Labour laws and contracts

Employees and employers

Labour laws and contracts

If you are working in Nicaragua it is useful to know the local labour laws to make sure you are not having any rights violated. Equally, if you are start a business and employ workers, you need to make sure that you stay on the right side of the law.

Labour laws

For American expats, Nicaraguan labour law may be a bit of a minefield, as it is more influenced by European law. A normal working week is 48 hours, and contracts are defined by on a monthly basis rather than annually. Employers must pay a Christmas bonus of one month’s salary, known as the aguinaldo.  

Below are the most important laws to be aware of before working or hiring in Nicaragua:

Employees are favoured

If there is any doubt as to the interpretation or application of the law in a lawsuit, the result will be whatever most favours the employee. By sticking to the book, employers should avoid any trouble.

Rights cannot be waived

Labour rights of employees cannot be waived in lieu of extra payment of any other reason. This means that there is no possible exception to:

  • Rights to vacation pay
  • Rights to severance
  • Rights to aguinaldo


There are three types of employment contract in Nicaragua, and to avoid any potential claims by employees it is important to issue the right kind.

Indeterminate contract

As the name suggests there is no set end-date in this type of contract; it may be terminated at will by either employer or employee. Should the contract be terminated, the employer will have to pay the employee any severance, vacation pay and aguinaldo that may have accrued.

Determinate contract

Similar to fixed-term contracts in the UK, determinate contracts in Nicaragua are issued with an end-period. It is very important to know that if the contract is terminated before the set end-date, the employer will have to pay the remainder of the contract. With that in mind, be careful when assessing the length of a job.

If the contract is renewed twice or the employee continues working after the end-date, it becomes an indeterminate contract and the employee becomes entitled to all such rights.

Contract for professional services

This contract is designed for self-employed workers. The benefit to workers is that they can work when and where they want, and for employers it means they do not have to pay any benefits, making the cost cheaper.

While that might sound like a win-win, it can be a dangerous option for employers looking for a cheap labour solution. As mentioned above, self-employed workers can work where and when they want. This means that if the employer directs specific work-times or places, the contract may in fact be viewed as a determinate contract in the eyes of the law.

The result of such a scenario is that, should the employee file a claim, the employer will be forced to pay all benefits accrued during the contract plus a penalty for not paying the aguinaldo.

Further reading

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