for more than 5 years and was being paid $140/month, but for the last year of his work he was being paid $80 due to him sharing responsibilities with someone else. In calculating his severance we are giving him 140 x 4 and 80×1 for a total of 640. Is this correct?
Thank you for your help!
Hi Ryan, according to Nicaragua labor law, the following is the formula for calculating severance.
•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.
Compensation cannot be less than one month or more than five months. The fractions between the years worked must be settled proportionally.
Yes, so, I guess I’m confused as to what to pay him for severance when his salary changed at the end of employment when he quit. Was my thinking correct above for the proportionality of the years worked? Could you explain how i “settle,” this? Do you mean make an agreement with the employee for the ratio of what he os to be paid? Thanks for helping. Confusing to figure out what sum he deserves.
I have an employee with dual citizenship in US and Nicaragua. She works in Nic a few weeks a year. How do their employment laws apply to her in this situation?
Employment terms are determined based on the country of the employment contract. Regarding taxation, the worker should seek expert tax advice on what her tax requirements are unique to her setup.
Thank-you very much for the extremely helpful and concise article. It is clearly written and answered several important questions I had about managing employee wages.
Hi there. Does anyone know what kind of severance should be paid out to an employee who has worked less than a year and quit? Thank you.
Hi! Payment made to workers upon termination is a rate of 1 month salary for each of the first three years of service. A worker with less than 1 full year service will have a pro rated amount paid aligned to the number of months worked.
I have a question about part time employees..those working 4 days a week or less. How are these laws regarding part time?
Please define more specifically what laws you are asking about.
Hi, I am slightly confused about the severance pay.
If the employee quits on his own behalf do we still need to pay him a severance fee or only if we let the employee go.
Thank you!
Employees on indefinite term contracts who resign (by providing the correct notice period), or who are terminated with just cause by the employer, are entitled to an indemnification for years of service.
I have a question regarding how compensation is paid. I’m informed that 1 month salary is paid the first few days of the month. Basically, the month is prepaid. For example, March 1 the full month salary for March is paid. Is this correct? Also, when do you pay the mandatory government salary increase? Thank you.
There are different set ups in place according to a company’s set up. Typically, monthly salaries are paid on the 15th, others might be paid twice per month or weekly. Individuals should check their employment contracts which usually stipulates the exact payment set up. Salary/minimum wage adjustments are in place; the most recent was in March 2024.