Discover the global hiring and employment landscape in Panama—a gateway to Latin America with a rapidly growing economy and a strategic location connecting the Pacific and Atlantic oceans. Panama's favorable business environment and significant foreign investments make it an attractive destination for global expansion.
Explore the employment essentials including payroll, personal income tax, statutory contributions, annual leaves, minimum wage, terminations, visa requirements, and more. Gain valuable compliance insights for a smooth entry into the dynamic Panama market with Slasify's global premium HR platform.
| Capital | Panama City |
| Currency | United States Dollar (USD) |
| Payroll Cycle | Semi-monthly |
| Minimum Wage | Varies |
| Annual Leave | 30 days |
| Personal Income Tax | Up to 25% |
| Taxable Income (USD) | Progressive Tax Rate (%) |
|---|---|
| Up to 11,000 | - |
| 11,001–50,000 | 15 |
| Over 50,000 | 25 |
There are no local taxes on employment income in Panama.
| Contribution rate | |
|---|---|
| Educational Insurance | 1.50% |
| Professional Risk | 0.33%–6.25% |
| Social Security | 12.25% |
| Contribution rate | |
|---|---|
| Educational Insurance | 1.25% |
| Social Security | 9.75% |
Salary must be paid in full, i.e. for regular and overtime hours, in each pay period that cannot exceed a fortnight.
Minimum wages in Panama vary across regions and professions, and can be consulted with through the Panamanian government portal.
Employees are entitled to a 13th month salary for each year of their service, which shall be distributed in 3 equal parts. This is payable every April, August and December.
Employers shall not terminate an employment relationship without just cause, and such termination must be done in accordance with the established formalities.
Employees can be dismissed for reasons of a disciplinary nature, non-attributable nature or economic nature.
| Disciplinary nature | Non-attributable nature | Economic nature |
|---|---|---|
| Refers to cases where the employee's fault is apparent, and may include cases of violence, deception and breach of trust, among others. | Refers to cases where the employee cannot be blamed for the circumstances leading to their dismissal, such as their health condition. | Refers to cases of financial hardship on the employer's end, including those of bankruptcy or redundancy. |
A comprehensive list of what these entail to can be found in Article 213 of the Labor Code.
There are certain exemptions whereby the employee can be dismissed without just cause without the employer being liable to pay back lost wages due to unjustified dismissal. In these cases, the employer must observe the required notice period and pay their employees the corresponding compensation.
Employees who are dismissed without just cause are entitled to a 30-day notice period. On the other hand, employees who resign without just cause are obligated to observe a 15-day notice period or, if they are technical workers, a 2-month notice period.
Regardless of the cause of termination, employees shall have the right to receive a seniority bonus equivalent to a week's salary for each year of service.
Moreover, without prejudice to the seniority bonus, those who are dismissed without just cause or who resign for a reason that amounts to unjustified dismissal shall be entitled to the following compensation:
| Length of service | Compensation |
|---|---|
| Up to 10 years | 3.4 weeks' salary per year of service |
| Over 10 years | 1 week's salary per year of service |
When the provision of a service requires a certain or specialized skill, a probationary period of up to 3 months can be included in the employment contract.
During the probationary period, the employment relationship may be terminated without any liability to the terminating party.
Standard working hours in Panama for employees working a daytime shift are subject to a maximum of 8 hours per day and 48 hours per week.
| Maximum standard working hours | |
|---|---|
| Night shift | 7 hours per day and 42 hours per week |
| Mixed shift | 7.5 hours per day and 45 hours per week |
For the purposes of calculating minimum wage or wages paid in a company with work shift in several periods, the 7 hours of work in a night shift or 7.5 hours of work in a mixed shift shall be remunerated as 8 hours of daytime work.
Note: Night work refers to those performed between 6:00 p.m. and 6:00 a.m., and a workday that includes more than 3 hours within the night period shall be deemed a night shift. A mixed shift is one that includes hours from different work periods, as long as it does not cover more than 3 hours during the night period.
Employees shall be entitled to a break period of at least 30 minutes and no more than 2 hours long. If the employee is required to remain in the workplace due to the nature of their work, their break period must be computed as paid work time.
Furthermore, employees who are breastfeeding their children shall be entitled to a 15-minute paid break every 3 hours for this purpose. If the employee so prefers, this break can be adjusted to be 30 minutes long each, and they can be taken twice per day. These periods are to be considered as effective working time.
Employees working more than the maximum standard working hours or their agreed upon hours are deemed to have worked overtime, and these employee must be paid with the following surcharge:
| Circumstance | Surcharge |
|---|---|
| Overtime carried out during the daytime (6:00 a.m.–6:00 p.m.) | 25% |
| Overtime carried out during night hours (6:00 p.m.–6:00 a.m.) or when it is an extension of a mixed shift started in the daytime | 50% |
| Overtime carried out as an extension of the night shift or a mixed shift that started at night | 75% |
Employees shall be entitled to a weekly day of rest, which usually falls on Sundays, and they can only be required to work on their weekly rest day when there exist imminent dangers to people's lives, the existence of the company or the workplace, or when the contracted work is in danger.
Employees working on a Sunday or any other mandatory weekly rest day shall be remunerated with a 50% surcharge of their regular pay, without prejudice to their right to enjoy another day of rest
Note: When a public holiday coincides with a Sunday, the following Monday shall be enabled as a mandatory weekly day of rest.
Employees are entitled to days off work during public holidays, and they shall be paid as as an ordinary work day. There are 13 days of public holidays in Panama for 2024.
| Holiday | Date |
|---|---|
| New Year's Day | January 1 |
| Martyrs' Day | January 9 |
| Carnival | February 13 |
| Good Friday | March 29 |
| Labor Day | May 1 |
| Presidential Inauguration Day | July 1 |
| Separation from Colombia Holiday | November 3 (observed November 4) |
| Colón Day | November 5 |
| Uprising of Los Santos Holiday | November 10 (observed November 11) |
| Independence Day from Spain | November 28 |
| Mother's Day Holiday | December 8 (observed December 9) |
| National Mourning Day | December 20 |
| Christmas Day | December 25 |
Employees can only be required to work public holidays when there exist imminent dangers to people's lives, the existence of the company or the workplace, or when the contracted work is in danger.
Those working on public holidays shall be remunerated with a 150% surcharge of their regular pay, without prejudice to their right to enjoy another day of rest. This 150% surcharge includes compensation paid to the employee for the day off.
Employees are entitled to accumulate up to 30 days of paid annual leave for every 11 months of continuous work at a rate of a day of leave per 11 days of service.
Annual leave shall generally be enjoyed without interruptions, though they can be divided into a maximum of 2 equal fractions, provided that this is permitted in a collective agreement and there is a prior arrangement with the employee on each occasion.
Moreover, annual leave shall be cumulative for up to 2 periods by agreement between the employer and the employee, with the labor authority being notified of such an agreement.
| First period | Second period |
|---|---|
| Must enjoy at least 15 days of annual leave | Remaining days from the first can be carried over to the second period |
Note: If the employee is hospitalized due to illness or accident during the time in which they are on annual leave, the period of hospitalization and the subsequent disability will not be considered part of the annual leave and it will be attributed to the employee's sick leave.
Employees shall be entitled to 12 hours of paid sick leave for every 26 days served or 144 hours of paid sick leave per year. This leave can be accumulated for up to 2 consecutive years and be enjoyed in whole or in part in the employee's third year of service.
Pregnant employees shall be entitled to 6 weeks of paid pre-natal leave and 8 weeks of paid post-natal leave. In no case will the total maternity leave period be less than 14 weeks, and employees shall be entitled to enjoy their full post-natal leave in the event of late childbirth.
Employers are obligated to cover the difference between the financial subsidy granted by the Social Security Fund for maternity and the employee's usual remuneration.
If the employee on maternity leave falls sick due to their pregnancy or childbirth, they shall be entitled to have their leave extended for the period proven by a medical certificate. The period resulting from this maternity leave extension shall be fully paid through a subsidy from the Social Security Fund, provided that the employee is affiliated.
In the event of an abortion, a non-viable birth or any other cases of abnormal births, the maternity leave shall be set in accordance with the health requirements of the interested party, as determined by the medical certificate and the prescriptions of the employee's doctor
Employees shall be entitled to 3 days of paid paternity leave, provided that the employer is notified at least a week in advance of the expected date of childbirth.
There are no provisions for additional parental leave in the Labor Code.
| Leave | Paid/Unpaid | Duration | Note |
|---|---|---|---|
| Medical Checkup Leave | Paid | - | A part-time leave for employees who, with prior notice and subsequent verification, needs to attend medical check-up appointments for their personal care or for the care of their children under 2 years old. |
| Public Office Leave | Unpaid | 6 months–2 years | For employees required to perform a commission or public office. In the cases of popularly elected public positions, the leave will be for the term of the position. |
| Union Commission Leave | Unpaid | Up to 5 years | For directors and officials of social organizations to perform a union commission |
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