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Global HR Compliance in Panama

Expanding your business into Panama or hiring remote global talent based there requires a clear understanding of the country’s employment rules. Whether you’re onboarding sales representatives to grow in the region or engaging international professionals in specialised roles, ensuring compliance with Panamanian labour law is critical to mitigating legal and financial risks.

This guide outlines the key aspects of employment in Panama, including contracts, terminations, statutory benefits, and working time rules. It also highlights how businesses can simplify operations with a Global Employer of Record (EOR) solution.

Employment Contracts in Panama

A written labour contract must be signed at the start of any employment relationship. In the absence of one, any employee claims regarding employment terms are presumed true unless the employer provides evidence to the contrary.

Contracts can be established for:

  • A definite period
  • A specific project
  • An indefinite period

Different working hours can be defined in the contract, provided they respect national hour limits.

Written contracts are not mandatory in the following areas: domestic service, farming, short-duration or casual work, and work in unpopulated areas.

Statutory Employment Rules and Regulations

Working Hours

Panama defines working hours according to time of day:

  • Day shifts (6:00 a.m. – 6:00 p.m.): max 8 hours/day, 48 hours/week
  • Night shifts (6:00 p.m. – 6:00 a.m.): max 7 hours/day, 42 hours/week
  • Mixed shifts (part day, part night): max 7.5 hours/day, 45 hours/week

Probation Period

A probation period of up to three months is allowed if the position requires specialised skills or qualifications. This period must not apply if the employee has held a similar role in the company before.

Annual Leave

Employees are entitled to 30 days of paid vacation for every 11 continuous months of work. A daily rest break between half an hour and two hours must also be observed.

Parental Leave

Male employees are not granted statutory parental leave. Female employees benefit from protection against dismissal during pregnancy and up to one year after returning from maternity leave. Dismissal during this time is only allowed with just cause and prior judicial authorisation.

Sick Leave

Employees accrue sick leave from the beginning of employment. The accrual rate is 12 hours for every 26 worked days, equivalent to 18 days of paid sick leave per year.

Overtime

In most sectors, overtime is limited to:

  • Max 3 hours/day
  • Max 9 hours/week

Authorisation is required, and overtime is only permitted in specific sectors (e.g., agriculture, export, and designated economic zones).

Minimum Wage

Minimum wages in Panama vary by region and sector:

  • Ranges from 1.22 to 2.36 balboas/hour
  • Lowest rates apply to agriculture; highest to construction
  • Last adjusted in January 2012.

Employment Termination in Panama

Termination procedures differ based on an employee’s length of service.

Employees with Less Than 2 Years of Service

These employees may be dismissed without cause, but the employer must:

  • Pay compensation
  • Settle labour benefits
  • Pay one additional month’s salary as notice

Employees with More Than 2 Years of Service

Dismissal is only lawful for causes specifically listed in the Labour Code. Employers must:

  • Notify the employee in writing
  • Provide clear details of the alleged misconduct (time, place, nature)

Employee Resignation

Resignations must:

  • Be submitted in writing
  • Be formally recorded before the Ministry of Labour
  • Be notified 15 days in advance

Employer-Initiated Dismissal with Notice

For employees with less than two years of service, employers may avoid the one-month notice salary payment by giving 30 days’ notice in advance.

How Acumen International Can Help You Hire in Panama

Direct Employment Without a Local Entity
We hire your talent in Panama under our local legal entity, so you don’t need to establish a company. This lets you enter new markets faster and with reduced costs.

Local Compliance, Centrally Managed
We handle employment contracts, payroll, taxes, social contributions, and statutory benefits in full alignment with Panamanian law—so you stay compliant while focusing on growth.

Custom Support for Complex Hiring
Need support with benefits structuring, sales commission schemes, or niche employment arrangements? We tailor our EOR services to the realities of your workforce needs.

Global Mobility Support
If your employee needs to relocate or obtain a work permit, we offer comprehensive immigration support and work permit sponsorship when required.

Global Payroll Calculator Access
Use our Global Payroll Calculator to estimate total employment costs, including mandatory contributions and statutory leave costs, helping you make informed hiring decisions.

One Partner Across 190+ Countries
Panama is just one piece of your global expansion. We provide Global Employer of Record (EOR) services in over 190 jurisdictions, helping you scale consistently and compliantly across borders.

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