Employer of Record in Panama

Businesses can only operate smoothly in Panama if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Panama below, to avoid any compliance issues.

Employment Contract Requirements

In accordance with Panama's Labour Law, employment contracts must be in Spanish or a mutually understandable language. Employers are obliged to provide a written contract specifying

• The identification of both parties
• Commencement date
• Employee's salary and other benefits
• Workplace

Onboarding Process

We can help you get a new employee started in Panama quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Panama

The regular workday is eight hours, and a full workweek extends up to 48 hours in Panama. Those under 16 years old have a maximum work week of 36 hours.

Overtime in Panama

In Panama, overtime is restricted to three additional hours per day or nine hours per week. Compensation for overtime exceeding 48 hours per week ranges from 125% to 175%, based on the timing of the hours.

Probation Period in Panama

Panama's work contracts or collective agreements lay out the probation period, which typically spans up to three months.

Fiscal Year in Panama

January 1st - December 31st is the 12-month accounting period that businesses in Panama use for financial and tax reporting purposes.

Payroll Cycle in Panama

The payroll cycle in Panama is usually Monthly, with employees being paid Once every month.

Minimum Wage in Panama

The minimum wage for employees in Panama is typically 1.70 USD per hour, amounting to ~326.56 USD per month for a typical 48 hour work week.

Bonus Payments in Panama

In Panama, employees receive a mandatory 13th-month payment, equivalent to an extra month's salary, distributed in three equal parts on April 15th, August 15th, and December 15th.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 0 - 21.34% on top of the employee salary in Panama.

Employee Payroll Tax Contributions

In Panama , the typical estimation for employee payroll contributions cost is around 11%.

Individual Income Tax Contributions

In Panama, individual taxes are calculated using a progressive rate that ranges from 0% to 25%.

Pension in Panama

The Social Security program, overseen by the Social Security Fund (CSS), provides pensions for retirees and disabled individuals. Contributions from both employees and employers fund these benefits.

Mandatory Leave Entitlement in Panama

The annual leave entitlement in Panama is 30 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Panama

Panama observes 12 national holidays:

Paid Time Off in Panama

In Panama, employees are entitled to 30 days of paid annual leave after a year of work, earned at a rate of 1 day per 11 days worked. Employers must provide payment for this leave three days in advance, and it cannot be substituted with compensation.

Maternity Leave In Panama

Maternity leave in Panama lasts for 14 weeks"six weeks before and eight weeks after the expected delivery date. Eligibility requires a medical certificate indicating the expected delivery date and nine social security contributions in the 12 months before the seventh pregnancy month.

Paternity Leave In Panama

Employees in Panama receive three fully paid days of paternity leave after their child's birth, compensated by the employer.

Sick Leave In Panama

In Panama, employees receive 18 days of paid sick leave annually, covered by employers with a doctor's note required. Additional sick days are paid by the Social Security Fund.

Parental Leave In Panama

Panama does not have a separate shared parental leave policy.

Termination Process in Panama

In Panama, termination after the probation period requires just cause, with no at-will termination. Employees who believe their termination is unfair have 60 days to seek reinstatement. Termination methods include:

• Resignation
• Mutual agreement
• Dismissal with valid cause
• Contract expiration

Notice Period in Panama

In Panama, the minimum notice period is 15 days, subject to administrative labor authority approval in special circumstances. Salary payment may sometimes substitute for the notice period. The notice period typically varies depending on the reason for termination.

• 15 days if the employee resigns
• 30 days if the employer terminates the employee

Severance in Panama

In Panama, employees receive severance pay unless it's a disciplinary dismissal. The amount depends on the termination reason, contract type, and duration of employment.