Guide to employment, payroll and benefits in


Rivermate offers complete payroll, benefits and compliance services for


01. Overview

Last updated: 

August 19, 2021

Panamanian Balboa
Ease of doing business
GDP growth

02. Grow your team in


with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in


, particularly if you don't have established local relationships. You can hire employees in


effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Panama, officially the Republic of Panama, is a transcontinental country in Central and South America that is bordered on the west by Costa Rica, on the southeast by Colombia, on the north by the Caribbean Sea, and on the south by the Pacific Ocean. Panama City, the country's capital and largest city, is home to nearly half of the country's 4 million residents. Before Spanish colonists arrived in the 16th century, Panama was populated by indigenous tribes. In 1821, it declared independence from Spain and joined the Republic of Gran Colombia, a confederation of Nueva Granada, Ecuador, and Venezuela. Following the dissolution of Gran Colombia in 1831, Panama and Nueva Granada became the Republic of Colombia. Panama seceded from Colombia in 1903 with the support of the United States, enabling the US Army Corps of Engineers to complete the Panama Canal between 1904 and 1914. The Torrijos–Carter Treaties of 1977 stipulated that the canal would be transferred from the United States to Panama on December 31, 1999. Panama's neighboring area was first restored in 1979. Canal toll revenue continues to account for a large portion of the country's GDP, despite the fact that trade, banking, and tourism are both important and growing sectors. It is considered to be a high-income economy. In terms of the Human Development Index, Panama was ranked 57th in the world in 2019. According to the World Economic Forum's Global Competitiveness Index, Panama was the seventh most competitive economy in Latin America in 2018. Panama's jungles, which cover about 40% of the country's land area, are home to a diverse range of tropical plants and animals, some of which are found nowhere else on the planet. Panama is a founding member of the United Nations, as well as the OAS, LAIA, G77, WHO, and NAM, among other international organizations.

04. Public holidays

05. Types of leave

Paid time off

Employees are entitled to 30 days of paid annual leave after one year of employment.

Public holidays

There are 11 paid public holidays in Panama.

Sick days

Employees are entitled to 18 paid sick days a year.

Maternity leave

Women are entitled to 14 weeks of paid maternity leave at 100% of their daily salary. Maternity leave will begin six weeks before and end eight weeks after the planned due date. If the due date is postponed, the prenatal part of the leave is extended, allowing the mother to take up to 8 weeks of post-natal leave. The greater of the last wage or the average of the last 180 workdays is used to measure maternity leave.

Paternity leave

Three days of paid leave are available to fathers.

Parental leave

In Panama, there are no rules governing parental leave.

Other leave

06. Employment termination

Termination process

In Panama, an employee's dismissal must be justified by the labor code. A written notice of termination must be issued, stating the reason for the termination and the date on which it was granted. A dismissal that violates labor code provisions is considered unreasonable, and the employee may have a claim before a labor court. Employers may continue with the dismissal if the labor court does not settle the issue within 60 days.

However, certain categories of employees may be discharged without cause (domestic workers, fishing or agricultural workers, retail workers).

Notice period

Except for employees dismissed for cause, notice is not required. Employees who are terminated without cause are entitled to thirty days' notice.

Severance pay

There are no statutory provisions governing severance pay unless the dismissal is due to redundancy. Payment is determined in this case based on the length of employment and is as follows.

Severance pay is equivalent to 1/2 month's pay for the first six months of employment. Severance pay is equivalent to 3/4 month's pay for up to 9 months of employment. For the first year of employment, severance pay is equivalent to one month's pay. Severance pay is equivalent to three months' pay after two years of employment. Severance pay is equivalent to 4.5 months' pay for employees who have worked for the company for up to four years. Severance pay is equivalent to 5.2 months' pay for employees who have worked for the company for up to five years. Severance pay is up to 9.75 months' pay for employees who have worked for the company for up to ten years. Severance pay is equivalent to 14.8 months of pay for employees who have worked for the company for up to 20 years.

Probation period

The maximum length of probation periods in Panama is three months.

07. Working hours


Panama's standard workweek is 48 hours and eight hours per day. Night work is limited to 42 hours per week and seven hours per day between 6:00 p.m. and 6:00 a.m. Daytime and nighttime work hours are limited to 45 hours per week, or 7.5 hours per day.

Young employees under the age of 16 are limited to 36 hours per week and six hours per day. Employees between the ages of 16 and 18 are limited to 42 hours per week, or seven hours per day.


Overtime pay is 125 percent of regular pay between 6 a.m. and 6 p.m.; 150 percent of regular pay between 6 p.m. and 6 a.m. or on a holiday or day of rest; and 175 percent of regular pay when overtime hours carry over from working during night hours.

It's critical to remember that an employee cannot work more than three hours of overtime per day or nine hours total per week. Overtime is not permitted if the work is deemed dangerous or a health hazard.

08. Minimum wage


The minimum wage in Panama is determined by industry and varies depending on the size of the business and area. It costs between US$275 and US$971.28 a month.

09. Employee benefits


Payroll taxes and the general budget are used to finance mandatory healthcare. Private healthcare is also accessible, although it is the secondary choice for primary care.

The national health system offers essential health care.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in


to hire a team takes time, money, and effort. The labor law in


has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into


simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in


give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in


via our Employer of Record / PEO solution.

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