Panama's labor code is weighed heavily in favor of the employee and is restrictive for the employer. What follows is a general summery of some of the key features of the Panama Labor Code, which should help any new prospective employer. A lawyer should be consulted before hiring a workforce.
Three types of contracts can be signed:
- The Definitive Period of Time Contract is determined by the job to be performed and is for a maximum of one year.
- The Indefinite or Permanent Labor Contract.
- Special circumstances can call for a probationary three-month contract.
A Panamanian worker is privileged with a wide variety of legal benefits:
- For every 11 months of continuous employment employees are entitled to an annual paid vacation of 30 days.
- The "Thirteenth Month" rule: In Panama workers get paid 13 months for every twelve or one day's salary for every 11 days worked. The bonus is payable in three installments in April, August and December.
- Termination of employment compensation is equivalent to a week's salary for every year worked.
- An unjustified-cause termination payment: a lump-sum payment, the value of which is based on labor code indemnification tables. After the amount is paid, the employee must be rehired if he or she wishes.
- Paid maternity leave of 14 weeks ( paid by Social Security, not by the employer) Working hours and rate of pay:
- For day shift hours the maximum working week is 48 hours, 42 for night shift and 45 for a combination.
- Minimum wage standards average between $0.82 and $1.33 per hour depending on area and occupation.
Vacation pay entitlement:
There are 11 national holidays during the year - with pay. You will be expected to pay double time if you request that employees work the national holiday or during the annual vacation.
- New Year's Day (Jan 1st0)
- Martyr's Day (Jan 9)
- Carnival (In February)
- Good Friday( in March)
- Labor Day (May 1)
- Independence Day ( from Colombia ) (Nov. 3rd)
- First cry for Independence in Colon (Nov.5th)
- First cry for Independence from Spain in Los Santos (Nov 10)
- Independence from Spain (Nov.28)
- Mother's Day (Dec 8th)
- Christmas (Dec. 25th).
