Deductions in Labor Matters in Nicaragua

As salary constitutes the compensation paid by the employer in exchange for services rendered and, in many cases, the sole source of income for salaried workers, labor legislation has regulated the issue of deductions, establishing the general rule in art. 88 of the Labor Code that legal deductions shall be made from the salary. These deductions typically include the amount owed by the worker as a contribution to social security and income tax (where applicable). Additionally, deductions ordered by civil and family courts, in cases where the employer has been appointed as a withholder or custodian, are also considered.

The jurisprudence of the National Labor Appeals Tribunal has expanded the range of possibilities regarding deductions that can be made from the worker’s salary, in addition to those mentioned above.

In the realm of labor relations, it is common for companies, by company policy, the unilateral decision of the employer, or as stipulated in collective bargaining agreements, to grant loans to workers for certain needs, with repayments made through monthly payroll deductions. Similarly, since such loans are granted for repayment over the medium or long term, it is also common for the loan agreement signed by employers and workers to stipulate that, in the event of termination of the employment relationship, the worker authorizes the employer to deduct the balance from the final settlement.

As this deduction is consensual, jurisprudential criteria have upheld it, given that it is not unilateral but consented to from the inception of the loan to honor a debt if either party decides to terminate the employment relationship.

This criterion is reflected, among others, in Judgment No. 410/2017 of May 9, 2017, where it was stated: “we observe that the worker authorized the employer to debit the remaining amount of the loan from her final settlement, as evidenced by the document visible on page 24, therefore the amount deducted from the final settlement was not illegal…”

Deductions agreed upon in employment contracts, authorized in the internal regulations, and/or authorized by the worker can be made without being considered illegal and/or made unilaterally to the detriment of the worker.

Regarding shortages that arise in the performance of duties for the employer, whether in cash or tools, there is the possibility of making a deduction if it is demonstrated through an audit process conducted by an authorized public accountant, not only the shortage itself but also the worker’s responsibility for its existence.


If the employer makes a deduction from the worker’s salary that is not legal or ordered by a judge, without adhering to the criteria of what are permissible deductions according to the criteria of the labor judicial authority, such deduction will be considered illegal, and the amount will be ordered to be refunded to the worker.

An additional important issue is that if a lawsuit is filed against an employer for the restitution of a deducted amount if the employer does not counterclaim for its payment within the judicial process at the appropriate procedural stage, they will lose the opportunity to have the deduction validated despite having been consented to or regulated in the instruments supporting the employment relationship.