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How to Employ People
in Nicaragua; Being an Employer in Nicaragua
By: Lee
Jurasevich
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:
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.
Family Factor:
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.
Group Factor:
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.
Gringo Factor:
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.
Payroll Regulations:
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.
Employee Contract:
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.
Gratitude:
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.
Lee Jurasevich is the founder of American
Construction SA in San Juan Del Sur, Nicaragua. He
is the owner of 3 businesses that are licensed to
operate in 4 countries with a current work force of
over 200 employees. These companies supply various
specialty service contracts to the private and
government sector with a combined annual gross sales
of over US $6 million per year. Lee first started
offering licensed, boned and insured construction
services in 1998.
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