Yesterday, Friday the 21st of October 2022, a New Minimum Wage Contract for the Tax Free Zones was signed between businesses, workers representatives and the Ministry of Labor (MITRAB) covering a 5 year period starting January 1st 2023.
According to MITRAB, more than 140,000 free zone workers will benefit from this wage agreement.
The annual percentage increases will take effect on the first of January of each year, and will create the new minimum monthly wages for each year as follows;
2023 – 8% (8,098 Córdobas)
2024 – 8% (8,746 Córdobas
2025 – 7% (9,349 Córdoba’s)
2026 – 6.7% (9,986 Córdoba’s
2027 – 6.7% (10,656 Córdoba’s)
Zona Francas
The Zona Francas or Tax Free Zones in Nicaragua are created under the Tax Free Law 91 (Ley de Zonas Francas de Exportación) which sets out incentives and rules whereby parts and materials imported into Nicaragua under the tax exemptions and incentives are assembled into finished products here in Nicaragua which are then shipped back.
Wages
As reported at the end of last year, January 1st 2022 was the last pay increase under the five year triparty wage agreement between the Government, Unions and Owners Representatives which was signed in 2017.
That deal saw the Zona Franca employees receiving a comparatively lucrative pay increase (when compared to the other 9 minimum wage sectors over the same 5 year period) of 8.25% per year for each year of the five year contract.
In January 2022, the minimum wage for Zona Franca employees increased from 6,926 to 7,497 Córdobas per month (US $211).
The five year tripartite agreements are designed to provide labor cost stability for the investors in the free zones.
The potential downside for employees is that the annual wage increases over the last 5 years (as well as the next 5 years, 2023 to 2027) will push those minimum wage employees further towards the personal tax threshold of about US $230 per month, above which personal taxes begin to be deducted.
It was reported that before this year’s increase, some Zona Franca workers were already well above US $250 with monthly bonuses and incentives.
