Panama has a relatively small labor
pool (Government statistics for 1999 listed approximately 1.5
million persons as "employable.") and this tends to
limit availability in upper-echelon positions. As a rule, Panamanians
respond well to in-house training and the bilingual workforce
(especially Spanish-English) is proportionately quite large.
Unionism is not as prevalent as in European countries and the
United States and tends to be centered in the construction, government
works and private manufacturing sectors. In Panama, union membership
includes around 10% of the workforce.
Though modifications are under study, the Panamanian Labor Code
still tends to be protective of the worker and somewhat prohibitive
for the employer. Under the code, three types of labor contracts
are recognized. The Definitive Period of Time Contract allows
for employment not to exceed one year. The time period of a Defined
Work Labor Contract is determined by the job performed. The Indefinite
or Permanent Labor Contract is for a duration which is at yet
undetermined by the parties at the time of signing. When special
circumstances dictate them, probationary three-month contracts
may be signed.
Mandatory employee fringe rights represent an estimated 35-40%
of base pay and a Panamanian employee is guaranteed a wide range
of benefits by law. Some of special note to employers include:
- An annual paid vacation of 30 days for every 11 months of
- A "Thirteenth Month" compensation that is aggregated
at one day’s salary for every 11 days worked. The bonus
is paid in three installments in April, August and December.
- Termination compensation equivalent to a week’s salary
for each year worked.
- An unjustified-cause termination payment. This is a lump-sum
payment, the value of which is based on labor code indemnification
tables. After the amount is paid, the effected employee must
be rehired if he or she desires.
- A paid maternity leave of 14 weeks.
The maximum normal workweek is 48 hours for daytime work, 42
hours for night work and 45 hours for mixed day and night work.
Executive Decree No. 38 of July 22, 1998 established new minimum
wage standards for three geographical regions, cross-referenced
by employment sector. The resultant table places the minimum wage
rate at between $0.82 and $1.33 per hour.
Foreign labor must obtain a one-year, sometimes-renewable work
permit from the Bureau of Immigration. (In certain sectors and
for some specialized positions, special temporary permits are
granted.) For companies choosing to hire foreign labor, the rule
of thumb is that the percentage of foreigners to nationals cannot
exceed 10%. Due to the fact that unemployment has averaged between
12% and 14% for the last several years, foreign-labor statutes
are strictly enforced in Panama and violations may result in fines
and/or revocation of visa status, depending upon the individual
In terms of taxation, bonuses to employees in excess of one
month’s salary or $750, whichever is lowest, are not deductible,
nor are profit-sharing payments in excess of 10% of a company's