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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.

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.

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