Legal aspects of the international assignment of employees in Nicaragua.

Posted by: Yury Cerrato | Senior Associate at Alvarado y Asociados

In this globalized world in which we live, it is very common for companies to send their employees from one country to another, either to work for a company within the same group or for another one.

In this article we will explain, from the Nicaraguan law’s point of view, the legal aspects that companies should know when deciding the legal strategy to be used for the assignment of one or more employees being transferred to Nicaragua from another country.

Most of the time, employees who work in their native country or in the country in which they plan to live through their retirement, request that their salaries continue to be paid by the company established in their “home” country (Home Employer) instead of the Nicaraguan company that will receive them. This occurs mainly with employees that are affiliated to a social security system in another country that offers them a retirement plan based on the social contributions paid during their labor careers, since these plans would be affected if they discontinue paying it in their home country.

What is mentioned in the previous paragraph is one of the reasons for which companies usually ask about the possibility of assigning employees to Nicaragua through the figure of “secondment”, which could be defined as the assignment of an employee or employees from one foreign company to work for another company in Nicaragua while keeping the original labor contract valid with the Home Employer and without executing a labor contract with the Nicaraguan company.

Notwithstanding, the secondment figure is not duly regulated by Nicaraguan law. Nicaraguan laws are designed to allow the international assignment of employees through the “expatriation” figure, only. We define “expatriation” as the process of assignment of employees from one foreign country to work in Nicaragua. Through expatriation, the employees are hired by a Nicaraguan employer with a new labor contract that shall be regulated by Nicaraguan laws. Through expatriation the foreign employee will be forced to pay taxes and social security contributions in Nicaragua, contributing with the State of Nicaragua in this manner; contribution that is not possible with the secondment figure because with this modality the employee does not receive a salary in Nicaragua and is not forced, in practice, to pay taxes and social security contributions in this country.

It is important to mention that the social security contributions paid by the employee in Nicaragua cannot be transferred to another social security system in another country. If the employee returns to his/her country of origin, the contributions paid in Nicaragua stay in Nicaragua and are not taken into account in any other country.

It is also important to mention that with the expatriation modality, the labor contract to be executed with the Nicaraguan employer is the contract that will govern the labor relationship in Nicaragua, which will be considered as a separate contract from the labor contract executed with the Home Employer for all legal effects. In this sense, it would be recommendable to review the laws of the home country to verify the necessity of terminating the original contract with the Home Employer to avoid an unnecessary continuity in the labor relationship with that employer.

There are some cases in which the companies do not want that the foreign employee be hired by the Nicaraguan company, either because the Nicaraguan company does not want to have a labor relationship with the foreign employee, because the foreign employee insists on keeping his/her labor relationship with the Home Employer, or because the foreign employee will only be working in Nicaragua for a short period of time. If for any reason, the companies do not want the Nicaraguan company to hire the foreign employee, It is important that companies check on the particulars of the case with a local labor specialist in order to determine the best manner to proceed to avoid labor contingencies.

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