The Republic of Panama lies at the crossroads of the North and South American continents, and the Atlantic and Pacific oceans. Stretching over 75,517 square kilometers, Panama shares a border with Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north, and the Pacific Ocean to the south. The country is known for the Panama Canal which connects the Atlantic and Pacific oceans across the Isthmus of Panama. The canal is one of the two most strategic artificial waterways in the world. Almost 75% of the country’s gross domestic product is accounted for by the services sector, mainly because of offshore banking and canal traffic. The services sector also employs 75% of Panama’s workforce.
*Please note that the official currency is the currency of remuneration when employed through WorkMotion in Panama.
Capital : Panama City | Currency : Panamanian Balboa (PAB); United States Dollar (USD) | Languages spoken : Spanish |
Population : 4.38 million (2021 est) | Minimum wage 2023 : No legislated universal minimum wage | Cost of Living index : $$$ (51 of 139 countries) |
Payroll Frequency : Bi-weekly/Monthly | VAT - standard rate : 7% | GDP - real growth rate : 15.3% (2021 est.) |
The national holidays mentioned below are valid for the year 2023.
The approximate time for sharing the contract with an employee in Panama is 10 business days assuming no special requests or changes to our standard employment contract. Any such requests or changes would need to undergo internal and external review, directly leading to a time delay.
NOTE: This number is subject to change and is only an estimation of the Contract Sharing Time. The estimated Contract Sharing Time begins from the moment that WorkMotion has received all required information from both the client and the employee.
The maximum daily hours of work is eight hours (maximum 48 hours per week). The maximum night shift is seven hours (maximum 42 hours per week). The maximum duration of a mixed shift (day and night work) is seven-and-a-half hours (maximum 45 hours per week).
Maximum overtime permitted in one day is three hours, up to a maximum of nine hours in one week.
The following overtime pay rates apply for different circumstances:
| Overtime circumstances | Applicable Pay Rate |
| Work is performed between 6 am and 6 pm | Plus 25% of usual rate |
| Work is performed between 6 pm and 6 am | Plus 50% of usual rate |
| An overtime work shift is an extension of a night shift or of a mixed shift that starts between 6 pm and 6 am. | Plus 75% of usual rate |
| Overtime exceeding the maximum permitted limits | Plus 75% on applicable overtime rate |
The probationary period can only be stipulated when the worker requires certain aptitudes or special skills. The maximum allowed period is three months. For other workers, there is no legislated provision for a probationary period.
Only employees that have served an employer for a continuous period that is less than two years (and other categories) can be dismissed without providing just cause provided they are given:
An employee on an open-ended contract must give the employer 15 days’ notice. The notice period is calculated from the payment period following the notification (beginning of a month).
Employees that have been employed for more than two years are not entitled to a notice period but receive an additional indemnity equivalent to 6.54% of all wages received during employment. There is no notice period for fixed-term contracts.
An employee is entitled to 30 days annual leave following 11 months of continuous months of work, at the rate of one day for every 11 days in the service of the employer. Pay for annual leave is a month’s salary when the remuneration has been agreed for a month, and four weeks and a third, when it has been agreed per week.
An employee is entitled to 18 days of paid sick leave per year provided a doctor’s note is submitted to the employer. The sick leave is paid for by the employer. Sick leave beyond 18 days is paid for by the Social Security Fund.
Other than maternity and paternity leave, there is no other provision for parental leave.
Maternity leave is provided for 14 weeks, six weeks before the expected date of delivery, and eight weeks after. In order to determine the starting date of the maternity leave, the female employee is required to present a medical certificate with the probable date of confinement to the employer.
To qualify for maternity benefits, a female employee should have paid nine monthly social security contributions within the previous 12 months before their seventh month of pregnancy.
Paternity leave is three days starting from the day the child is delivered.
To qualify for paternity leave, the male employee gives the employer at least one week’s notice of his spouse or cohabitant’s date of delivery, and subsequent to the birth, a birth certificate issued by the National Directorate of the Civil Registry certifying him as the father of the child.
Other than leave relating to holidays that fall on a Sunday for employees that normally schedule their rest day on Sundays, there are no other types of paid leave specified by law.
There are no other legal provisions for unpaid leave unless otherwise provided for by a collective bargaining agreement.
The benefits offered by the social security system include:
An overview of employer contributions towards social security is given in the table below:
| Insurance | Employer Contribution |
| Social Insurance | 12.25% |
| Education Tax | 1.5% |
| Unemployment | 2.25% of quarterly payroll |
| Accident Insurance | 0.33% to 6.25% depending on the type of industry |
Public healthcare is funded by the social security system in Panama. The Caja de Seguro Social (CSS) covers public health insurance. Everyone who makes contributions to the social security system is covered by public health insurance.
The employer contributes 12.25% of the gross wage towards social security.
The state health insurance scheme covers:
Accident Insurance covers disability benefits for employees who incur accidents in the workplace. Accidents that occur while commuting to and from work are covered too. Levels of disability are assessed by the Medical Assessment Commission. Disability is classified as either temporary or permanent.
To qualify for benefits, an employee must be assessed with a work injury or occupational disease. There is no minimum qualifying period.
Employers contribute between 0.33% and 6.25% of the salaries paid towards workers’ compensation.
Conditions for accessing benefits from unemployment insurance are:
The benefit is paid as the total balance in the employee’s account. However, a portion of the account balance may be used as collateral against a loan from an approved lending institution.
The employer contributes 2.25% of the quarterly payroll towards unemployment insurance.
The pensionable age for Old-age pension (Pensión por Vejez) is 62 for men and 57 for women with at least 240 months of contributions (at least 120 months of contributions for seasonal agricultural and construction workers).
Old-Age benefits from the social insurance include Old age pension, disability pension, disability grant, survivors’ pension, survivors’ grant, and the funeral grant.
The public pension is financed by social insurance contributions.
Employers pay 1.5% of the employees’ wages towards educational tax. This contribution is made to assist the functioning of schools in the country.
The information contained in this Country Guide is provided for informational purposes only and should not be construed as legal advice on any subject matter. The contents of this Country Guide contain general information and may not reflect current legal developments or address your situation. You should not act or refrain from acting on the basis of any content included in this Country Guide without seeking the advice or representation of a licensed attorney. WorkMotion Software GmbH disclaims all liability for actions you take or fail to take based on any content included in this Country Guide.
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