Panama

Contract Types 

The main types of contracts in Panama are indefinite, fixed term which finish on a set date, and project contracts, which end at the conclusion of a project.

Probation          

The probation period can be a maximum of 3 months for an indefinite contract and should be proportionate for a fixed term contract.

Working Hours 

Working hours are 40 hours per week being 8 hours per day, 5 days per week.

Overtime            

Employees are allowed to work a maximum of 3 hours of overtime per day. Over 48 hours per week, overtime should be paid at 125% for work between 6.00am and 6.00pm, 150% for work between 6.00pm and 6.00am and 200% for holidays.

Other Financial

A 13th month salary is mandatory paid in 3 equal instalments on 15th April, 15th August and 15th December. Employers are subject to a Professional Risk tax of between 0.33% and 6.25% depending on the type of industry.

Other

Salary should be stated in local currency, though because the Panamanian Balboa is pegged 1:1 to the US Dollar it is acceptable to state salaries in US Dollars.  

Tax rates valid for 2025

Corporation Tax: 25%

Consumption Tax (VAT): 7%

Employers’ Contributions:

12.25%

1.5% Educational Insurance

Professional Risk Tax 0.33% to 6.25%

Employees’ Contributions

9.75%

1.25% Educational Insurance

Income Tax Rates

0 – 11,000: 0%

11,000 – 50,000: 15%

Over 50,000: 25%

Notice  

Notice will depend on the terms of the contract. 15 days’ notice is usual for employees. For employers, 30 days’ notice should be given unless the contract specifies more. The notice period cannot exceed 90 days.

A final payment must include normal pay up to the termination date, prorated untaken vacation pay, 13th month salary and any bonuses.

Terminations    

Unless the termination is a resignation, for just cause or during probation, severance is payable. For fixed term contract terminations employees should be paid the salary due for the remainder of the contract.

Severance Pay

Employees who are not dismissed for just cause are entitled to 1 week’s salary for each 3 months of service in the first year and 3.4 weeks’ salary for each year thereafter, prorated for part years.

After 10 years’ service an additional week’s salary per year is payable.

During Probation            

A contract can be terminated during probation with no severance but it is usual to give a reason to avoid claims of discrimination. Notice should be given as per the contract.

 Annual Leave 2025

National Public Holidays: 14

New Year’s Day – 1st January    

Day Given in Lieu: No

Martyr’s Day – 9th January         

Day Given in Lieu: No

Carnival/ Shrove Tuesday – 4th March

Day Given in Lieu:  NA

Maundy Thursday – 17th April

Day Given in Lieu:  NA

Good Friday – 18th April              

Day Given in Lieu: NA

Labour Day / May Day – 1st May

Day Given in Lieu:  No

Independence Day – 3rd November        

Day Given in Lieu: No

National Symbols Day – 4th November  

Day Given in Lieu:  No

Colon Day – 5th November         

Day Given in Lieu: No

Shout in Villa de los Santos – 10th November     

Day Given in Lieu: No

Independence from Spain – 28th November

Day Given in Lieu:  No

Mother’s Day – 8th December   

Day Given in Lieu:  No

Christmas Day – 25th December              

Day Given in Lieu: No

Comments: *In election years only in Panama.  Note that some employers will give a day in lieu when a holiday falls at the weekend.

All leave entitlement is based on a 5-day working week. Public holidays always falling on Sunday are not included.

Paid legal entitlement  

30 calendar days which accrues at the rate of 1 day for every 11 days worked in the first year of employment.

Carry over permitted     

Leave can be carried over by mutual agreement, usually in accordance with a documented policy but there is no regulation regarding this. When leave is carried over it is usual to require this leave to be used in the first 3 months of the following year. It is the employer’s responsibility to ensure that employees take their leave in a timely fashion.

Sick       

The employer pays for the first 3 days of sick leave, thereafter sick pay is paid by social security up to 26 weeks.

Maternity          

New mothers are entitled to 14 weeks of (government) fully paid maternity leave, which starts 6 weeks before the birth. Adopting mothers are eligible for 28 days’ leave.

Paternity            

3 consecutive working days of paid leave is allowed from the date of the child’s birth. This is paid at 100% by the employer.

Parental

There are no provisions in the law regarding parental leave.

Medical Insurance         

This is sometimes provided to employees and their families, typically by multi nationals and other large organisations to provide faster access to a greater choice of facilities.

Other   

In addition to allowances to cover items such as phone and home office, meal vouchers, gym membership and transport allowances are sometimes given.