In Nicaragua, the notice period requirements vary depending on the type of employment contract.

Employer Obligations

For indefinite term contracts, employers are required to provide at least 15 days' written notice when terminating an employee. However, for definite term contracts, notice is not required unless it is specifically agreed upon within the contract. During the probation period, which usually lasts a maximum of 30 days, no notice is required for termination.

Employee Obligations

Similarly, an employee under an indefinite term contract wishing to resign must provide the employer with at least 15 days' written notice. For definite term contracts, an employee can only terminate the contract earlier for "just cause" as defined by law. During the probation period, no notice is required for termination.

Exceptions to Notice Period Requirements

There are certain exceptions to these notice period requirements as specified in the Nicaraguan Labor Code. For instance, employers may terminate employment without notice for reasons such as serious misconduct by the employee, which is considered as termination with just cause. Additionally, the employer and employee may mutually agree to waive the notice period.

In Nicaragua, severance pay, also known as "liquidación" or "indemnización", is a financial compensation that employers are legally obligated to provide to employees under certain termination circumstances.

Eligibility for Severance Pay

According to the Nicaraguan Labor Code, employees become entitled to severance pay in the following situations:

• Termination without Just Cause: This occurs if the employer terminates the employment contract without a valid reason as defined by law.
• Indirect Dismissal: This happens when the employee resigns due to the employer substantially altering working conditions or engaging in acts that make it difficult to continue the employment relationship.

Calculation of Severance Pay

The severance pay in Nicaragua is calculated using a tiered system based on the employee's length of service:

• For 3 years or less of service, the severance pay is one month's salary for each year of service.
• For 4 to 6 years of service, the severance pay is 20 days' salary for each additional year of service.
• For 7 years or more of service, the severance pay is five months' salary.

Important Considerations

There are several important considerations regarding severance pay in Nicaragua:

• Severance Pay Cap: The total severance pay cannot exceed five months of the employee's salary.
• Excluded Payments: Certain payments, such as the 13th-month bonus (Aguinaldo), are not usually factored into the severance pay calculation.
• Deductions: Legal deductions, such as social security contributions, may be applied to the severance payment.

In Nicaragua, labor laws have established specific procedures that employers must follow when terminating an employee's employment.

Termination with Just Cause

An employer can immediately terminate an employee with just cause for reasons outlined in Article 46 of the Nicaraguan Labor Code. These reasons include serious misconduct by the employee, such as theft or violence, repeated failure to perform job duties, and absence from work without justification. In this scenario, the employer is not obligated to provide notice.

Termination without Just Cause

If an employer terminates an employee without just cause, certain steps must be followed:

1. Authorization Request: The employer must submit a written request for authorization to terminate the employment contract to the Labor Inspection Department (within the Ministry of Labor). This request must outline the reasons for termination.
2. Notice to Employee: After receiving approval from the Labor Inspection Department, the employer must provide the employee with written notice of termination.
3. Accrued Benefits: The employer must pay out any outstanding accrued benefits, such as unused vacation time and the proportional 13th-month bonus.

Resignation by Employee

An employee wishing to resign must provide the employer with at least 15 days' written notice. An employee may resign without notice during the probationary period or if they have "just cause", such as the employer breaching contractual obligations or engaging in harassment.