Payroll and Benefits Guide - Panama



United States Dollar (USD)


Panama City

Employer Taxes

up to 21.34%


Date Format


Fiscal Year

1 Jan – 31 Dec

Fun Facts

Panama is the only place in the world where you can see the sun rise on the Pacific Ocean and set on the Atlantic Ocean.

The Panama hat, a popular fashion accessory, is actually of Ecuadorian origin.

The Harpy Eagle, one of the largest and most powerful eagles in the world, can be found in the forests of Panama

Panama celebrates its independence from Spain on November 28th each year.

Panama is home to the largest population of jaguars in Central America.

Panama is a biodiversity hotspot with a wide variety of flora and fauna.



Employee Payroll Tax

Contribution TypeRate
Social security9.75%
Education contribution1.25%

Employer Payroll Tax

Contribution TypeRate
Social security12.25%
Education Tax1.50%


Payroll Cycle

In Panama, the payroll frequency is stipulated in the employment contract and paid on a monthly, semi-monthly, or weekly basis.

13th Salary

13th-month payments are mandatory and the amount of an additional month’s salary is paid in three equal installments on 15th April, 15th August, and 15th December.

Work Hours and Week

A typical workday consists of eight hours per day, and a full-time work week can extend up to 48 hours


Overtime work is limited to three additional hours per day, nine hours per week and if the work is deemed hazardous to one’s health, an employee should not perform overtime at all.


Paid Time Off

Employees are entitled to 30 days of paid annual leave after completing 12 months of employment.

Public Holidays

Public holidays that fall on a Sunday are moved to the following working day.

Sick Days

The first 3 days of sick leave are paid by the employer.

Maternity Leave

Maternity pay is typically provided by the Social Security system, given that the employee has accumulated at least nine monthly Social Security contributions before the seventh month of pregnancy.

The amount of maternity pay is calculated based on either the employee’s last salary or the average of the last 180 workdays, whichever is higher.

Paternity Leave

Employees are entitled to three days of fully compensated paternity leave following the birth of their child. The employer compensates this leave.

Parental Leave

There are no provisions in the law regarding parental leave.


Termination Process

The termination process in Panama can vary depending on the specific terms of the employment agreement and any collective agreements in place. It is also influenced by the type of contract and the reason for termination.

Notice Period

notice periods cannot exceed three months and are commonly 30 days or pay in lieu when workers are dismissed ‘without just cause’.

Severance Pay

Severance pay is not required unless the case of dismissal is due to redundancy.

Probation Period

Probation Period

The probation period is up to three months.


As a general rule, employers/companies must make up 90% of their workforce via Panamanian citizens or foreigners who are either married to a Panamanian citizen or who have resided in the country for at least ten years.

The Ministry of Labor has published a decree which restructures Panama’s work permit categories and implements numerous other changes to work permit regulations.

Employers who need to contract foreign personnel must obtain authorization issued by the Ministry of Labor.

The Ministry of Labor has published a decree which restructures Panama’s work permit categories and implements numerous other changes to work permit regulations.

For Work Permits

SEM and EMMA visa holders


The standard rate of movable goods and service transfer tax is 7.00%