Guide · Business and employment
Hiring Employees in Panama
How to hire workers in Panama: contracts, minimum wage, thirteenth-month pay, vacation, CSS contributions, foreign staff and severance.
- Law
- Labor Code
- Minimum wage
- By decree, by region and activity
- Thirteenth month
- In three installments a year
- Updated
In short
Hiring in Panama requires a written employment contract, registering the worker with the Social Security Fund and complying with the minimum wage, thirteenth-month pay and vacation set by the Labor Code. To hire foreigners you also need a work permit and must respect the proportion of Panamanian staff the law requires.
What types of contract are there?
- Indefinite term: the general rule.
- Fixed term: within the duration limits set by law; if they are exceeded or contracts are chained without cause, the relationship may be considered indefinite.
- For a specific project: tied to a specific job that ends when it is completed.
The contract is made in writing and may include a probationary period of up to 3 months, which must be expressly agreed.
What must you pay the worker?
- The agreed salary, never lower than the minimum wage, which is set by decree according to region, activity and company size, and reviewed periodically.
- The thirteenth month (décimo tercer mes), paid in three installments over the year.
- Paid vacation: 30 days for every 11 months of continuous work.
- Overtime, with the premium set by law, if the maximum working hours are exceeded.
What are your obligations to the Social Security Fund?
Before hiring, register as an employer with the Social Security Fund (CSS). Then register each worker and pay the employee and employer contributions every month, which include social security, education insurance and occupational risk insurance: you withhold part from the salary and pay the rest yourself. We explain what the CSS covers in health insurance and CSS.
Can I hire foreigners?
- Foreign workers need, with some exceptions, a work permit from the Ministry of Labor and Workforce Development. Some residency options, such as the Friendly Nations Visa, are based on a contract with a Panamanian company.
- The law requires a proportion of Panamanian staff: as a general rule, 90% of ordinary staff must be Panamanian (or foreigners treated as such) and specialized or technical foreign staff may not exceed 15%, with exceptions under some special regimes.
- Some professions are reserved for Panamanians.
- People holding the remote worker visa cannot work for Panamanian companies.
What happens when employment ends?
The Labor Code protects job stability: a dismissal must be based on a justified cause provided by law and communicated in writing. When employment ends, the worker receives a final settlement with any unpaid salary, proportional vacation and thirteenth-month pay, the seniority bonus on indefinite contracts and, if the dismissal is unjustified, compensation.
Frequently asked questions
What is the minimum wage in Panama?
There is no single figure: a decree sets the minimum wage by region, economic activity and company size, and it is reviewed periodically. Check the current table for your activity before setting salaries.
Can I hire someone as an independent contractor to save costs?
Only if the relationship is genuinely independent. If there are set hours, subordination and a fixed periodic payment, it is an employment relationship whatever the contract says, with all its obligations.
Can I bring my own team from my home country?
Yes, with work permits and respecting the proportion of Panamanian staff. Some special regimes, such as the SEM regime, have their own visas for their staff.
How is the final settlement calculated?
It adds up any unpaid salary, proportional vacation and thirteenth-month pay and, depending on the case, the seniority bonus and compensation. Each item has its own legal formula: review it before paying.