HR Software for Panama

Leave Policy

Maternity Leave

Pregnant employees who have worked 60 consecutive days are entitled to 14 weeks of paid leave. Four weeks of this must be taken before the birth of the child. The employee receives 100% of her average salary during this period and social security is responsible for this remuneration.

The employee may extend the vacation without pay at the employer’s sole discretion.

You can use the leave module in IceHrm to manage maternity leave in Panama.

Paternity Leave

Employees are entitled to 7 days of paid paternity leave, which must be taken after the birth of the child. The employee receives 100% of his average salary during this period and the employer is responsible for this compensation.

Parental Leave

Parents are entitled to 12 weeks of parental leave, which both parents can take. This leave can be taken before the child reaches the age of two. The leave can be taken all at once or in separate periods and must be taken within the first year after the birth or adoption of the child.

Sick Leave

Employees are entitled to paid sick leave for up to 18 or 36 days, depending on seniority.

Pay & Tax

Minimum Wage Requirements

The minimum wage depends on the company’s industry and can range from $275 to $970. For IceHrm, the monthly minimum wage is $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%

Payroll Cost

The cost to the employer is generally estimated at 38% of the employee’s salary (including the 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

Pay for overtime is mandatory. Hours outside of normal working hours are considered overtime. Employees can work up to three additional hours per day. Employees receive compensation for additional hours:

125% of the hourly rate on a normal day
150% of the hourly rate for the time after 6 p.m
175% of the hourly rate for night shift employees

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

Termination

Termination Requirements

Dismissals must take into account complex rules and the regulations of the country in which an employee is employed. Off-boarding is always carried out by the employer with the main participants. It may include ad hoc fees as well as required or recommended steps for specific termination cases.

Terminations in Panama can be complex. Outside the probationary period, termination cannot be made at will and termination must be for a valid reason. If the employee believes the dismissal was unjustified, he or she has up to 60 days to sue the employer for reinstatement on grounds of unfair dismissal.

The employment contract can be terminated by:

Voluntarily by the employee (withdrawal)
By mutual agreement
Must be in writing and may not waive any rights of the employee
Dismissal with just cause
By expiry of the contract
Because of finishing work
Due to the death of the employee
By the death of the employer, when it entails the inevitable termination of the contract.
For the extension of the reasons for the suspension of the contracts at the request of the employee.
Unilaterally by the employer:
For permanent employment contracts, there must be a reason and a written notice of termination must be given.

In special cases and circumstances it may be necessary for the employer to obtain approval from the relevant employment service.

Notice Period

The minimum notice period is 15 days and depends on the reason for termination:

Typically 15 days if the employee gives notice
Typically 30 days if the employer gives notice to the employee.

Special cases and circumstances may apply, including the signing of the termination notice by the appropriate labor authority. The termination can be replaced by payment of the corresponding 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 depends on the reason for termination, the type of contract (fixed or permanent) and the length of the employment relationship.

Statutory Time Off

Paid Time Off

Both full-time and part-time employees are entitled to 30 calendar days of paid time off per year. PTO is credited monthly at 2.72 days per month. After 5.5 months of work, employees are entitled to 15 calendar days of annual vacation.

Public Holidays

Panama celebrates 8 national holidays. National holidays include:

New Year’s Day (1st January)

Martyr’s Day (9th January)
Carnival Monday and Tuesday
Good Friday
Labor Day (1st May)
Independence Day (11th November)
Christmas Day (25th December)

Onboarding

Onboarding takes three working days. If the employee does not have a social security number, registration will be delayed by at least seven working days.

Additional Info

Employment Contract Details

The contracts must be written in Spanish and can be bilingual. They must be in writing and signed by both parties. A contract must contain:

Name, nationality, age, gender, marital status, address, ID
If the employer is a company, the name of the company, the address, the name of the legal representative and the data of entry in the public register must be provided.
Names of the people living with the employee and any family members
Date of start and duration of the employment relationship
Description of the workplace
Workplace
Regular working hours
Salary, date and method of payment
Place and date of conclusion of the contract
Signatures of both parties

Probation Period

Employees hired through IceHrm are subject to a probationary period of 90 days, which cannot be extended as it is the country’s maximum limit. From January 2022, IceHrm will include a probationary period in all employment contracts.

The probationary period helps employers and employees make sure they are a good fit for each other. This means the company can quickly decide whether the position is right for them, and the employee can see whether it matches their career goals.