As of March 2024, the estimated population of Panama is 4,468,087.
The currency in Panama is the United States Dollar (USD). The currency symbol is $.
According to Panama's Labor Code, permanent work is one that constitutes an occupation of permanent necessity in the company or establishment and that has as its object normal and uniform activities of the employer, and corresponds to the contract for an indefinite period. Contracts for a definite term cannot be used to fill positions of a permanent nature. A fixed-term contract is considered to be made for an indefinite period in the following cases: If the term of a contract for a definite time expires but the employee continues to provide services. If a contract is concluded to execute specific work and the worker continues performing the same tasks after the work is completed. Seasonal work is work that is executed at a certain time every year, forms part of the normal and uniform routine of the employer's activities, and constitutes a form of a contract for an indefinite period. Seasonal workers are recognized as permanent workers when 2 full seasons have been worked consecutively.
In Panama, it is not mandatory to conclude all employment contracts in writing. Contracts about the following subjects do not need to be concluded in writing: Agricultural or livestock work Domestic service Accidental or occasional work that does not exceed 3 months' duration Specific work of which the value does not exceed PAB 200 (Panamanian balboas) Services and work contracted in villages with no more than 1500 inhabitants, except in the case of work with a value greater than PAB 5,000 or by employers who permanently employ more than 10 workers. Contracts concluded in writing must be signed in three copies: one for the employer, one for the employee, and one to be submitted to the General Directorate of Labor. The written contracts must contain details on identity of each party, job nature, duration of contract, salary, signature of both parties, etc.
Panama's Labor Code allows the use of temporary workers. Temporary work agencies must receive prior authorization from the Ministry of Labor and Social Welfare, which allows the operation of companies dedicated to providing workers to other employers that need to use them temporarily, for periods not exceeding 2 months. Temporary work agencies and employers that utilize their workers must obey the following rules: The minimum wage that workers must receive will be the highest set in their respective districts. The companies that use the services of the workers will be jointly and severally responsible, with the employing company, for wages, benefits, and compensation corresponding to the period in which, on each occasion, they use their services. The temporary worker's acts are considered the employer's own acts for all legal purposes. The Ministry of Labor and Social Welfare is empowered to regulate this provision and ensure that these companies do not circumvent the provisions regarding worker placement. Contracts that require an agency to provide all employees to a user company are prohibited.
According to Panama's Labor Code, employment contracts can include a probationary period of up to 3 months. A probationary period can only be included when the job requires certain specialized skills. The probationary period must be expressly stated in the written employment contract. During this period, either of the parties may terminate the employment relationship without any liability. The probationary period is invalid if the worker is rehired for a role they previously held within the same company.
In Panama, the labor law provides that the standard workweek is 48 hours, and the standard working day is 8 hours. Employees who work longer hours are eligible for overtime. Working hours for persons below 16 years of age cannot exceed 6 hours per day. Working hours for persons under 18 years of age cannot exceed 7 hours per day. The maximum length of a night shift is 7 hours, and the corresponding maximum working week for night workers is 42 hours. The maximum duration of the mixed day and night shift is 7.5 hours, and the respective maximum working week is 45 hours. Night shifts of 7-hour and 7.5-hour mixed day/night shifts are to be remunerated as 8 hours of daytime work to calculate the legal minimum wage or to calculate wages paid in a company with a shift of work in several periods.
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Panama's labor law stipulates that employees are entitled to 30 days of annual leave for every 11 continuous months of work, accrued at the rate of 1 day for every 11 days in the employer's service. Employees are to be paid their average monthly, weekly, or daily salary for each day of annual leave. The sums that the employee must receive must be settled and paid 3 days in advance of the date on which the employee begins their annual leave. Employees must enjoy their annual leave without interruption. The annual leave period may only be divided into a maximum of 2 equal parts when such division is allowed in a collective bargaining agreement or prior agreement with the employee. The employer must indicate, at least 2 months in advance, and after consultation with the employee, when the employee is to take annual leave.
According to Panama's Labor Code, an employee accrues 12 hours of sick leave for every 26 shifts worked, up to 144 hours (18 working days) per year. Employees are entitled to receive their normal wages from their employer while on sick leave. Employees may accumulate sick leave over 2 years, but then must use the leave, in whole or in part, during the third year of service. Employees must provide medical certificates to avail themselves of this leave. When an employee has exhausted all the sick leave to which they are entitled, they may take additional leave and deduct those days from their annual leave. Effective October 11, 2025, employers must submit a formal request to the Ministry of Health to verify the authenticity of Medical Certificates of Incapacity. Medical certificates must be: Issued by a duly licensed physician Pre-numbered and registered with the General Health Office Contain the physician's name, address, and phone number Contain the name of the public institution or private company issuing the certificate Contain the exact date and time of the start and end of the incapacity Employers may take disciplinary action against employees who submit false medical certificates, including dismissal for just cause, once the invalidity is confirmed by the relevant Regional Health Authority.
Panama's labor law provides a total of 14 weeks of paid maternity leave: 6 weeks before the delivery and 8 weeks following delivery. In no case may the total leave period be less than 14 weeks. If the due date is delayed, the prenatal period of leave is extended so the employee has the right to 8 weeks of leave after birth. To qualify to receive state maternity benefits, an employee must have at least 9 months of contributions before the seventh month of pregnancy. Employees who qualify for the state maternity benefit are entitled to 100% of their average weekly earnings over the previous 9 months for the 14 weeks of maternity leave. If an employee does not qualify for state maternity benefits, the employer must pay the employee her regular wages during maternity leave.
Employees in Panama are entitled to 3 working days of paid paternity leave. Employees must give their employer at least 1 week of notice of their partner's delivery date and provide a birth certificate certifying they are the child's father. This 3-day paid leave qualifies as service time to the employer.
According to Panama's Labor Code, the following categories of employees must receive a notice of 30 days or payment of 30 days' wages in lieu of notice before dismissal: Employees who have less than 2 years of continuous service with the employer Domestic workers Permanent or plant workers, those working in small businesses, or in the agricultural, livestock, agro-industrial, or manufacturing sectors Employees in ships dedicated to international service Apprentices Establishment workers in retail merchandise sales and companies with five or fewer employees. Employees who have worked for more than 2 years generally can only be fired for just cause.
According to Panama's Labor Code, employers must provide seniority pay to permanent employees when they are terminated. Seniority pay is calculated at a rate of 1 week's salary for each year worked since the beginning of the employment relationship, irrespective of the reason for termination. In the case of fixed-term contracts, if the employer terminates the contract without just cause before the expiration of the term or the total execution of the work, the employer must pay compensation equal to the wages due for the remaining term of the contract. If the employee is dismissed unfairly or without prior authorization, they are entitled to the following compensation from the Severance Fund (Fondo de Cesantía): For less than 1 year of service, 1 week's salary for every 3 months of work, provided it cannot be less than 1 week's salary For 1 to 2 years of service, 1 week's pay for every 2 months of work For 2 to 5 years of service, 3 months of salary For 5 to 10 years of service, 4 months of salary For 10 to 15 years of service, 5 months of salary For 15 to 20 years of service, 6 months of salary For more than 20 years of service, 7 months of salary
The Social Security Fund of Panama (Caja de Seguro Social (CSS)) provides retirement pensions to insured persons. The legal retirement age is 57 years for women and 62 years for men. The monthly base pension is equal to 60% of the average pay over the best ten years of earnings, plus 1.25% of the monthly average wage for each 12-month period of contribution over 240 months, and an additional 2% of the average wage for each 12-month period of contributions after the normal retirement age. The minimum monthly pension is PAB 265 (Panamanian balboas). The amount in the Personal Savings Account under the defined contributions system is paid as a pension, depending on the employee's life expectancy. If an employee has not paid 240 contributions but has paid at least 180 contributions, they are eligible for a proportional pension as a full old-age pension multiplied by the number of contributions paid divided by 240. Employees contribute 9.25% of gross monthly earnings to the social security fund, while employees contribute 4.25% of gross monthly earnings. The employer must contribute 10.75% of any 13th-monthly salary paid to the employee each year, and the employee must contribute 7.25% of any 13th-monthly salary each year. Effective March 18, 2025, the CSS was consolidated and restructured from a dual scheme into a unified pension model. The pension benefit is based on accumulated contributions. Individuals who are expected to retire within 7 years of the reform will remain under the old scheme. The new CSS model grants a minimum pension of PAB 144.00 to members who were unable to make sufficient contributions and provides a Guaranteed Solidarity Pension that is based on the accumulated contributions in the individual accounts of affiliates and guaranteed to be at least 60% of the reference salary. Individuals may make voluntary contributions to their pension in addition to mandatory contributions. Employer contributions will gradually increase as follows: 13.25% on April 1, 2025 14.25% on March 1, 2027 15.25% on March 1, 2029
A surviving legal spouse is eligible to receive survivors' benefits. In the absence of a spouse, a live-in partner is also eligible to receive a pension if they had been living with the deceased for at least 5 years. The amount of the monthly pension is equal to 50% of the old-age or disability pension that the insured would have been eligible to receive. It is paid to the eligible spouse or partner for life following the death of the insured. If the deceased person had not met the conditions, their survivors would receive a lump sum equal to 1 month of salary for every 6 months of contribution. The amount in their Personal Savings Account under the defined contributions scheme is paid as a lump sum to the survivors. In case of death due to a work accident or occupational disease, the benefits to survivors are paid by employers.
The Social Security Fund of Panama provides disability benefits to insured individuals younger than 60 years of age who have lost at least 2/3 of their capacity to work. The amount of the disability pension is the same as that of the old-age pension, and the source of funding is the same. If an employee does not meet the criteria for age or contributions, they become eligible to receive a disability grant equal to one month's pension for every 6 months of contributions. The amount in the Personal Savings Account under the defined contributions system is paid as a lump sum. In case of disability due to a work accident or occupational disease, the benefits are paid by the employer, depending on the type and degree of disability. Employers are also responsible for medical expenses, medical assistance, hospitalization, and travel expenses. Employees contribute 9.25% of gross monthly earnings to the social security fund, while employees contribute 4.25% of gross monthly earnings. The employer must contribute 10.75% of any 13th-monthly salary paid to the employee each year, and the employee must contribute 7.25% of any 13th-monthly salary each year. These contributions do not fund workplace injury benefits.
Individuals who have established physical residency in Panama for over 183 days in a fiscal year are considered tax residents. Only income generated from sources in Panama are taxed. The tax year is the same as calendar year, running from January 1 to December 31. Tax residents' net income is taxed at a rate of between 0%-25%. The highest marginal tax bracket, 25%, is applied to individuals with a net income of over USD 50,000 (U.S. dollars).
Foreign nationals who wish to be employed in Panama are required to obtain a work permit. There are several different categories of work permits available, including specific permits available to foreign nationals working in the Canal Zone and the Colon Free Zone. Employees must submit their Certificate issued by the National Immigration Service and educational qualifications. Foreign professional permits are granted for a term of 2 years, renewed for a term of 3 years, and extendable for the same term. The following document must be added to obtain an extension: proof of 9 paid installments of Social Security contributions. Employees who have stayed in Panama for more than 10 years can apply for indefinite-term work permit.
