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Discover everything you need to know about Panama

Hire in Panama at a glance

Here ares some key facts regarding hiring in Panama

Panamanian Balboa
GDP growth
GDP world share
Payroll frequency
Working hours
45 hours/week

Overview in Panama

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  • Geography and Climate: Panama, a narrow land bridge connecting North and South America, features diverse coastlines on the Caribbean Sea and Pacific Ocean, interior mountain ranges like the Cordillera Central, and a tropical climate with distinct rainy and dry seasons. It is known for its rich biodiversity, including rainforests and mangroves.

  • Historical Overview: Initially inhabited by indigenous groups such as the Kuna and Ember谩, Panama became a strategic point for the Spanish Empire following European arrival in 1501. It gained independence from Spain in 1821, joined Gran Colombia, and later seceded with US support in 1903 to facilitate the construction of the Panama Canal. The canal, completed in 1914, was under US control until 1999 when Panama gained full sovereignty.

  • Society and Economy: Panama has a diverse population and a service-oriented economy, heavily reliant on the Panama Canal, logistics, banking, and tourism. It is classified as a high-income country by the World Bank but faces challenges like income inequality and disparities in urban-rural development. The workforce is young and increasingly skilled, though a significant portion remains in the informal sector.

  • Cultural and Employment Practices: The culture emphasizes family and personal relationships, which influence employment practices and communication styles. Work environments tend to be hierarchical, with a high value placed on personal connections and indirect communication to maintain harmony.

  • Economic Sectors: Key sectors include logistics and transportation, finance and banking, and tourism, with emerging growth in technology, green industries, and healthcare. Infrastructure and agriculture also provide significant employment, particularly in rural areas.

  • Communication and Organizational Culture: Building personal connections is crucial in business, with a preference for indirect communication and a formal approach in initial interactions. Organizational hierarchies emphasize respect for seniority and centralized decision-making.

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Employer of Record in Panama

Rivermate is a global Employer of Record company that helps you hire employees in Panama without the need to set up a legal entity. We act as the Employer of Record for your employees in Panama, taking care of all the legal and compliance aspects of employment, so you can focus on growing your business.

How does it work?

When you hire employees in Panama through Rivermate, we become the legal employer of your staff. This means that we take on all the responsibilities of an employer, while you retain the day-to-day management of your employees.

You as the company maintain the direct relationshiop with the employee, you allocate them the work and manage their performance.
Rivermate takes care of the local payrolling of the employee, the contracts, HR, benefits and compliance.

Responsibilities of an Employer of Record

As an Employer of Record in Panama, Rivermate is responsible for:

  • Creating and managing the employment contracts
  • Running the monthly payroll
  • Providing local and global benefits
  • Ensuring 100% local compliance
  • Providing local HR support

Responsibilities of the company that hires the employee

As the company that hires the employee through the Employer of Record, you are responsible for:

  • Day-to-day management of the employee
  • Work assignments
  • Performance management
  • Training and development

Taxes in Panama

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  • Social Security Contributions (CSS): Employers in Panama must contribute 12.5% of an employee's gross salary to the Caja de Seguro Social (CSS), which is mandatory for all employers.

  • Educational Insurance Tax: Employers are required to contribute 1.5% of an employee's gross salary to this tax, which is managed by the Ministry of Education (MEDUCA).

  • Income Tax Withholding: Employers must withhold income tax based on graduated rates provided by the Direcci贸n General de Ingresos (DGI), with payments due monthly or semi-monthly.

  • Occupational Risk Insurance: This insurance, mandatory in certain industries, varies in rate depending on the industry's risk level and is also managed by the CSS.

  • 13th Month Bonus: This mandatory bonus is subject to income tax and social security contributions like regular salary.

  • Employee Tax Deductions: Employees contribute 7.25% of their gross salary to Social Security and have income tax withheld at graduated rates.

  • Value Added Tax (ITBMS): The standard rate is 7%, with certain goods and services such as alcoholic beverages and tobacco products taxed at higher rates. Financial, medical, educational, and public transportation services are exempt.

  • VAT Filing Procedures: Businesses must register with the DGI, issue compliant invoices, file regular returns, and remit the net ITBMS owed.

  • Special Economic Zones (SEZs): Businesses in these zones enjoy benefits like duty exemptions and reduced tax rates, subject to specific operational and investment criteria.

  • Multinational Enterprise Headquarters Regime (SEM): Offers tax exemptions and other benefits for multinational companies establishing regional headquarters in Panama, subject to meeting certain thresholds and licensing requirements.

  • Other Tax Incentives: Panama provides additional incentives for sectors like tourism, agriculture, and reforestation, each with specific eligibility and application requirements.

Leave in Panama

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In Panama, labor laws ensure that employees receive paid annual leave, accumulating one day of vacation for every eleven days worked, with a full entitlement of 30 days after a year of employment. Employees must use their vacation leave as payment in lieu is not permitted, and employers must pay for vacations at least three days before they commence. Vacation time can be split into two periods if agreed upon in a collective bargaining agreement. Upon termination, unused vacation days must be compensated.

Panama also observes several national holidays, including New Year's Day, Martyrs' Day, Carnival, Good Friday, Labor Day, and various independence-related holidays. The dates for Carnival, Ash Wednesday, and Good Friday vary annually based on the religious calendar.

Additionally, Panamanian law mandates other types of leave, such as maternity leave (14 weeks, paid by social security or the employer), sick leave (first three days paid by the employer, then by social security), paternity leave (three days), bereavement leave, and study leave, which may be paid or unpaid depending on employer policies. Employees are compensated for any accrued but unused vacation leave upon termination of employment.

Benefits in Panama

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In Panama, employers are mandated to provide a comprehensive benefits package to their employees, which includes various types of leave, social security contributions, and overtime pay. Key leave entitlements include 30 days of annual leave, 14 public holidays, 18 days of sick leave, 14 weeks of maternity leave, and 1 week of paternity leave. Other mandatory benefits include contributions to the Social Security System (CSS) for medical coverage and worker's compensation, as well as a 13th-month salary bonus.

Additionally, many companies offer optional benefits to enhance employee satisfaction and competitiveness. These can include performance-based bonuses, commuting and housing allowances, company-provided cars or transportation, and necessary work equipment. Work-life balance is supported through flexible work arrangements and wellness programs, while professional development is encouraged via educational allowances. Some employers also provide private health and dental insurance plans to supplement the basic coverage offered by the CSS, which has limitations such as long wait times and limited specialist availability.

The retirement system in Panama includes a mandatory Social Security pension program, with the option for additional voluntary private pension plans, offering potentially higher returns but requiring individual management.

Workers Rights in Panama

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The termination of employment contracts in Panama is regulated by the Panamanian Labor Code, which specifies lawful grounds for dismissal, notice requirements, and severance pay entitlements. Employers may terminate employment for cause, such as misconduct or poor performance, or for economic reasons, with necessary approvals from the Ministry of Labor. Employees can resign due to intolerable working conditions or by providing notice as per their contract.

Notice periods vary; immediate termination is possible for cause, while economic dismissals require prior justification to the Ministry of Labor. Severance pay depends on the termination reason and tenure, with specific entitlements for economic dismissals and unjustified terminations.

Panama also enforces anti-discrimination laws protecting characteristics like race, sex, religion, and disability, among others. Employers are responsible for ensuring non-discriminatory practices in hiring and maintaining a respectful work environment. Mechanisms for redress include complaints to the Ministry of Labor or legal action through courts.

Additionally, the Labor Code outlines standards for work hours, rest periods, and ergonomic requirements to ensure safe working conditions. Employers must provide a safe workplace, conduct risk assessments, and offer necessary training and equipment. Employees have rights to a safe environment and can refuse unsafe work.

Overall, Panama's labor laws aim to balance employer and employee rights and responsibilities, with ongoing efforts to strengthen anti-discrimination measures and workplace safety regulations.

Agreements in Panama

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In Panama, all employment contracts must be in Spanish and registered with the Ministry of Labor. There are three primary types of contracts:

  1. Indefinite-Term Contracts: These do not have a specified end date and are the standard form unless stated otherwise, providing full benefits under local labor laws.
  2. Fixed-Term Contracts: Used for temporary roles, these contracts can last up to one year, extendable to three years for specialized roles. If employment continues beyond the agreed term, the contract automatically becomes an indefinite-term contract.
  3. Probationary Contracts: These are included within other types of contracts and cannot exceed 90 days, allowing either party to terminate the agreement without cause during this period.

Key elements of an employment contract include:

  • Identification of both parties involved.
  • Detailed job description and responsibilities.
  • Clearly outlined remuneration and benefits.
  • Work schedule, including overtime regulations.
  • Leave policies as per Panamanian law.
  • Termination clauses specifying grounds and notice periods.
  • Dispute resolution processes.

Probationary periods are specifically regulated, only applicable to roles requiring special skills, and must not exceed 90 days. Confidentiality is legally expected from employees, and while non-compete clauses are generally unenforceable due to constitutional rights, employers may use non-solicitation clauses or stricter confidentiality agreements to protect their interests.

Remote Work in Panama

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Panama's approach to remote work is flexible and voluntary, with no specific law but guided by principles from the Ministry of Labor and Workforce Development (MITRADEL). Key aspects include:

  • Voluntary Participation: Remote work must be mutually agreed upon, either in the initial contract or through an amendment.
  • Work Schedule: The standard 48-hour workweek applies, but flexible scheduling is allowed, respecting the right to disconnect.
  • Technological Infrastructure: Essential for remote work, including reliable internet, secure communication platforms, and necessary equipment, which may or may not be provided by the employer.
  • Employer Responsibilities: Include ensuring a safe work environment, managing performance effectively, and facilitating communication and collaboration. Employers must also adhere to data protection laws under Panamanian Law 81 of 2019, ensuring minimal data collection, transparency, security measures, and breach notifications.

Additional flexible work arrangements like part-time work, flexitime, and job sharing are available, promoting work-life balance and allowing for various work schedules and shared responsibilities. Equipment and expense policies are typically outlined in employer-employee agreements rather than mandated by law.

Working Hours in Panama

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  • Working Hours and Overtime: Panamanian labor law sets a standard workday of eight hours and a workweek of 48 hours, with many businesses operating a 40-hour week. Overtime is paid at 125% of regular pay from 6:00 AM to 6:00 PM, and 150% for hours outside this range or on holidays. For night or mixed shifts extending beyond these hours, the rate increases to 175%.

  • Rest and Breaks: Employees are entitled to a mandatory rest day, typically Sunday, and a daily rest break of at least 30 minutes. Special provisions are made for breastfeeding mothers, allowing them additional breaks.

  • Night and Weekend Work: Night shifts are limited to seven hours between 6:00 PM and 6:00 AM, with a weekly cap of 42 hours. Work on national holidays requires double pay, while other overtime is compensated with a 25% to 75% premium depending on the timing and nature of the shift.

  • Legal References and Compliance: These regulations are outlined in the Panamanian Labor Code (C贸digo de Trabajo de 1971), Articles 33-38. Employers and employees are advised to consult the Panamanian Ministry of Labor for detailed and current regulations.

Salary in Panama

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Understanding competitive salaries in Panama is essential for attracting and retaining skilled employees. Factors influencing salary competitiveness include job title, industry, experience, education, location, and company size. Research methods include salary surveys and government resources, with the Panamanian Ministry of Labor providing key data on minimum wages, which vary by region and sector and are influenced by company size.

Panama's labor laws mandate a thirteenth-month bonus and allow for various allowances such as transportation, meals, education, housing, and telephone expenses. Performance-based bonuses are also common, including commissions, profit-sharing, and performance bonuses.

Payroll practices in Panama are governed by labor laws, with options for monthly, bi-weekly, or weekly payments. Mandatory payroll elements include base salary, thirteenth-month pay, social security, educational insurance, and income tax, with electronic transfers being the preferred payment method. Employers must handle payroll taxes and provide detailed pay slips to employees.

Termination in Panama

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In Panama, labor laws outline specific regulations for employment termination, varying by cause and duration of service.

  • Termination With Cause: No notice is required if there is a justifiable reason (Article 213).
  • Termination Without Cause: Employers must give 30 days' notice or pay equivalent to 30 days' wages for employees with less than two years of service. Employees with over two years can only be terminated for just cause (Article 225).
  • Resignation: Employees must give at least 15 days' notice, or two months for technical positions (Article 226).

Severance Pay is mandatory in cases of unjustified termination or economic reasons, calculated based on the employee's length of service and average salary. For up to 10 years of service, severance equals 3.4 weeks of salary per year. Beyond 10 years, it's one week's salary per year. A seniority premium equivalent to one week's salary per year of service is also included.

Additional Notes:

  • No severance is paid for justified terminations.
  • Mutual agreements on severance must meet or exceed legal minimums.
  • Economic terminations require prior authorization from the Ministry of Labor with evidence of economic necessity.
  • All notices must be in writing, and employees can challenge wrongful terminations in labor courts.

Freelancing in Panama

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Health & Safety in Panama

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In Panama, workplace safety and health are constitutionally guaranteed, with detailed regulations outlined in the Labor Code, particularly Book II, and further supported by the General Regulations on the Prevention of Occupational Hazards and Safety and Health at Work. These regulations cover risk assessments, hazard prevention, worker training, and emergency procedures, with specific stipulations for high-risk sectors like construction.

Key institutions involved in enforcing these standards include the Ministry of Labor and Workforce Development (MITRADEL) and the Social Security Fund (CSS), which also handles occupational health through its program and manages compensation claims for work-related injuries and illnesses.

Employers are mandated to ensure a safe working environment by identifying and mitigating hazards, providing necessary training and personal protective equipment (PPE), and reporting accidents. Workers have rights to refuse unsafe work, participate in safety initiatives, and must adhere to safety regulations.

Inspections are a crucial enforcement tool, conducted by MITRADEL and CSS, focusing on compliance with safety standards and can be scheduled or unscheduled. Employers are responsible for accident investigations and must report incidents promptly. The CSS handles compensation claims, providing benefits for medical care, wage replacement, and compensation for permanent impairments or fatalities.

Overall, Panama emphasizes a comprehensive approach to occupational health and safety, involving stringent regulations, active employer and worker participation, and robust institutional oversight.

Dispute Resolution in Panama

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Labor Courts in Panama

Legal Basis

  • Established by the Labor Code (C贸digo de Trabajo), specifically in Book V.


  • Sectional Labor Courts (Juzgados Seccionales de Trabajo): Handle individual labor disputes at the initial instance.
  • Superior Labor Court (Tribunal Superior de Trabajo): Appellate courts overseeing several Sectional Courts.
  • The Labor Chamber of the Supreme Court of Justice: The highest labor court, handling appeals and specific legal matters.


  • Handles disputes from employment contracts, interpretation of collective agreements, work-related injuries, union rights, and labor-related sanctions.


  • Proceedings are oral, fast-tracked, and initiated by filing a claim. Evidence is presented, and decisions can be appealed.

Arbitration in Panama

Legal Basis

  • Governed by Law No. 131 of 2013.

Arbitration Panels

  • Ad-hoc panels: Formed for specific disputes, parties select arbitrators.
  • Institutional Arbitration: Permanent centers like the Center for Conciliation and Arbitration of Panama.


  • Covers disputes that are legally arbitrable, including labor disputes under certain conditions.


  • Involves an arbitration agreement, appointment of arbitrators, hearings, and an arbitral award.

Compliance Audits and Inspections


  • Involves planning, fieldwork, analysis, reporting, and corrective actions. Audits assess compliance with regulations and standards.


  • Essential for risk mitigation, maintaining standards, and promoting best practices.


  • Conducted by various entities like government regulatory agencies and independent auditors.

Frequency and Consequences

  • Frequency varies by industry; non-compliance can lead to fines, legal action, and operational disruptions.

Reporting Violations and Whistleblower Protections

Reporting Mechanisms

  • Internal systems within companies, ANTAI for public sector complaints, and specialized agencies for specific sectors.

Whistleblower Protections

  • Protected under Law 82 of 2013, especially in the public sector, against retaliation.

Practical Considerations

  • Whistleblowers should document evidence and consider the severity and scope of violations. Legal consultation is advised.

International Labor Standards

ILO Conventions

  • Panama adheres to key ILO conventions protecting union rights, prohibiting forced and child labor, and ensuring non-discrimination in employment.

Enforcement and Monitoring

  • MITRADEL is responsible for enforcing labor laws and international standards.


  • Challenges include enforcing regulations in the informal sector, limited access to legal protection in rural areas, and resource constraints for comprehensive monitoring.

Cultural Considerations in Panama

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Understanding Communication Styles in Panamanian Business Culture

  • Formality and Respect: In Panama, formality is emphasized in business interactions. Titles and polite forms of address are important, and initial meetings usually start with formal introductions.

  • Indirect Communication: Panamanians often use indirect communication to maintain harmony and avoid confrontation. Understanding this style is crucial for interpreting messages accurately, as direct refusals are rare.

  • Non-Verbal Cues: Non-verbal communication such as body language, facial expressions, and eye contact is significant. Maintaining eye contact shows respect, while gestures like touching can indicate warmth, though they should be used cautiously in formal settings.

  • Importance of Relationships: Building trust and rapport is essential in Panamanian business culture. Social interactions outside of work are common and help in fostering a collaborative environment.

  • Negotiation Practices: Negotiations in Panama involve building relationships first, using indirect communication, and focusing on collaborative solutions. Personal connections and recommendations are highly valued.

  • Hierarchical Structures: Panama has a hierarchical business structure with a high respect for authority. Decision-making is typically top-down, and leadership styles tend to be autocratic but with a personal touch.

  • Cultural Adaptation: With globalization, there is a potential shift towards flatter organizational structures and more participative leadership styles in some sectors.

  • Business Operations and Holidays: Panama has numerous national and regional holidays that affect business operations. Awareness of these holidays is important for planning and maintaining business continuity.

Frequently Asked Questions for Employer of Record services in Panama

What is the timeline for setting up a company in Panama?

Setting up a company in Panama involves several steps and can take anywhere from a few weeks to a couple of months, depending on the efficiency of the processes and the preparedness of the necessary documentation. Here is a detailed timeline for setting up a company in Panama:

  1. Choosing a Company Name (1-2 days):

    • Verify the availability of the desired company name with the Public Registry of Panama. This step is crucial to ensure that the name is unique and not already in use.
  2. Drafting and Notarizing the Articles of Incorporation (3-5 days):

    • Prepare the Articles of Incorporation, which must include details such as the company name, objectives, capital, and the names of the directors and shareholders.
    • Have the Articles of Incorporation notarized by a Panamanian notary public.
  3. Registering the Company with the Public Registry (5-10 days):

    • Submit the notarized Articles of Incorporation to the Public Registry of Panama for official registration. This step formalizes the existence of the company.
  4. Obtaining a Tax Identification Number (RUC) (1-3 days):

    • Register the company with the Panamanian tax authorities (Direcci贸n General de Ingresos, DGI) to obtain a Tax Identification Number (RUC).
  5. Opening a Corporate Bank Account (1-2 weeks):

    • Open a corporate bank account in Panama. This process can vary in duration depending on the bank's requirements and the completeness of the documentation provided.
  6. Obtaining Business Licenses and Permits (1-4 weeks):

    • Depending on the nature of the business, apply for the necessary licenses and permits from local authorities. This may include municipal licenses, health permits, and other sector-specific authorizations.
  7. Registering for Social Security (1-2 weeks):

    • Register the company and its employees with the Panamanian Social Security Fund (Caja de Seguro Social, CSS) to comply with social security obligations.
  8. Hiring Employees and Complying with Labor Laws (Ongoing):

    • Ensure compliance with Panamanian labor laws, including employment contracts, minimum wage requirements, and employee benefits.

Using an Employer of Record (EOR) service like Rivermate can significantly streamline this process. An EOR can handle many of these steps on behalf of the company, reducing the time and administrative burden involved in setting up a business in Panama. This allows the company to focus on its core operations while ensuring compliance with local regulations.

Who handles the filing and payment of employees' taxes and social insurance contributions when using an Employer of Record in Panama?

When using an Employer of Record (EOR) in Panama, the EOR, such as Rivermate, handles the filing and payment of employees' taxes and social insurance contributions. This includes the calculation, withholding, and remittance of income taxes, as well as contributions to the social security system (Caja de Seguro Social, CSS) and other mandatory benefits. The EOR ensures compliance with Panamanian tax laws and regulations, thereby relieving the client company of the administrative burden and complexities associated with local payroll and tax compliance. This allows the client company to focus on its core business activities while ensuring that all legal obligations are met accurately and timely.

What options are available for hiring a worker in Panama?

In Panama, employers have several options for hiring workers, each with its own set of legal and administrative requirements. Here are the primary methods:

  1. Direct Employment:

    • Local Entity: The employer must establish a legal entity in Panama, such as a corporation or a branch office. This involves registering with the Public Registry, obtaining a Tax Identification Number (RUC), and registering with the Social Security Fund (CSS).
    • Employment Contracts: Employers must draft employment contracts in accordance with Panamanian labor laws, which include specific provisions regarding working hours, wages, benefits, and termination conditions.
    • Compliance: Employers must comply with local labor laws, including minimum wage regulations, social security contributions, and other statutory benefits like vacation and severance pay.
  2. Independent Contractors:

    • Contractual Agreement: Employers can hire workers as independent contractors. This requires a contractual agreement outlining the scope of work, payment terms, and duration of the contract.
    • Tax and Compliance: Independent contractors are responsible for their own taxes and social security contributions. However, employers must ensure that the relationship does not resemble an employment relationship to avoid legal complications.
  3. Temporary Staffing Agencies:

    • Third-Party Employment: Employers can engage workers through temporary staffing agencies. The agency acts as the employer of record, handling payroll, taxes, and compliance.
    • Flexibility: This option provides flexibility for short-term projects or seasonal work without the administrative burden of direct employment.
  4. Employer of Record (EOR) Services:

    • Outsourced Employment: An EOR like Rivermate can hire workers on behalf of the employer. The EOR becomes the legal employer, managing all aspects of employment, including payroll, taxes, benefits, and compliance with local labor laws.
    • Simplified Process: This option allows employers to quickly and compliantly hire workers in Panama without establishing a local entity. It simplifies the hiring process and reduces administrative overhead.
    • Risk Mitigation: Using an EOR mitigates risks associated with non-compliance with local labor laws and regulations, as the EOR assumes responsibility for legal and regulatory compliance.

Benefits of Using an Employer of Record (EOR) in Panama:

  • Speed and Efficiency: An EOR can expedite the hiring process, enabling employers to onboard workers quickly without the need to navigate complex legal and administrative procedures.
  • Cost-Effective: Avoiding the costs associated with setting up and maintaining a local entity can result in significant savings.
  • Compliance Assurance: EORs have expertise in local labor laws and regulations, ensuring that all employment practices are compliant, thereby reducing the risk of legal issues.
  • Focus on Core Business: By outsourcing employment administration to an EOR, employers can focus on their core business activities and strategic objectives.
  • Scalability: EOR services provide the flexibility to scale the workforce up or down based on business needs without long-term commitments.

In summary, while direct employment and independent contracting are viable options for hiring workers in Panama, using an Employer of Record like Rivermate offers significant advantages in terms of speed, compliance, and administrative ease.

How does Rivermate, as an Employer of Record in Panama, ensure HR compliance?

Rivermate, as an Employer of Record (EOR) in Panama, ensures HR compliance through several key strategies and practices tailored to the specific legal and regulatory environment of the country. Here are the detailed ways Rivermate achieves this:

  1. Local Expertise and Knowledge: Rivermate employs local HR and legal experts who are well-versed in Panamanian labor laws, regulations, and cultural nuances. This ensures that all employment practices are compliant with the latest legal requirements and best practices in Panama.

  2. Employment Contracts: Rivermate prepares and manages employment contracts that comply with Panamanian labor laws. These contracts include all necessary clauses related to wages, working hours, benefits, termination conditions, and other statutory requirements, ensuring that both the employer and employee are protected under local law.

  3. Payroll Management: Rivermate handles payroll processing in strict accordance with Panamanian regulations. This includes accurate calculation of wages, taxes, social security contributions, and other mandatory deductions. They ensure timely and correct payments to employees, thereby avoiding any legal penalties or disputes.

  4. Tax Compliance: Rivermate ensures that all tax obligations are met, including income tax withholding, social security contributions, and other relevant taxes. They stay updated with any changes in tax laws and regulations to ensure ongoing compliance.

  5. Benefits Administration: Rivermate manages statutory benefits such as health insurance, pension contributions, and other mandatory employee benefits. They also offer guidance on additional benefits that can help attract and retain talent while remaining compliant with local laws.

  6. Labor Law Adherence: Rivermate ensures adherence to Panamanian labor laws regarding working hours, overtime, leave entitlements (such as vacation, sick leave, and maternity/paternity leave), and workplace safety regulations. They provide guidance and support to ensure that the working conditions meet legal standards.

  7. Employee Onboarding and Offboarding: Rivermate manages the entire employee lifecycle, from onboarding to offboarding, in compliance with Panamanian regulations. This includes proper documentation, orientation, and ensuring that termination processes are handled legally and ethically, including the calculation and payment of any severance or final settlements.

  8. Regulatory Updates and Training: Rivermate continuously monitors changes in Panamanian employment laws and regulations. They provide regular updates and training to their clients and their HR teams to ensure ongoing compliance and to mitigate any risks associated with non-compliance.

  9. Dispute Resolution: In the event of employment disputes, Rivermate provides support and guidance to resolve issues in accordance with Panamanian labor laws. They ensure that any disciplinary actions or grievances are handled fairly and legally.

  10. Data Protection and Privacy: Rivermate ensures compliance with data protection laws in Panama, safeguarding employee information and maintaining confidentiality. They implement robust data security measures to protect sensitive HR data.

By leveraging these comprehensive strategies, Rivermate ensures that companies operating in Panama can focus on their core business activities while remaining fully compliant with all local HR and employment laws.

Is it possible to hire independent contractors in Panama?

Yes, it is possible to hire independent contractors in Panama. However, there are several important considerations to keep in mind to ensure compliance with local laws and regulations.

  1. Legal Framework: In Panama, the distinction between an employee and an independent contractor is crucial. Independent contractors are not covered by the same labor laws that protect employees, such as those related to minimum wage, overtime, and severance pay. Instead, they operate under civil or commercial contracts.

  2. Contractual Agreement: When hiring an independent contractor, it is essential to have a well-drafted contract that clearly outlines the scope of work, payment terms, duration of the contract, and other relevant details. This contract should explicitly state that the individual is an independent contractor and not an employee to avoid any potential misclassification issues.

  3. Tax Implications: Independent contractors in Panama are responsible for their own tax filings and social security contributions. Employers do not withhold taxes or make social security contributions on behalf of independent contractors. However, it is advisable to verify that the contractor is compliant with their tax obligations to avoid any potential liabilities.

  4. Control and Independence: To maintain the independent contractor status, it is important that the contractor retains a significant degree of control over how the work is performed. The more control the hiring company exerts over the contractor's work, the higher the risk of the contractor being reclassified as an employee by the authorities.

  5. Benefits of Using an Employer of Record (EOR): While hiring independent contractors can be straightforward, using an Employer of Record (EOR) like Rivermate can provide additional benefits. An EOR can help navigate the complexities of local labor laws, ensure compliance, and reduce the risk of misclassification. They can also handle payroll, tax filings, and other administrative tasks, allowing you to focus on your core business activities.

In summary, while it is possible to hire independent contractors in Panama, it is important to ensure that the contractual relationship is clearly defined and compliant with local laws. Using an EOR can provide added assurance and streamline the process.

Do employees receive all their rights and benefits when employed through an Employer of Record in Panama?

Yes, employees in Panama receive all their rights and benefits when employed through an Employer of Record (EOR) like Rivermate. An EOR ensures compliance with local labor laws and regulations, which is crucial in a country like Panama where labor laws are comprehensive and protective of employee rights.

Here are some key aspects of how an EOR ensures employees receive their rights and benefits in Panama:

  1. Employment Contracts: An EOR will draft and manage employment contracts that comply with Panamanian labor laws. These contracts will include all necessary terms and conditions, such as job description, salary, working hours, and termination clauses.

  2. Wages and Salaries: The EOR ensures that employees are paid in accordance with Panamanian minimum wage laws and any applicable collective bargaining agreements. They also handle payroll processing, ensuring timely and accurate payment of wages.

  3. Social Security and Taxes: An EOR manages the mandatory social security contributions and tax withholdings. In Panama, this includes contributions to the Social Security Fund (CSS) and the Educational Insurance Fund (IFARHU). The EOR ensures these contributions are made correctly and on time.

  4. Benefits: Employees are entitled to various benefits under Panamanian law, such as paid annual leave, sick leave, maternity leave, and severance pay. An EOR ensures these benefits are provided in accordance with the law. For example, employees are entitled to 30 days of paid annual leave after one year of service.

  5. Health and Safety: An EOR ensures compliance with workplace health and safety regulations, providing a safe working environment for employees. This includes adherence to the Occupational Health and Safety Law (Law 51 of 2005).

  6. Termination and Severance: In the event of termination, an EOR ensures that the process complies with Panamanian labor laws, which include specific provisions for notice periods and severance payments. For instance, employees are generally entitled to severance pay based on their length of service.

  7. Dispute Resolution: An EOR can assist in resolving any employment disputes in accordance with Panamanian labor laws, ensuring that employees have access to fair and legal recourse.

By using an EOR like Rivermate, companies can ensure that their employees in Panama receive all the rights and benefits they are entitled to under local law. This not only helps in maintaining compliance but also contributes to employee satisfaction and retention.

What legal responsibilities does a company have when using an Employer of Record service like Rivermate in Panama?

When a company uses an Employer of Record (EOR) service like Rivermate in Panama, the legal responsibilities of the company are significantly streamlined, but there are still important aspects to consider. Here are the key legal responsibilities and benefits:

  1. Compliance with Local Labor Laws: The EOR ensures that all employment practices comply with Panamanian labor laws, including contracts, wages, working hours, and termination procedures. This reduces the risk of legal issues for the company.

  2. Payroll and Taxation: The EOR handles payroll processing, ensuring that employees are paid accurately and on time. They also manage the calculation and remittance of all required taxes and social security contributions, ensuring compliance with Panamanian tax laws.

  3. Employment Contracts: The EOR drafts and manages employment contracts in accordance with Panamanian law. This includes ensuring that contracts are legally binding and include all necessary terms and conditions.

  4. Employee Benefits: The EOR administers employee benefits as required by Panamanian law, such as health insurance, vacation leave, and other statutory benefits. This ensures that employees receive all mandated benefits without the company needing to navigate the local benefits landscape.

  5. Work Permits and Visas: If the company hires foreign employees, the EOR assists with obtaining the necessary work permits and visas, ensuring compliance with immigration laws in Panama.

  6. Termination and Severance: The EOR manages the termination process, ensuring that it is conducted in accordance with Panamanian labor laws. This includes calculating and disbursing any required severance pay and handling any potential legal disputes.

  7. Record Keeping and Reporting: The EOR maintains all necessary employment records and handles any required reporting to Panamanian government agencies. This ensures that the company remains compliant with local regulations regarding record-keeping and reporting.

  8. Risk Management: By using an EOR, the company mitigates the risk of non-compliance with local laws, which can result in fines, legal disputes, and damage to the company鈥檚 reputation.

  9. Focus on Core Business: With the administrative and legal responsibilities managed by the EOR, the company can focus on its core business activities and strategic goals without being bogged down by the complexities of local employment laws.

In summary, while the EOR takes on many of the legal responsibilities associated with employment in Panama, the company must still ensure that it selects a reputable EOR service like Rivermate that has a thorough understanding of Panamanian labor laws and regulations. This partnership allows the company to operate smoothly and compliantly in Panama.

What are the costs associated with employing someone in Panama?

Employing someone in Panama involves several costs that employers must consider. These costs can be broadly categorized into direct salary expenses and mandatory benefits and contributions. Here鈥檚 a detailed breakdown:

  1. Gross Salary: The primary cost is the employee's gross salary, which is subject to negotiation based on the role, industry standards, and the employee's experience.

  2. Social Security Contributions: Employers in Panama are required to contribute to the social security system. The employer's contribution rate is 12.25% of the employee's gross salary. This covers various benefits, including health insurance, maternity leave, and pensions.

  3. Educational Insurance: Employers must also contribute to the educational insurance fund, which is 1.5% of the employee's gross salary. This fund supports educational programs and initiatives in Panama.

  4. Severance Fund: Employers are required to contribute to a severance fund, which is 1.92% of the employee's gross salary. This fund is used to pay severance in case of termination.

  5. Vacation Pay: Employees in Panama are entitled to 30 days of paid vacation per year. This cost is typically factored into the overall compensation package.

  6. 13th Month Bonus: Panama mandates a 13th-month bonus, which is an additional month's salary paid in three installments throughout the year (April, August, and December). This effectively increases the annual salary cost by approximately 8.33%.

  7. Income Tax Withholding: While this is deducted from the employee's salary, employers must manage the withholding and remittance of income tax on behalf of their employees. The tax rates are progressive, ranging from 0% to 25% based on the employee's income.

  8. Other Benefits: Depending on the company policy and industry standards, employers might offer additional benefits such as health insurance, transportation allowances, meal vouchers, and more. These are not mandated by law but can be significant in attracting and retaining talent.

  9. Legal and Administrative Costs: Employers must also consider the costs associated with compliance, legal advice, and administrative overheads to ensure adherence to Panamanian labor laws.

Using an Employer of Record (EOR) like Rivermate can help manage these costs effectively. An EOR handles payroll, benefits administration, tax compliance, and other HR functions, ensuring that all legal requirements are met. This can save time and reduce the risk of non-compliance, which can be costly. Additionally, an EOR can provide insights into local market conditions and help structure competitive compensation packages, making it easier to attract and retain top talent in Panama.

What is HR compliance in Panama, and why is it important?

HR compliance in Panama refers to the adherence to the country's labor laws, regulations, and standards that govern the employer-employee relationship. This includes compliance with employment contracts, wages, working hours, health and safety standards, social security contributions, and termination procedures. Ensuring HR compliance is crucial for several reasons:

  1. Legal Obligations: Panama has specific labor laws outlined in the Labor Code (C贸digo de Trabajo), which employers must follow. Non-compliance can result in legal penalties, fines, and sanctions. By adhering to these laws, companies avoid legal disputes and financial liabilities.

  2. Employee Rights and Protections: Compliance ensures that employees' rights are protected, including fair wages, safe working conditions, and benefits such as social security and health insurance. This fosters a positive work environment and enhances employee satisfaction and retention.

  3. Reputation Management: Companies that comply with local labor laws maintain a good reputation in the market. This is particularly important for multinational companies operating in Panama, as it reflects their commitment to ethical practices and corporate social responsibility.

  4. Operational Efficiency: Proper HR compliance helps streamline HR processes, reducing the risk of errors and inconsistencies in payroll, benefits administration, and employee management. This leads to more efficient operations and better resource management.

  5. Risk Mitigation: By ensuring compliance, companies mitigate the risk of labor disputes, strikes, and other disruptions that can affect business continuity. It also minimizes the risk of costly litigation and damage to the company's brand.

  6. Attracting Talent: Companies known for their compliance with labor laws are more attractive to potential employees. Talented professionals are more likely to join and stay with organizations that respect their rights and provide a stable and lawful working environment.

Using an Employer of Record (EOR) like Rivermate in Panama can significantly aid in achieving HR compliance. An EOR takes on the responsibility of ensuring that all employment practices adhere to local laws and regulations. This includes managing payroll, taxes, benefits, and other HR functions, allowing companies to focus on their core business activities while being assured of full compliance with Panamanian labor laws.

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