Employing individuals in Nicaragua can be a very difficult project. It is one of the more difficult aspects of running a business, or maintaining your home in the country. It can be very easy to get into bad situations, that can end up costing you a significant amount money. For example, I know of an individual who ended up paying over $5,000 in attorney fees and employee compensation to an employee who was making about $7 per day.
When hiring employees in Nicaragua you must know what you are doing, and be willing to stick to your guns. If you are not a good boss with strict rules, policies, procedures and regulations, you will likely end up with problem employees.
However if you are professional, and expect good work from your employees, you can offer your employees a great work experience in a professional organization. They can learn good work ethic, and so many other amazing things, that will help these individuals provide for their families the rest of their lives. Teaching your employees skills, and how to be professional, is worth a lot to the people of Nicaragua.
Nicaraguan people want to be professional, they want to learn and they want to better themselves. If you go into a professional business in Nicaragua, all of the employees are proud of what they do, and they do their jobs to the best of their abilities. Too often I see employers who do a poor job of training employees, end up with a bad workforce, and wonder why. No one benefits from this, not the employee, and certainly not the employer.
Hiring an employee in Nicaragua needs to be pre planned and thought through ahead of time. You need to know how you are going to train them, exactly what you expect out of them, expected tasks and procedures, how you are going to supervise them and how you are going to monitor their progress.
Before you hire anyone you need to have them complete a contract with your company (we talk more about contracts later). You will want to have someone explain to the employee the importance of doing a good job, and how you expect them to work hard and be professional.
You want your company to be their second family — you are a team and together there is nothing you can’t overcome.
In Nicaragua it is very normal for supervisors to hire many of their family members to work for them. This can be both good and bad. Overall I believe it is a bad idea to hire all from one family. There are plus sides to using a one family exclusively — the family knows who is good and who is bad, they can help regulate problems, motivate lazy employees, make sure unhappy employees don’t cause problems and many other positives.
Some negative factors to consider are that if you have a problem with your supervisor, or any individual for that matter, it can be you against the family — and this normally does not end up well. I have personally been in this situation, and while it didn’t cause too many problems I think I was pretty lucky. I also happened to have all of my other ducks in a row, so that definitely helped my cause. If you have an entire family against you, it’s possible to lose all of your employees, or worse yet you may find yourself in a lawsuit with all your employees saying one thing, and you saying another.
I recommend not to have more than a 50/50 mix of family members when you first start hiring, and from there you should only hire the best applicants.
The group factor is when an employee becomes unhappy. This can happen overnight, and is normally caused by a problem or opportunity outside of work. For example, an employee may get a better job offer, and all of a sudden they become extremely unhappy. They could proceed to demand more money, or even try to get fired. If they get fired they may be entitled to money from the company, depending on your contract and how they were fired. It is common place for unhappy employees to get as many people to quit, or get fired, with them as possible — so be on the lookout if this situation comes up. In my experience, about 50% of the time employees will convince other employees to quit with them. This could potentially be huge problem for an employer who is unorganized, and not ready to deal with this type of problem.
To combat this potential problem it is wise to take a proactive approach and have frequent group meetings with all of the employees. These meetings should be more about telling the employees what good of a job they have, rather than to take complaints. In Nicaragua complaints seem to flow pretty freely, nor do they have a problem making their way up the chain of command, so again, be prepared.
Number of Employees:
In Nicaragua an employer will typically hire considerably more employees, than in other countries, to complete the same job. A restaurant will have about twice as many employees as in the U.S., and a construction site may have 4 times as many employees as a comparable site in the U.S. What this means is you may be used to running a construction site in the U.S., but in Nicaragua you have 4 times the amount of employees that you are used to. In a typical 5 bedroom house in the U.S. you will have no employees, but in Nicaragua you may have 3 or 4! A driver, cook-house made, grounds keeper and a watchman.
This can create problems if you are not ready to deal with the increased number of employees. Logistics will be more difficult. Where will they eat, sleep, etc., supervision will be more complicated, employee problems more frequent, job site security harder to maintain and communication will undoubtedly be more difficult. Try to figure out ahead of time how many employees you are going to have, and how these numbers differ from what you are used to.
When things go Bad:
You trained, supervised, encouraged and otherwise did everything you could to help an employee, but you are left with no other choice than to let them go. It is possible the terminated employee will leave gracefully, and you will never hear from them again, and maybe if they see you later they will still be really nice, however, it doesn’t always happen this way. If you offered them an opportunity that they probably will never see again in their life time, and then took it away from them, naturally they could become very angry. They may become angry with you, your management, themselves or all of the above. This employee could attempt to sue you, steal from the company, or its employees and possibly even threaten to have other friends and family members leave your company. After a firing you need to be a high alert for theft, at least for a few weeks, and make it known that you are watching out for anyone looking to cause problems.
No one said being an employer was easy. You may very well feel unsafe for a week or two, if the situation is really bad. The most important thing is to be prepared mentally and legally for the worst, before anything like this happens. Remember, by hiring native employees you are helping out the country, and your efforts should be hailed. At the same time you also are running a business, and you have to look out for the best interests of that business. Don’t feel bad if you have to let unproductive employees go.
Laws are against you:
Get used to the fact that there are many laws in Nicaragua that are only enforced against rich Western business owners. There are many payroll laws, employment laws, permitting laws and others laws which are typically not enforced, however, when a Nicaragua claims wrong doing, as a westerner if you are not following every law to the "T" you will have problems. Realistically, though, it does not take much to follow the laws correctly, and if you follow the laws your problems will be reduced practically to zero.
In order to cost effectively follow all of the laws, I would find a good accountant with a good lawyer contact. They will know the laws, and can get the lawyer’s advice, for cheaper than you can. This should only cost around $100 to $200 dollars per month, and as long as you follow their advice you should be fine. Make sure you also have them write an airtight employee contract, pay your payroll taxes and insurance and keep records of all employee payments.
Remember, in Nicaragua you are a gringo, and the deck is stacked against you as a business owner and employer. People know you have money, and they will try to get it from you. Judges will typically rule in the favor of the poor Nicaraguan if they can, and regulating agencies will come visit your business more than others. To protect yourself make sure you have your paperwork together. Also, whenever possible have a Nicaraguan be your face with the government. You should not be going to stores to buy things, or to government offices for permits or licenses, this should all be done by a Nicaraguan employee.
Don’t make the mistake of thinking that there are no payroll rules in Nicaragua, and that you can just hire anyone you want, pay them cash, and that’s that. Nothing could be farther from the truth. Also, if you start your business here with a system that does not follow the laws, it will be much harder to transfer later into a legitimate system. Employees will not want to pay taxes and insurance, and they will not want to sign contracts after the fact. At this point they have you right where they want you, and your negotiating position is shaky at best. You can’t fire them without paying them off, which means they don’t have to sign the contract, as your only recourse really is to fire them. Meanwhile they are accumulating vacation pay day by day that you didn’t even know you had to pay.
You need to have a good employee contract to safe guard yourself against lawsuits and fines. Your pay rate should include paid vacation, in addition to government holidays. Termination of an employee does not entitle them to any severance pay. If you are going to teach them special trades, that will take your time and money, employees should sign an agreement where they agree to work for you for at least one year — with no additional raises unless minimum wage increases. Pay rates may or may not include food and transportation costs.
A good contract should make it so you are free to do what is necessary for your business to succeed.
Things to think about:
Are your employees going to bring their own food to work? If so they need to know before they start that there will be no additional money for food.
If employees need to pay to get themselves to the jobsite, then they need to know this before hand as well, before agreeing to a wage. The last thing you want is for your employees to start working, and then have a payment dispute in the first week.
Items like food and transportation affect all employees, so it’s easy for them to gang up and threaten to walk off the job site as a whole.
How much do you pay:
Get the price right the first time, as you will never be able to go back to a lower price. Let employees know, in a contract, what their salary includes. Vacation days, Holidays, Transportation to and from the job site and food are all things employees will try to get on top of what you are already paying them. You are required to pay government holidays, which there are a lot of, as well as taxes and a percentage of their insurance. All of these items add up quickly, so you need to be very careful to account for these additional costs in your salary negotiations.
You will need to ask a trust worthy individual what good pay rates are, and then stick to them. By paying too much you are likely to cause problems. I hear stories of people paying two or three times the going rate, and of course their employees are very happy, but it also tells your employees that you are unaware of your surroundings, and you might as well put a big sucker sign on your forehead.
At the end of the day not everyone is going to be happy with you as a business owner, and employer. In fact you may very well have an ex-employee who is extremely mad at you. But, what you are doing for the people of Nicaragua, and the country as a whole by creating jobs, is priceless. Your hard work may or may not go unnoticed, but in the end you should feel a great sense of accomplishment and pride for what you are doing to help the country of Nicaragua.