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![Panama (42) Panama (42)](https://i0.wp.com/www.papayaglobal.com/wp-content/uploads/2016/06/panama-bg.jpg)
Last updated: May 16, 2023
Currency
United States Dollar (USD)
Employer Taxes
Unknown
Payroll Frequency
Monthly
Employee Costs
11%
Capital
Panama City
Date Format
dd/mm/yyyy
Fiscal Year
1 January - 31 December
Table of contents
- Contributions
- Minimum Wage
- Payroll
- Working Hours
- Leave
- Termination
- VISA
- VAT
- Version History
![Panama (43) Panama (43)](https://i0.wp.com/www.papayaglobal.com/wp-content/uploads/2016/06/panama-bg.jpg)
Contributions
Employer
Employer Payroll Contributions
up to 21.34% | Total Employment Cost |
12.25% | Social security |
1.92% | Unemployment |
1.50% | Education Tax |
0.98-5.67% | Accident |
Employee
Employee Payroll Contributions
11.00% | Total Employee Cost |
9.75% | Social security |
1.25% | Education contribution |
Employee Income Tax
0% | 0 – 11,000 US$ |
15% | 11,000 – 50,000 US$ |
25% | 50,000 US$ + |
Employer taxes
Highest
Lowest
Employee taxes
Highest
Lowest
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.
MINIMUM WAGE (PER MONTH)
Highest
Lowest
Payroll
Payroll Cycle
In Panama, the payroll frequency is stipulated in the employment contract and paid on a monthly, semi-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 installments on 15th April, 15th August, and 15th December.
Working Hours
General
The standard workday consists of eight 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
Overtime work is limited to three additional hours per day, nine hours per week and if the work is deemed hazardous to one’s 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 6.00 am and 6.00 pm are paid at 125.00% of the employee’s regular wage
- Hours performed between 6.00 pm and 6.00 am or on a rest day or holiday are paid at a rate of 150.00% of the employee’s 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 (accrued at 1 day for every 11 days worked). Employers must provide the payment of annual leave three days before the vacation and cannot be compensated in lieu of payment.
Vacation Days
Public Holidays
Highest
Lowest
Public Holidays
Public holidays that fall on a Sunday are moved to the following working day.
Sick Days
The first 3 days of sick leave are paid by the employer. From the 4th day Social Security pays sick leave at a rate of 70% of salary, for a period of up to 26 weeks.
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.
PAID MATERNITY LEAVE (DAYS)
Highest
Lowest
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 trialed 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
In general, notice periods cannot exceed three months and are commonly 30 days or pay in lieu when workers are dismissed ‘without just cause’. No notice is required when workers are dismissed with ‘just cause’ or during the probation period.
Severance Pay
Severance pay is not required unless the case of dismissal is 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– 0.5 months of pay
- Up to 9 months of employment- 0.75 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 employee’s employment contract/collective agreement. The probation period is up to 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 authorization issued by the Ministry of Labor. This authorization 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 Ministry of Labor has published a decree which restructures Panama’s work permit categories and implements numerous other changes to work permit regulations.
Under the decree, there are overall stricter quota requirements for employers in Panama but relaxed quota requirements for short-term technicians; stricter work permit rules for SEM and EMMA visa holders, stricter documentary requirements for certain employers, and new work permit options for self-employed foreign nationals and students, among numerous other changes.
The Ministry has granted a grace period until March 31, 2023, so that foreign nationals who already hold a valid work permit in Panama or submit their work permit application on or before that date are unaffected by the changes.
VAT
General
The standard rate of movable goods and service transfer tax is 7.00%.
Stay up to date on payroll & employment law changes
Version History
April 18, 2022
Minimum wages now typically range from 326.56 USD to 971.35 USD per month.
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Questions & Answers
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2 Comments
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Susan
3 months ago
What is the spanish word for the severnce payment?
Reply
Admin
Enny Shmurin
3 months ago
Reply to Susan
Indemnización por despido
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![Panama (47) Panama (47)](https://i0.wp.com/www.papayaglobal.com/wp-content/uploads/2023/03/countrypedia-cta.png)
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Payroll and Benefits Guide
in Panama
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
And more...
All questions are answered by our in-house compliance department working in conjunction with our local in-country partner for this specific country
Public Holidays Calendar
Panama 2023
Download:
CSV
ICS
Day | Date | Holiday | Notes |
---|---|---|---|
Sunday | Jan-1 | New Year's Day | |
Monday | Jan-2 | New Year’s Day Holiday | Day Off in Lieu |
Monday | Jan-9 | Martyrs’ Day | |
Tuesday | Feb-21 | Carnival | |
Friday | Apr-7 | Good Friday | |
Monday | May-1 | Labour Day | |
Friday | Nov-3 | Separation Day from Colombia | |
Sunday | Nov-5 | Colón Day | |
Monday | Nov-6 | Colón Day Holiday | Day Off in Lieu |
Friday | Nov-10 | Uprising of Los Santos | |
Monday | Nov-27 | Independence Day from Spain | |
Friday | Dec-8 | Mother's Day |
As an expert in global workforce management and payroll, I can provide insights into the concepts mentioned in the article. The article discusses Papaya Global's offerings, which encompass various aspects of workforce management, payroll payments, analytics, compliance, and more. Here's a breakdown of the key concepts:
-
Global Workforce Platform:
- Workforce Management: Involves end-to-end payroll payments and connectors for easy connected payroll.
- Employee Portal: Provides mobile or web payslips and additional services.
- JE Reconciliation: Focuses on closing the loop in payroll processes.
- Country Experts: Designated experts for businesses to address specific country-related workforce needs.
-
Workforce Analytics:
- Offers comprehensive data insights to better understand and optimize workforce dynamics.
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Compliance:
- Aims to comply with regulations globally, including GDPR, with automatic information collection.
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Workforce Payments:
- Payroll Payments Platform: Regulated and automated platform for on-time payments.
- Global Workforce Wallet: Facilitates cross-border direct deposits.
- Payments Connector: Connects local data to global payments for efficient processing.
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Data Security:
- Adheres to industry-leading security standards for safeguarding sensitive information.
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Fraud Prevention:
- Implements measures to protect payments from fraudulent activities.
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Payments Transparency:
- Ensures transparency in funds, processes, and fees associated with payments.
-
Employment Models:
- Includes global payroll, employer of record, contractors, and agent of record for diverse hiring needs.
-
US Workforce:
- Offers solutions for hiring compliantly in the US, catering to various business needs.
-
Employment Services:
- Covers global benefits, immigration support, and equity management to attract top talent.
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Case Studies:
- Features real-world examples like the SentinelOne Case Study, highlighting successful collaborations.
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Who We Serve:
- Targets businesses of different sizes, from startups to enterprises, and various teams within organizations.
-
Featured Resources:
- Provides additional resources like AI applications in facilitating cross-border movement.
-
Pricing and Knowledge Resources:
- Offers a knowledge library, blog, glossary, case studies, competitor comparisons, and tech tools for effective payroll and payment management.
-
Company Information:
- Details about Papaya Global, its team, media coverage, and opportunities for partnerships and careers.
-
Infopedias:
- Resources such as CountryPedia and PaymentsPedia for country-specific payroll and payments data.
Additionally, the article includes specific information about Panama, covering topics like contributions, minimum wage, payroll cycle, working hours, leave policies, termination process, VISA requirements, VAT, and a public holidays calendar.
For any specific inquiries or further details on a particular aspect, feel free to ask.