Employing in Panama

Panama is a thriving hub for global business, known for its skilled workforce, particularly in sectors like banking, tourism, real estate, and services. Its pro-business environment and strategic location make it an ideal place for companies seeking expansion. However, employers must understand Panamanian labor laws to stay compliant and avoid penalties.

‍

Applicability of the Labor Code

Panama’s labor code, established in April 1972, governs all employment relationships within the country. It applies to all individuals and businesses registered under Panamanian corporate law or operating within its borders. This comprehensive framework ensures fair treatment of employees and compliance from employers.

‍

Employee Contract

Written employment contracts are mandatory and must be sealed with the Ministry of Labor.

Types of Employment Contracts:

1. Fixed-Term Contracts: For temporary positions or freelancers, with defined start and end dates.
2. Indefinite-Term Contracts: For full-time employees with no end date, offering full benefits under labor laws.

While contracts are not legally required to be in Spanish, offering bilingual (Spanish and English) contracts is common practice.

‍

Probation Period

Employers can implement a probationary period of up to three months. During this time, termination without severance is allowed, provided the terms are clearly outlined in the employment contract.

‍

Employee Leaves

• Annual Leave:
  • 30 days of paid vacation for every 12 months of continuous service.
  • Payment for the leave must be provided three days before the leave begins.
• Maternity Leave:
  • 14 weeks (6 weeks before and 8 weeks after delivery).
  • Paid by social security, but employers must contribute any unpaid balance.
  • Adoptive parents are entitled to 28 days of paid leave.
• Paternity Leave:
  • 3 days of paid leave, covered by the employer.
• Sick Leave:
  • 18 days per year, fully paid with a medical certificate.
• Public Holidays:
  • Employees are entitled to 11 public holidays annually.
  • Working on a public holiday entitles employees to overtime pay at 150% of their regular salary.

‍

Payroll

Payroll Cycle

‍Employees are typically paid monthly or bi-weekly, based on their contracts.

‍

Minimum Wage

‍The minimum wage ranges from USD $326.56 to $971.35 per month, depending on industry, region, and business size.

‍

Overtime Pay

• Daytime Overtime (6 AM–6 PM): Paid at 125% of the regular rate.
• Nighttime Overtime (6 PM–6 AM): Paid at 150%.
• Hazardous Work Overtime: Paid at 175%.
• Maximum overtime: 3 hours per day or 9 hours per week.

Employers must use consistent currency (USD or PNB) for all salary payments.

‍

Bonus

All employees are entitled to a 13th-month bonus, equivalent to one month’s salary. It is paid in three installments: April 15, August 15, and December 15.

‍

Key Provisions of the Labor Code

Minimum Age:

• Minimum working age is 18, but exceptions exist for minors aged 14–17 under strict conditions.
• Minors cannot work night shifts (6 PM–8 AM), hazardous jobs, or public holidays without additional approvals.

‍

Termination and Severance Pay:

• Notice Period:
  • Up to 3 months, depending on the employment tenure and reason for termination.
• Severance Pay:
  • Based on employment tenure, ranging from 0.5 months’ pay for 6 months of service to 14.8 months’ pay for 20 years of service.

‍

Visa and Immigration Requirements

Employers hiring foreign nationals in Panama must secure work permits through the Ministry of Labor. Foreign employees are limited to 10% of the workforce (15% for specialized roles). Work permits, tied to temporary or indefinite contracts, must align with residency visas, such as Temporary or Permanent Residence Visas. Employers are responsible for application costs, ensuring compliance, and renewing permits as needed.

‍

Penalties for Non-Compliance

Failure to comply with Panamanian labor laws can result in severe penalties, including:

• Overtime violations: Employers must pay an additional 75% of the employee's gross salary plus a fine.
• Unjustified dismissals: Employers can face claims of up to $2,000 or more.

‍