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Central America

Panama

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Employer of Record (EOR) in Panama

What you'll learn

  • Country Introduction
  • Tax Breakdown for Employers
  • Statutory Leave Laws
  • Minimum Wage and Working Hours
  • Termination Process
  • Additional Information
Panama Introduction

Panama is a transcontinental country spanning the central part of North America and the northern part of South America. The country is bordered by Costa Rica, Colombia, the Caribbean Sea, and the Pacific Ocean. It houses the Panama Canal which is an artificial waterway that connects the Atlantic and Pacific Oceans, and divides North and South America. The canal cuts across the Isthmus of Panama so it can be a conduit for maritime trade — revenue from the canal tolls represents a large portion of Panama’s GDP.

Paid Leave and Statutory Leave

Parental Leave

Pregnant employees are entitled to 14 weeks of maternity leave beginning 6 weeks before the due date and 8 weeks after the birth. This leave is paid for by social security as long as the employee has contributed to social security for the last 9 months. Fathers can take 3 days of fully paid paternity leave after the birth of their child, paid for by the employer. Employees can also take adoptive leave.

Sick Leave

Employees are entitled to 18 days of paid sick leave each year.

Paid Leave

There are 11 paid public holidays in Panama, and employees who have worked at their company for 1 year are entitled to 30 days of paid time off each year.

Wage Requirements and Working Hours

The minimum wage in Panama depends on the job and industry, with average wages around PAB 1,600 per month. The standard workweek is up to 48 hours at 8 hours per day. Overtime work is regulated by the employment contracts and is usually paid between 125%-175% of the regular salary.

Termination Process

Process

The termination process depends on the employment contract and reason for termination. All terminations need to have notice provided in writing, and unjust terminations can be challenged in court.

Notice Period

The standard notice period in Panama is 30 days with a maximum of 3 months.

Severance Pay

Severance pay for terminations due to redundancy depends on the employee’s length of time at the company:

  • 0-6 months = 0.5 months of pay
  • 6-9 months = 0.75 months of pay
  • 9 months - 1 year = 1 month of pay
  • 1-2 years = 3 months of pay
  • 2-4 years = 4.5 months of pay
  • 4-5 years = 5.2 months of pay
  • 5-10 years = 9.75 months of pay
  • 10-20 years = 14.8 months of pay

Additional Information

It is mandatory in Panama to give a 13th-month salary bonus equal to 1 month of salary, usually paid in 3 installments in April, August, and December.

OVERVIEW
Language(s):
Spanish
Currency:
Panamanian Balboa (PAB)
Capital City:
Panama City
Population:
4.4 Million
Cost of Living Rank:
49th
VAT (Valued Added Tax):
7%
Employer TaxES
17.77%
(estimated)

★  12.25% - Social Security

★  1.92% - Unemployment

★  1.5% - Education

★  2.1% - Accident Insurance

Simplified Global HR and Payroll.
Let’s work on it together.

We've made the process really simple
with only 3 steps.

1

Remote candidate

You've sourced a full-time employee or contractor located in a country where your company is not incorporated.

2

Cost Calculation

Pass us the details of your candidate and we will let you know exactly what it costs to employ your candidate in that country.

3

Onboarding & Admin

Sit back and relax as we onboard your new team member and take care of all the local compliances and admin work.

Same-day onboarding
Best Pricing
Available in 150+ countries
How Remofirst employs in Panama

It can be prohibitively expensive to establish an entity in every country you want to hire talent in, so Remofirst will hire and pay your employee on your behalf while you manage their daily duties. Remofirst will handle formal HR procedures and employment contracts that adhere to local laws, so that you can simply approve invoices via our platform. When you work with an Employer of Record (EOR) you can compliantly hire the best employees around the world.

How employees in Panama get paid
Your employee's hours, time off, holidays, bonuses, and commissions are automatically calculated into payroll. Remofirst will invoice you in either US Dollars (USD), Euros (EUR), British Pounds (GBP), Canadian Dollars (CAD), or Singapore Dollars (SGD) around the 15th of each month to make sure your employees in Panama are paid on time in Panamanian Balboa (PAB). To make it even easier, you can summarize your entire global team's salaries to aggregate them into one payment (instead of many individual payments).
Full-time Employees vs Global Contractors

Unlike full-time employees, contractors work on projects with multiple companies at a given time and are technically self-employed. Full-time employees are solely focused on their employer and usually receive benefits (such as health insurance, equity or stock options, and time off) as an additional form of compensation. While it can be cheaper to work with international contractors instead of paying benefits to a full-time employee, you run the risk of misclassification. It's recommended to work with an EOR for contractor onboarding and payments, so you can know that your international contractors are paid compliantly and on time.

Dependable support for employees
Whenever the employee or employer has a question about benefits, Visas, or anything else related to international employment in Panama, they can use our platform's chat function to get answers from our team of experts. Every client of Remofirst also receives a dedicated account manager that will serve as a point of contact for global HR support.