Employment Law

Panama Employment Contract

In Panama, employment contracts can be oral or written, but we always recommend that you have a formal written contract every time you hire. These contracts should contain all necessary details of the employment arrangement, such as working hours, rights, benefits, wages, etc. They should also be written in Spanish and reference the U.S. dollar or Panamanian balboa (although U.S. dollars are generally more recommended).

Fixed Term

Indefinite

Panama Working Hours

The standard working week for Panamanian employees is 5 days and 44 hours. Any time worked in excess of this time shall be compensated at 125% of regular wages, or 175% for night shifts.

Holiday Policy

Panama Vacations

Employees in Panama are generally entitled to 30 days of paid leave per year.

Panama Sick Leave

Employees in Panama are generally entitled to up to 18 days of paid sick leave per year.

Maternity and Paternity Leave in Panama

Female employees in Panama are entitled to 14 weeks of paid maternity leave, with a maximum of six weeks before and eight weeks after the birth. Panamanian fathers can take up to three days of paid paternity leave upon the birth of their child.

Employee Severance Pay and Termination in Panama

Employees in Panama are generally entitled to receive 30 days' notice before terminating their employment contract. If applicable, severance pay is typically equivalent to approximately three to four weeks of salary for each year of service to the employer. The trial period is limited to three months.

Panama Tax Laws and Withholding Taxes

Employers and most employees in Panama are required to pay social security contributions for their employees. The employee contribution is equivalent to 6.75% of the salary, and the employer contribution is equivalent to 2.75% of the salary. The government also contributes 1.04%.

Panama's territorial income tax laws are very beneficial to many people, especially foreign workers. Income from Panamanian sources is taxed at progressive rates from 0% to 25%.

Panama's corporate tax is also territorial in nature, with Panama-source income taxed at a rate of 25%.

Health Insurance in Panama

Panama has a public health care system, although many employers do offer private insurance as part of their benefit packages.

Salary and Benefits

Panama’s Compensation Law

Minimum wages in Panama vary greatly depending on the type of job, such as agriculture, manufacturing, construction, etc. Therefore, when recruiting employees in Panama, it is important to understand the rates that apply to your employees.

Benefits Administration in Panama

Understanding and setting up employee benefits in Panama can be difficult and can require significant time, effort and investment from the employer. However, it's critical to comply with payroll and benefit laws because if you don't, you could face hefty fines and legal issues.

Remoly can help you bypass this element of Panama expansion by providing benefits system outsourcing, saving you time and money. Our experts will advise you on the best course of action and take care of your benefits set-up and management, helping you focus on the rest of your expansion.