Employer Of Record in Panama

We make it easy and painless to expand your business into Panama. Forget about dealing with local regulations, confusing tax laws and international payroll management. We take care of all that so you don't have to.

PEO Panama

Accelerate your growth into Panama Compliantly and hassle-free

At Serviap Global we handle all employee onboarding, payroll, compliance, risk, mitigation and benefits, so you can focus on what matters most – your business.

How we can help you expand in Panama

As your EOR in Panama we’d help you expand by hiring employees and running their payroll without establishing a local branch office or subsidiary. 

Your candidate is hired by a PEO in Panama provider in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. Shortly after, your new employee will be working for you, just like any other member of your team. 

Expand to Panama with Serviap Global

Through our PEO and EOR services, you can hire qualified talent in your industry without the trouble of opening your own legal entity. 

In just a few days, you can easily and safely build a presence in Panama, being sure that your staff will be hired in compliance with labor and tax regulations

Table of Contents

Quick Facts

Currency:
United States Dollar (USD)

Capital:
Panama

Payroll Cycle:
Monthly

Language:
Spanish

Because of its geographic location at the crossroads of the Pacific and Atlantic oceans and between North and South America, Panama is known as the “Hub of the Americas”. Panama is the home of the Panama Canal, with ports on both oceans. Panamanian business, and the social climate, is heavily influenced by North American and Latin American cultures. Its diversified economy — largely focused on banking, trading and tourism — has increased its role in the global marketplace. Currently in this country there is a focus on encouraging women into secondary education, therefore furthering the growing potential for an educated workforce.

The Economy 

Panama has a stable government with a dollar-based economy. It’s democratic and actively seeks foreign investment, offering attractive low inflation rates, and zero foreign exchange risk. Panama’s economy is primarily based on its services sector, this sector includes the Canal, banking, tourism, logistics, activities in the Colón Free Trade Zone (CFZ), insurance, container ports, and flagship registry. 

The Importance of Small and Medium-sized Companies

One of the significant characteristics of a flourishing economy is the success and growth of small and medium enterprises (SMEs). In Panama more than 80% of businesses are classified as micro-, small-, or medium-size.

Population Characteristics

Panama is a nation with a population of about 4.4 M people. The average age is 29 years old and the literacy rate is 95%. Panamanians are quick to tell you what they love about their country, national pride runs deep and feelings towards Americans are mainly positive.

Economic Opportunities

Panama has one of the fastest growing economies in Latin America and dedicates substantial funding to social programs. Expanding a business beyond the U.S. borders is warmly welcomed. Its strong economy, low taxation, entrepreneurial opportunities, low barriers to entry and stable government make Panama an exceptional choice.

Key Sectors of the National Economy

  • Foreign Trade
Panama is mainly export oriented and highly dependent on trade. The country also has the largest trading fleet in the world. The free zone of Colón is the second largest free zone in the world after Hong Kong, demonstrating the country’s openness to foreign trade.
  • Agriculture
Agriculture is a major industry in Panama. Major foreign corporations are some of the largest landowners in the country
  • Services
The service industry is the biggest industry in the country. Transport is the most important economic pillar in the service industry, as it comprises the Panama Canal; the government’s chief revenue source. Financial services in Panama are another important economic pillar. In the late 20th century, Panama gained a reputation as a tax haven. Also, insurance is big business in Panama and auto insurance in particular, which is mandatory to all vehicle owners in the country.

Human Talent

English-language courses and higher education represent the best prospects for Panamanian students within the study abroad market. In fact, 85% of all managerial positions are filled by candidates who study abroad. The most in-demand fields of study for Panamanian students in the U.S. are business administration, management, finance, banking, marketing, and engineering.

Prominent Cities for Business

  • Panama City
This is the economic and financial center of the country. The city’s economy is heavily weighted toward banking, tourism and commerce. The Panama Canal helped the city establish itself as a prime location for offshore banking and tax planning.
  • San Miguelito
The second largest city by population with 315,019 people, it is also a port city which gives it excellent transport facilities that connect it to the sea. These have proven valuable for the vibrant economic activities in the city.
  • Juan Díaz
Juan Diaz is one of the centers of manufacturing in Panama, including food processing, wood products, paper, textiles, and other products. It is an important economic, education and commercial area.

Technological Ecosystem

Panama has been called the region’s “Technology King” following strong wireless growth. It’s long been recognized as a telecommunications hub. Panama’s excellent infrastructure kept it at the tech forefront first in land lines then later cell phone service.

Facilities for Foreign Investment

Incorporating a company and launching a new international venture is simpler in Panama than most anywhere else in the region. And income obtained outside the country is free of income tax. Panama is a unique country in the fact that you can register a business in around two weeks, and you do not need to physically be in the country during or after the incorporation process. By establishing an offshore company in Panama, you can create a holding company to protect your assets and real estate from future liability.

Business Culture in Panama

Meetings Always confirm meeting times in advance because things can often change on short notice. Punctuality is expected, although preliminary small talk sometimes delays the official start time of a meeting. Gestures and Body Language Good eye contact is appreciated in Panama and interpreted as a show of interest and integrity. Being loud, using profanity or generally drawing negative attention to oneself is considered very rude. As is pointing at others with the index finger. Gifts Giving gifts to Panamanian business associates is discouraged, instead follow up with a thank-you note within a few days of the meeting or social event.

Panama Gastronomy: regional and traditional cuisines

A typical meal in Panama will include meat, fruits and vegetables, coconut and some rice and beans. Because of its enviable location on two oceans, seafood is always an excellent choice. Ceviche is common, typically made from curing fresh, raw, seafood with citrus juice and served cold. Typical Panamanian foods are mild in flavor. Common ingredients are corn, wheat flour, plantains, yuca, beef, chicken, seafood and pork.

General Highlights

Year2022
CountryPanama
CapitalPanama City
Num. States / Province10 provinces and 3 indigenous regions
Principal CitiesPanama City, San Miguelito, Juan Díaz
LanguageSpanish
Local CurrencyBalboa or U.S. dollar
Major ReligionChristianity
Date FormatDD/MM/YYYY
Thousands Separator Format999,999,999.99
Country Dial Code+507
Time ZoneGMT-5
Population4,404,110
Border CountriesCosta Rica & Colombia
Continental surface75.517 km²
Fiscal YearOctober 1 to September 30
VAT %Taxpayer Identification Number (NIT)
Minimum WageU.S. $ 971.28 per month
Taxpayer Identification Number Name in the countryNIT
Current PresidentLaurentino Cortizo
What you need to know about employing personal in Panama

Laws and Agencies that regulate labor relationships

A business must register with the Financial Services Regulatory Commission, the Registrar of Companies, the Ministry of Finance, the Inland Revenue Department, and the Social Security Board.
LawsBrief Description
    Constitution of PanamaWith the ultimate purpose to strengthen the Nation. This includes the guarantee of freedom, ensuring democracy and institutional stability, exalting human dignity, promoting social justice, maintaining general welfare, and regional integration, and invoking the protection of God.
    Labor CodeLabor and employment in Panama is governed by the Labor Code.   This code was adopted through Cabinet Decree N. 152 of March 1971, reformed by Law N. 44 of August 1995 and it specifies norms to regularize labor.
  Tax CodeArticle 694 of the Panamanian Fiscal Code states the object of Income Tax is “the taxable income that is produced, from any source, within the territory of the Republic of Panama whichever may be the place where it is perceived”.

Key Tax and Labor Authorities

Labor CodeLabor Code in Panama is governed by its Labor Code and it specifies norms to regularize labor.
      Labor Contracts in PanamaDefinite term: This contract may not exceed one (1) year, except for those services that require special technical preparation, the term of the contract may be stipulated up to a maximum of three (3) years. Indefinite term: It establishes an employment relationship without defining the term, a start date is established but not an end date.
  Contracts SignedLabor contracts must be written and signed at the beginning of the employment relationship in three (3) copies, one for the Ministry of Labor and Labor Development, one for the company and one for the employee.
ProbationA period of 3 months.
The International Labor Organization  Panama is a member as of 1996.
Work Hours8 hours per day, 48 hours per week. Underage employees of 16 are limited to a 36-hour working week.

Basic Requirements

The contract must contain:
  • Name, nationality, age, sex, marital status, domicile and identification card number of the
  • Name of the persons who live with the worker and depend on him/her.
  • Specific determination of the agreed work or
  • Place or places where the service is to be
  • Duration of the contract, if it is for a fixed, determined or indefinite period of
  • Duration and regular division of the working
  • The salary, form, day and place of
  • Place and date of conclusion of the
  • Signature of the parties, or the corresponding

Payroll

Legal Benefits in Panama:
Minimum WageU.S. $ 971.28 per month
WagesWages are paid monthly in USD
        Overtime•          There is a maximum of overtime allowed per day, 3 hours and 9 hours per week. •          If 48 hours per week are exceeded, overtime must be paid at an overtime rate dependent on the hours the overtime was worked. •          If the hours worked are between 6:00 a.m. and 6:00 p.m., the overtime rate is 125% of the employee’s regular salary. •          From 6:00 p.m. to 6:00 a.m., or on a day off or holiday, the overtime rate is 150% of the employee’s regular salary. •          Hours carried over from night work are increased to 175% of the employee’s regular salary.
Christmas SalaryPaid in three equal parts on April 15, August 15 and December 15.
    Panama’s Workers CompPanama’s Workers Comp pays for all accidents and sickness at the workplace. And it is administered by Panama’s Social Security System.   Employers pay between .98% – 5.6% into the workers comp system with the rate depending upon the risks associated with the job and the salary.
  Vacations or PTO30 days of paid annual leave following the commencement of 12 months of employment.
Leaves of Absence Employees have the right to paid absences for the following things:•          Maternity Leave: Begins six weeks before the due date and ends eight weeks after delivery for a total of 14 weeks. It is paid by the social security (if the employee has accrued nine monthly social security contributions before the seventh month of pregnancy). Otherwise the employer pays. In the case of a difficult multiple birth or pregnancy-related illness, the leave can be extended in advance with a medical certificate. •          Paternity Leave: The father is entitled to 3 days of leave after the birth and the company compensates him. •          Adoptive mothers: Are entitled to 28 days of paid leave.
Foster child leaveA foster mother who adopts a child that is under three years of age has the right to 26 weeks’ maternity leave, from the date of the family placement. The foster mother is also entitled to enjoy indemnification (paid by social security) for her living maintenance and that of her child, and is protected against dismissal for two years from the family placement Foster fathers of children under three years of age are protected from dismissal for up to two years after the family placement (Article 339, New OLL) Foster fathers of children under three years of age can take paid paternity leave for 14 continuous days from the family placement.

Employers Contribution or Labor Cost

Payroll taxes: Social security 9.75% Education contribution 1.25% Annual Taxable Income Income of resident individuals expressed in tributary units is subjected to tax at progressive rates. As of June 2021, each TU is valued at VES 20,000.
Over this amountNot over this amountTax % on Excess
Less than $11,000$22,000No income tax
$11,000$50,00015%
$50,000 and over25%
Corporate Tax Rates Corporations are subject to a fixed income tax that is of a rate of 25%.

Disability

The “Social Security Fund” includes “Professional Risks”. The purpose of this program is to substitute, within certain limits and conditions, the employer’s responsibility stipulated in the Labor Code, to protect or compensate its employees for damages due to occupational diseases or accidents resulting from risks to which the workers are exposed.

Public Holidays

The Labor Code provides for public holidays that are observed in Panama:
DateHoliday Name
1 JanuaryNew Year’s Day
9 JanuaryMartyrs’ Day
Tuesday before Ash WednesdayCarnival Tuesday
Friday before EasterGood Friday
1 MayLabor Day
3 NovemberSeparation Day
5 NovemberColon Day
10 NovemberPrimer Grito de Independencia de la Villa de Los Santos
28 NovemberIndependence Day
8 DecemberMother’s Day & Feast of the Immaculate Conception
25 DecemberChristmas Day
In Panama any termination must be in writing and must follow the laws outlined in the Panamanian Labor Law. This varies according to the employment agreement and collective bargaining agreement in effect and is based on the type of contract and the reason for termination.
Type of TerminationBrief Description
Justified DismissalIt is classified into 3 categories: •          Disciplinary •          Of a non-attributable nature •          Economic
Unjustified DismissalWhen the unjustified dismissal is proven, the employee receives a severance payment that will correspond to their seniority time and salary. The amounts are calculated on the wages received during the last 6 months or 30 days, whichever is more convenient for the employee.
Voluntary ResignationResignation without just cause in Panama is a right that workers have and must present it in writing to the employer 15 days in advance.
Other forms of compensation upon termination include:
  • If the employee resigns he/she is not entitled to severance
  • For pre-notice: In the case of a contract for an indefinite term, neither party may terminate it without giving prior notice to the other, except as provided in Articles 81 and 84 of this Code, in accordance with the following rules:
  1. upon completion of the probationary period up to one year of service, 30 days
  2. for more than one year and up to five years of service, 45 days
  3. for more than five and up to ten years of seniority, 60 days
  4. more than ten years of seniority and thereafter, 90 days
For severance pay: In the event of dismissal without just cause ordered by the employer, whether or not notice has been given:
Length of EmploymentRequired Notice
0 – 30+ years15 daily wages for each year of service or fraction of six months

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