Hire employees in

Panama, hassle-free

Hire employees in Panama, hassle-free

With Deel, your business can easily hire employees in Panama. No more worrying about local laws, complex tax systems, or managing international payroll. Deel takes care of everything in 150+ countries.

The average onboarding time frame in Panama is 3 days with Deel.

Download the Guide

Currency

Panamanian Balboa (PAB) & United States Dollar (USD)

Capital

Panama City

Official Language

Spanish

Payroll Cycle

Monthly

Hire employees in Panama. No entity needed.

Usually, to hire in Panama, your business needs an entity. That means a local office, an address registered as a subsidiary, and an account with a local bank. All of this, plus navigating regional benefits, payroll, tax, and HR laws, can take months.

Panama also treats contractors differently than full-time employees, so misclassifying a contractor could lead to fines. Deel lets you hire employees in Panama quickly, easily, and compliantly. We even automate tax document collection, payroll, benefits, and more.

All the necessary benefits for Panama
built right in

Deel allows you to provide localized benefits for employees in Panama within minutes. All in one manageable online dashboard.

  • Pension Insurance
  • Public Health Insurance
  • Unemployment Insurance
  • Work From Home Allowance
  • Workers Compensation Insurance

Our quickstart guide to hiring in Panama

Navigate the tabs below to learn everything you need to know about hiring an employee in Panama

Minimum Wage Requirements

The minimum wage will depend on the sector of the company and can range from USD 275 to USD 970. For Deel, the minimum monthly wage is USD 611.52.

Individual Income Tax

The individual income tax ranges from 0% to 25%. Income tax is calculated according to progressive rates.

Gross Annual Income Tax Rate (%)
Up to USD 11,000 0%
Up to USD 50,000 15%
Over USD 50,000 25%

Employer Cost

The employer cost is generally estimated at 38% of the employee salary (inclusive of work-from-home allowance). 
  • Social security - 12.25%
  • Educational security - 1.50%
  • Professional risks - 2.10%
  • 13th Salary - 8.33%
  • Vacation pay - 9.09%
  • Seniority premium - 1.92%
  • Compensation - 0.33%
  • Work-from-home Allowance USD 50

Overtime Pay & Maximum Hours

Overtime payment is mandatory. Hours outside of standard work hours are considered overtime. Employees can work up to three extra hours per day. For additional hours, employees are paid:
  • 125% of the hourly rate, on a standard day
  • 150% of the hourly rate, after 6 pm
  • 175% of the hourly rate for the night shift employees

Standard working hours are eight hours per day, 40 hours per week. The standard workweek is from Monday to Friday. However, the standard workweek can be extended to 48 hours per week from Monday to Saturday. 

Maternity Leave

Pregnant employees who have worked for 60 consecutive days are entitled to 14 weeks of paid leave. Four weeks must be taken before the child's birth. The employee will receive 100% of their average salary during this period, and Social Security will be responsible for this pay. 

The employee may extend leave unpaid at the employer's sole discretion.

Paternity Leave

Employees are entitled to 3 days of paid paternity leave that must be taken after the child's birth. The employee will receive 100% of their average salary during this period, and the employer will be responsible for this pay. 

Sick Leave

Employees are entitled to paid sick leave for up to either 18 or 36 days depending on the seniority of the employee.  

Termination Requirements

Terminations in Panama can be complex. There is no at-will termination outside the probation period and termination must be done for just cause. In case the employee considers the termination an unfair dismissal, they will have up to 60 days to sue the employer.

Compliant terminations include:

  • Voluntarily by the employee
  • By mutual agreement
    • Must be in writing and should not waive any employment rights
  • Termination with cause
  • Unilaterally by the employer:
    • For indefinite employment agreements must be for cause and in writing
  • For the completion of the work
  • By the expiration of the contract
  • Due to the death of the employee or employer

Special cases and circumstances may apply including requiring the employer to get authorization from the relevant administrative labor authority.

Notice Period

The minimum notice period is 15 days and will vary according to the reason for the termination:
  • Generally, 15 days if the employee resigns
  • Generally, 30 days if the employer terminates the employee

Special cases and circumstances may apply, including having the notice signed by the relevant administrative labor authority. Notice can be replaced by paying the equivalent in salary.

Severance for Employees

In Panama, all employees are entitled to severance pay unless the termination is due to a disciplinary dismissal. 
Severance pay is complex and will depend on the reason for the termination, type of contract (fixed-term or indefinite term), and length of the labor relationship.

Paid Time Off

Both full-time and part-time employees are entitled to 30 calendar days of paid time off (PTO) a year. PTO accrues monthly at 2.72 days per month. Employees are eligible for 15 calendar days of annual leave after 5.5 months of work. 

Public Holidays

Panama celebrates 8 national holidays. National public holidays include: 
  1. New Year’s Day
  2. Martyrs Day
  3. Tuesday of Carnival
  4. Holy Friday 
  5. Labor Day
  6. National Holidays (4 days) 
  7. Mother’s Day
  8. Christmas 

Additionally, every five years, there is an additional holiday for the day the President of the Republic of Panama is elected. 

Onboarding

Onboarding takes three business days. If the employee has no Social Security Number, the onboarding will be delayed at least seven business days. 

Employment Contract Details

Contracts must be in Spanish and can be bilingual. They must be in writing and signed by both parties. A contract must include: 

  • Name
  • Start date
  • Length of the employment
  • Job description
  • Termination conditions
  • Holiday entitlement and pay
  • Salary and any other supplements
  • Working hours
  • Length of breaks
  • Special working-hour arrangement is pursuant to the provisions concerning reduced working hours, flexible working hours, etc.

Probation Period

Employees hired using Deel have a probation period of 90 days, this cannot be extended as it is the country maximum. As of January 2022, it's Deel company policy to include probation periods in all employment contracts moving forward.

Probation periods help an employer and the employee ensure they're a hiring match, allowing a company to quickly decide if it's a fit or the employee to see if the job aligns with their career goals.
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Hiring in Panama, hassle-free

With Deel, your business can easily hire employees in Panama. No more worrying about local laws, complex tax systems, or managing
international payroll. Deel takes care of everything in 150+ countries.

Group (8)

599 USD

Management fee

Group (9)

38%

Estimate Employer Cost

*of employee salary

Want to learn the cost of hiring an employee in Panama?

View our Employee Cost Calculator

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