The labour market in Panama

Panama's labour market
Updated 2017-07-31 08:34

Panama's unemployment rate in recent years has hovered just above 5%, a rate which many employers consider about right, because it means the country's labor market is relatively content but not complacent. Too high a rate creates general unease, while if it is too low, there is no incentive for the workforce to study, train and generally improve itself.

The minimum wage in Panama is around US$2 an hour, depending on type of employment and the part of the country, and the work ethic of some lower-paid workers is commensurately poor. An employer wishing to establish a committed and reliable workforce must balance prudence with the need for the firm to be regarded as a good place to work.

As the cost of living is relatively cheap, it is not unknown for unskilled workers to take a job for just as long as it takes to pay the rent or buy a new phone, then disappear once the aim is achieved.

The provision of contracts outlining duties and expectations is, therefore, considered a wise move, especially given the national tendency for the worker's word to be taken above that of the employer in the event of a dispute.

There are different types of employment contract in Panama:

  • specific or limited duration contracts
  • indefinite or unlimited duration contracts
  • construction or manual job contracts.

It is, of course, essential that anyone setting up a company here consults a firm of lawyers with expert knowledge in the field of employment in Panama, as the country has employment laws that may be very different from or similar but not identical to those in operation elsewhere. The following information should be treated as a guide and confirmation sought from legal experts.

The maximum for daily working hours in Panama is eight, and seven at night, with daytime hours regarded as 6am to 6pm. A standard working week is 48 hours.

Extra payments for overtime are demanded by law.

Wages are typically paid in the middle of the month and at the end. Income tax, social security and contributions to an education fund are all to be deducted by the employer and paid on to the relevant authorities.

Public holidays include some that are not observed in the US and elsewhere (Mothers' Day on December 8, for instance), and anyone working on a holiday is entitled to 150% of the usual rate.

A bonus known as 'the 13th month' is paid in equal instalments on April 15, August 15, and December 15.

Sick pay and accident compensation are paid by the Panama Workers Comp, organised by the Social Security Department and to which employers pay contributions.

A company's workforce must comprise at least 90% Panamanians, foreigners married to Panamanians, and foreigners who have been legal residents for at least 10 years.

Citizens of 'Friendly Nations' (50 or so countries) can work for a Panama company and receive work permits.

As for terminating employment, grounds for dismissal and so on, this is a complex area which should be studied in consultation with the authorities.

Retirement age in Panama is set at 62 years for men and 57 years for women.

Useful link:

Panama Ministry of Labor

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