Panama
In the next few minutes, you’ll learn exactly how you can hire remote talent in Panama—without spending thousands of dollars on expensive solutions. Hiring abroad can be confusing, but it shouldn’t be that confusing: We’re here to help clear things up.
Country snapshot
CURRENCY
United States Dollar (USD)
EMPLOYER TAXES
up to 21.34%
PAYROLL FREQUENCY
Monthly
OFFICIAL LANGUAGE
Spanish
It’s the fastest way to hire globally
Hiring employees takes months, at the minimum. When you hire with Thera's locally-generated contracts, it’s a matter of days or weeks. This means you can hire the best talent, fast, without losing them to a hellish procession of paperwork.
It’s a lot cheaper
It costs just $0 to sign up for Thera, then $25 per month to hire your contractors with Thera. If you hired employees manually (or did contracting on your own), you’d likely be on the hook for thousands of dollars each month. Setting up an entity alone can cost tens of thousands of dollars.
It’s more flexible for you & your team
Can be less risky than hiring employees
Hiring employees is a bigger commitment, and can open you up to increased liabilities and regulations. When you hire contractors overseas, your biggest risk is misclassification—but laws surrounding contractor classification are often significantly more straightforward.
Some people want to be employees
The contractor life isn’t for everyone—some people want the security that being an employee often appears to provide. Though it’s rare, this does happen, and it’s one disadvantage of manage an all-contractor team.
You might not have as much control over your talent
Most countries’ contractor-employer relationship laws stipulate that the employer can’t set fixed working hours, among other things. These laws give contractors more freedom over how and when they do their work than an employee would have. In reality, however, most contractors are willing & able to work on the company’s schedule—it’s a matter of setting expectations beforehand.
Panama’s a beautiful country with a rich history and, more relevant to you, some great remote talent. If you’re looking to hire in the country, you’ve got two choices: Hire your candidate as an employee, or bring them on as a contractor. Below are the details about each—as well as what we’d recommend.
Hire talent as contractors
Hire talent as employees
If you’ve read up until this point, you’ll know that it’s easier, cheaper, and more flexible to hire contractors in Panama than employees. Still, there are valid reasons why you might want to hire employees instead. The content below is for you—we’ll cover employer taxes and obligations in Panama.
Employer tax
Social security
Unemployment
Education Tax
Accident
Paid Time Off (PTO)
PTO is calculated by the:
- After 1 year of employment, employees are entitled to 30 working days of paid annual leave.
Public Holidays
There are 11 public holidays.
Sick Days
The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:
- Employees are entitled to 18 days of paid sick leave.
Maternity Leave
Women are entitled to 14 weeks of paid maternity leave and paid at 100% of the regular pay.
Maternity leave can start 6 weeks before the expected due date and 8 weeks after. However, if the actual due date is delayed, then the prenatal portion of the leave is extended so that the mother can enjoy 8 weeks of post-natal leave.
Maternity leave is calculated by the greater of the last salary or average of the last 180 workdays.
Paternity Leave
Fathers are entitled to 3 days of paid leave.
Parental Leave
There are no statutory laws regarding parental leave in Panama.
Other Leave
None.
Marriage Leave
None.
Bereavement Leave
None.
Termination Process
In Panama, the dismissal of an employee must have just cause as outlined in the labor code. Termination in writing must be provided outlining the cause and the date that the termination was given.
A dismissal that does not follow the laws outlined in the labor code is considered unjustified and the employee may be able to make a claim with a labor court. If the labor court does not resolve the claim within 60 days, the employer may continue with the dismissal.
However, there are certain classifications of employees that may be dismissed without just cause (domestic workers, fishing or agricultural workers, retail workers).
Notice Period
The notice period in Panama is:
Notice is not mandatory except for employees dismissed for just cause.
For employees who are dismissed without just cause, they are entitled to 30 days’ notice.
Severance Pay
There are no statutory laws regarding severance pay unless the reason for dismissal is redundancy. In this case, payment is determined based on the length of employment and is as follows:
- Up to 6 months of employment– .5 months of pay
- Up to 9 months of employment- .75 months of pay
- Up to 1 year of employment- 1 month of pay
- Up to 2 years of employment- 3 months of pay
- Up to 4 years of employment- 4.5 months of pay
- Up to 5 years of employment- 5.2 months of pay
- Up to 10 years of employment- 9.75 months of pay
Probation Period
The maximum length of probation is 3 months.
Working Hours
The standard workday is 8 hours, and a full time work week is up to 48 hours.
Overtime
125% of the regular pay when overtime hours are between 6 am and 6 pm.
150% of the regular pay when overtime hours are between 6 pm and 6 am or work over a holiday or day of rest.
175% of the regular pay when the overtime hours carry over from working during night hours.
It is important to note that an employee cannot work more than 3 hours of overtime per day or a total of 9 hours per week. If work is deemed dangerous or a hazard to one’s health, overtime is not permitted.
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