Minimum Wage

General

In Panama, minimum wages are dependent on the economic activity, specific occupation, and size of the establishment. Minimum wages typically range from 326.56 USD to 971.35 USD per month.

Payroll

Payroll Cycle

In Panama, the payroll frequency is stipulated in the employment contract, paid on a monthly or weekly basis.

13th Salary

In Panama, 13th-month payments are mandatory, and the amount of an additional month’s salary is paid in three equal instalments on 15th April, August, and December.

Working Hours

General

The standard workday consists of 8 hours per day, and a full-time work week is up to 48 hours. Employees under the age of 16 are limited to a 36-hour working week.

Overtime

All work over standard working hours  is to be paid as overtime and is regulated by employment contract/collective agreements etc. When an employee is requested to work overtime or work on holidays, there are maximums in relation to the number of hours allowed. These maximums are three additional hours per day, 9 hours per week, and if the work is deemed hazardous to ones’ health, an employee should not perform overtime at all.

All overtime hours in excess of 48 hours a week are to be paid at an overtime compensation rate; this rate is dependent on the hours in which the overtime is carried out.

• Hours performed between t6.00 am and 6.00 pm are paid at 125.00% of the employees’ regular wage
• Hours performed between t6.00 pm and 6.00 am or on a rest day or holiday are paid at a rate of 150.00% of the employees’ regular income.
• Hours carried over from working during night hours increased to 175.00% of the employee’s standard rate pay.

Working Week

Monday-Friday

Leave

Paid Time Off

An employee in Panama is entitled to 30 days of paid annual leave following the commencement of 12 months of employment. Employers must provide the payment of annual leave three days before the vacation and cannot be compensated in lieu of payment.

Public Holidays

There are 11 paid public holidays.

Sick Days

Employees are entitled to 18 days of paid sick leave.

Maternity Leave

Maternity leave starts six weeks before the expected date of delivery and ends eight weeks after delivery, for a total of 14 weeks.

Maternity pay is paid by the social security system (provided that the employee has accrued a total of nine monthly social security quotas before the seventh month of pregnancy), if the employee has not accrued the minimum the payment will be made by the employer (calculated as the greater of the last salary or average of the last 180 workdays).

In the case of multiple, difficult birth or pregnancy-related illness, the leave can be extended upon the presentation of a medical certificate.

Female employees are protected during their maternity leave and cannot work any rest days or overtime hours.

Adoptive mothers are entitled to 28 days of paid leave.

Paternity Leave

Employees are entitled to three days of fully compensated paternity leave following the birth of their child; the employer compensates this leave.

Parental Leave

There are no provisions in the law regarding parental leave.

Other Leave

There are no provisions in the law regarding any additional leave.

Termination

Termination Process

The termination process varies according to the employment agreement and collective agreement in place and is based on the type of contract and reason for termination. All termination must be provided in writing and must follow the laws outlined in the Panama Labor Law; unjustified dismissals may be trialled in labor court. If the court cannot resolve the claim within 60 days, the employer may dismiss the employee.

Employees cannot be dismissed when pregnant or for their involvement in trade union activities, strikes, or complaining about their employer.

However, there are certain classifications of employees that may be dismissed without just cause (domestic workers, fishing or agricultural workers and retail workers)

Notice Period

Employers may terminate an employee during their probation period without notice. In general, notice periods cannot exceed three months and are commonly 30 days.

Severance Pay

Severance pay is not required unless in the case of dismissal due to redundancy; the severance payment for redundancy is dependent on the employee’s length of service as follows:

• Up to 6 months of employment– .5 months of pay  
• Up to 9 months of employment- .75 months of pay  
• Up to 1 year of employment- 1 month of pay  
• Up to 2 years of employment- 3 months of pay  
• Up to 4 years of employment- 4.5 months of pay  
• Up to 5 years of employment- 5.2 months of pay  
• Up to 10 years of employment- 9.75 months of pay
• Up to 20 years of employment- 14.8 months of pay

Probation Period

In Panama, probation periods are outlined in the employees’ employment contract/collective agreement. The probation period is typically around three months.

VISA

VISA

As a general rule, employers/companies must make up 90% of their workforce via Panamanian citizens or foreigners who are either married to a Panamanian citizen or who have resided in the country for at least ten years. They can engage an expert or foreign technical personnel, but this must not exceed 15% of the total number of workers.

Employers who need to contract foreign personnel must obtain an authorisation issued by the Ministry of Labour. This authorisation, or work permit, is valid for renewable one-year periods, except for citizens of certain specific countries who may obtain a permanent work permit. Employees under the Marrakech Treaty may renew their resident permits and work permits, but only for a maximum of six years.

The most popular Visa is the Pensionado Visa (for retirees). The requirements for getting a Pensionado Visa are proof of a lifetime income of at least 1,000 USD per month for one person plus an additional 250 USD for each dependent.

VAT

General

The standard rate of movable goods and service transfer tax is 7.00%