Hire in Panama
Panama PEO &
Employer of Record
Hire & manage teams remotely in Panama without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.



Business Language
Spanish
Salary Currency
United States Dollar (USD)
Payroll tax
25%
Payroll Cycle
Monthly
Time zone
UTC -5
Capital city
Panama City
Hire Employees in Panama
The NNRoad Advantage ☺
Pay as you go
Global account manager
Compliance
Fast Onboarding
Foreigner Visas
Platform
Employer of Record in Panama
01.
Candidate Selection
02.
Employee Onboarding
03.
Compliance & Payroll
04.
Payroll Reporting
Recruiting process outsourcing – including but not limited to resume screening, shortlisting candidates, coordination for interviews, and assistance for salary negotiation.
Hiring and termination of employees/local labor contracts (contract administration – engagement, extension termination and conversion to permanent hire).
On-boarding and off-boarding employees following labor law practice.
Complete payroll solution and benefit administration
Employee management – employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law.
Mandatory insurance compliance (i.e. pension, labor and health insurance) according to the local labor laws.
Payment management (Invoicing customers/clients and vendor payments).
Work VISA application assistance, if needed.
Local individual income tax reporting.
Payroll & PEO in Panama
01.
Compliance & Payroll
02.
Payroll Reporting
Registering the necessary company and personnel information for payroll calculation in the payroll software and system
Monthly Payroll Processing
Year-End Adjustment and Annual Declaration


Taxes & Payroll in Panama
Employee Income Taxes:
Panama’s tax system is founded on the premise of income being territorial. Citizens and residents are taxed on income earned from Panamanian sources. Non-residents are only taxed on income earned in Panama, and the payer must withhold the tax on any sort of income paid to a non-resident.
Tax Brackets
15%: 11,000 – 50,000 USD
25%: Over 50,000 USD
Sample Calculation
Employer Costs in Panama
Employer Contribution
- Social security: 12.25%
- Unemployment: 1.92%
- Education tax : 1.50%
- Accident: 0.98-5.67%
Employee Contribution
- Social security: 9.75%
- Education tax: 1.25%
Benefits & Insurance in Panama
Social Security Fund
The Panamanian Social Security Fund is in charge of administering and governing the Republic of Panama’s social security system. Pensions, as well as programs such as survival, disability, and old age, are coordinated by the social security fund. The social security fund also provides benefits, such as maternity and illness benefits.


Working Hours in Panama
Working Hours Per Week
The standard workday in Panama is eight hours, and the workweek is up to 48 hours. Night shifts (from 6 p.m. to 6 a.m.) are restricted to seven hours per day and 42 hours per week. A mixed-shift workweek is seven and a half hours long and can last up to 45 hours.
Overtime
Overtime is paid based on the following rules:
- 25% of ordinary wages, when the overtime work is performed between 6 am and 6 pm.
- 50% of ordinary wages when the overtime work is performed between 6 am and 6 pm and mixed shifts which start in the daytime and continue for longer than usual working time.
- 75% of ordinary wages when an overtime work shift is an extension of a night shift or of a mixed shift that starts between 6 pm and 6 am.
Termination Laws in Panama
Contracts can be dissolved through mutual consent, resignation, or unilaterally for good or bad reason. In Panama, only limited and serious conditions, as defined by the labor legislation, can result in a just cause dismissal.
The employer must give the employee written notice of the termination, including the reason for it and the date it was given. A dismissal that does not follow the labor code’s rules is considered unreasonable, and the employee may be able to file a claim in a labor court.
Severance
Severance pay is required if an employee has served the company for less than 2 years continuously and if dismissed without cause. In this case, the severance pay is equal to 3.4 weeks of salary for each year worked.
Employment Contract in Panama
Employment Contract
Employment contracts in Panama can be in writing or verbal form. Contracts are usually for an indefinite term, and fixed-term contracts can only be used for temporary replacement of an employee or for specific tasks that are not permanent in the nature of the company.
Written employment contracts must include:
- Name of employer and employee
- Probation period
- Job description
- Place of work
- Working hoursSalary and form of payment
- Duration of the contract if it is for a definite term, or a specific project
- Other terms agreed by the parties
Probation Period
The probation period can be for maximum three months and must be included in the employment contract.


Types of Leaves in Panama
Annual Leave
Employees that have worked for at least 11 months without interruption are entitled to 30 days of paid vacation leave. The pay due to the employee will be settled and paid three days prior to the start of the employee’s yearly vacation.
Sick Leave
Employees in Panama are entitled to 18 days of paid sick leave. For non-work-related illness or injury, the employer pays sick pay at 100% salary rate for the first 18 days. From the 21st day onward, the Social Security fund (at rates according to the law) covers sick pay.
Maternity and Paternity Leave
A female employee is entitled to maternity leave for a period of six weeks prior to delivery and eight weeks following childbirth. The overall length of maternity leave must not be less than 14 weeks. The Social Security Fund is responsible for maternity leave payments. Pregnant women who have paid a minimum of 9 monthly installments in the 12 months before to the 7th month of pregnancy, that is, up to the 6th month inclusive, are eligible for the Maternity Allowance.
Fathers are entitled to three days of leave paid by the company. The leave shall be taken immediately after the childbirth.
Public Holidays in Panama
Public Holidays
- New Year’s Day – January 1
- Martyr’s Day – January 9
- Carnival – February 28
- Mardi Gras – March 1
- Ash Wednesday – March 2
- Holy Friday – April 15
- Labor Day – May 2
- Separation Day – November 3
- Flag Day – November 4
- Colon Day – November 5
- Los Santos Uprising Day – November 6
- Independence Day – November 28
- Panama Mother’s Day – December 8
- Christmas Day – December 25-26