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Nicaragua Severance Calculator 2026

Last updated: January 2026

The labor settlement (liquidación) in Nicaragua for 2026 is calculated according to the Labor Code in córdobas. Components include: severance for unjust dismissal (1 month per year of service for the first 3 years, 20 days per additional year, capped at 5 months total), proportional vacation (15 days per 6 months worked), proportional aguinaldo, and pending wages. The daily salary is calculated by dividing monthly salary by 30. Nicaragua has a unique severance formula with a 5-month cap. In case of voluntary resignation with at least one year of service, workers receive reduced severance. Vacation in Nicaragua accrues at 15 days per semester (6 months), totaling 30 days per year — among the most generous in Central America.

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FAQ

What does a labor settlement include in Nicaragua?
A settlement includes: severance (formula varies, max 5 months), proportional vacation (15 days per semester), proportional aguinaldo, and pending wages. The severance formula depends on years of service and reason for termination.
How is severance calculated in Nicaragua?
Severance for unjust dismissal: 1 month per year for the first 3 years, then 20 days per additional year, capped at 5 months total. For voluntary resignation after 1+ years: the same formula applies but at a reduced rate. The cap of 5 months is unique to Nicaragua.
How many vacation days are in the settlement?
Nicaragua grants 15 calendar days of vacation per semester (6 months), totaling 30 days per year — the most generous in Central America. Unused vacation is paid in the settlement at the daily salary rate (monthly salary ÷ 30).
Is severance taxable in Nicaragua?
Severance within the legal limits (up to 5 months) is exempt from IR in Nicaragua. The proportional aguinaldo in the settlement is also IR-exempt. Proportional vacation pay is subject to normal tax treatment.
What is the maximum severance in Nicaragua?
The maximum severance in Nicaragua is capped at 5 months of salary, regardless of years worked. This is calculated as: 1 month per year for years 1-3 (= 3 months), plus 20 days per year for year 4 and beyond, but never exceeding 5 months total.
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