COUNTRY

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).

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.

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.

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.

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

Pension

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 255 (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.

Dependents/Survivors Benefits

The Social Security Fund of Panama provides benefits for survivors upon an insured and eligible employee's death. The amount of the monthly pension is 50% of the old-age or disability pension the deceased was entitled to for a surviving spouse and 20% of any pension the deceased was entitled to for each child. If the deceased had a balance in their Personal Savings Account under the defined contributions scheme, their survivors would receive a pension from that fund in the same proportion and for as long as the fund lasted.

If the deceased person had not met the conditions, their survivors would receive a lump sum equal to one month of salary for every six 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.

Employees contribute 9.25% of gross monthly earnings to the Social Security Fund, while employers 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.

Invalidity Benefits

The Social Security Fund of Panama provides for disability benefits to insured people younger than 60 years of age who have lost at least 2/3rd of their capacity to work. The amount of the disability pension is the same as that of the old-age pension, as is the source of funding.

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 six 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.