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Written Agreements

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 three 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 ten 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.

Oral Agreements

Panama's Labor Code permits oral employment contracts in certain cases. The following types of contracts may be made orally:

• Agricultural or livestock work
• Domestic service
• Accidental or occasional work that does not exceed three months' duration
• Specific work of a value not exceeding 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 ten workers.

In such cases, the facts or circumstances that the employee alleges were included in the employment contract shall be presumed to be true.

Implied Agreements

Panama's Labor Code states that in the absence of a written contract, facts or circumstances alleged by the employee to be provisions of the contract shall be presumed to be true. The employer may rebut this presumption by introducing evidence.

An employment contract, whether verbal or written, is an agreement where one person agrees to render services under another's authority or dependence. An employment relationship exists whenever personal work is performed under legal subordination or economic dependence.

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.

New Year’s Day - January 1; Martyr’s Day - January 9; Carnival Tuesday - Date subject to change every year; Good Friday - Date subject to change every year; Labor Day - May 1; Day of the Dead - November 3; Day to celebrate the gesture of Rufina Alaro - November 10; Independence Day - November 28; Mothers’ Day - December 8; National Mourning Day - December 20; Christmas Day - December 25; Presidential Inauguration - July 1 (every five years).

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.

Notice Period

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.

Severance Benefits

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

Minimum Wage

Panama's labor law prohibits employers from paying a worker less than the mandatory minimum pay rate. The minimum wage is fixed by an executive decree on the recommendation of the National Minimum Wage Commission. The 2024 minimum wages for Panama's different regions and industries are effective as of January 10, 2024.

There are 2 regions in Panama:

Region 1 includes the following:

Region 2 includes the rest of the country.

Panama sets over 60 different hourly minimum wages depending on the industry and whether the employer is located in Region 1 or 2. The hourly minimum wage ranges from PAB 1.64 (Panamanian balboas) for small-scale agricultural work to PAB 4.95 for cabin crew on international flights. The minimum wage for domestic workers is set at PAB 340 per month in Region 1 and PAB 315 per month in Region 2.

Panama's labor laws require employment contracts to specify if wage payment frequency is monthly, bi-weekly, or weekly.

Overtime, Holiday & Vacation Pay

According to Panama's Labor Code, any work done over the stipulated 8 hours per day shift (7 hours per night shift or 7.5 hours per mixed shift) is considered overtime and is eligible for extra remuneration as follows:

• Overtime during day time - 125% of the regular salary
• Overtime during the day after a night shift or mixed day shift - 150% of the regular salary
• Overtime during the night after a night shift or mixed day shift - 175% of the regular salary.

An employee working on a public holiday is entitled to 150% of their normal salary.

Employees are to be paid their proportional average monthly, weekly, or daily salary for each day of annual leave. The sums that the employee must receive must be settled and paid three days in advance of the date on which the employee begins their annual leave.

Visas

The following categories of visas are available in Panama:

• Tourist visa - This visa is issued to persons who enter Panama for recreational/leisure purposes, valid for up to 30 days, and can be extended for up to 90 days.
• Transit visa - there are 3 types of transit visas in Panama:
  • Passers-by - This visa is issued to persons who come to Panama as passers-by for up to 3 months.
  • Travelers in transit - This visa is issued to persons who enter Panama with the sole intention of continuing the trip to another country within 48 hours following the date of arrival.
  • Travelers in direct transit - This visa is issued to persons who enter Panama with the exclusive intention of continuing the trip to another country within 9 hours.
• Temporary visit visa - This visa is granted to persons who enter Panama for a specific purpose: visiting a spouse or blood relatives (9 months), undergoing medical treatment (30 days), studying full-time in Panama, carrying out scientific, cultural, academic, religious, or humanitarian missions (3 months), or employment as specialized workers or technicians (5 years).

Work Permits

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.