Countries › Panama › Guide › 7. Labor and employment › Employing people in Panama: what an employer must do and what a hire really costs under the Código de Trabajo and the 2025 social security reform

Employing people in Panama: what an employer must do and what a hire really costs under the Código de Trabajo and the 2025 social security reform

Last verified: 2026-10-29 · Status: Changing

Hiring in Panama means a written contract filed with MITRADEL, registration with the Caja de Seguro Social, hourly minimum wages by activity and region, a thirteenth month salary and 30 days' vacation per 11 months. On top of salary the employer pays 13.25 percent social security (rising to 15.25 percent by March 2029), accrues a seniority premium of one week per year payable on every exit and prefunds severance in a cesantía fund. Workers gain dismissal protection after two years, and at least 90 percent of ordinary staff must be Panamanian.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates as legal tender; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar (checked 29 October 2026). USD figures therefore equal the balboa figures.

Key facts

Employer social security contribution (until 28 February 2027)	13.25 %Ley 51 de 2005 texto único art. 96 (Ley 462 de 2025), as of 2026-10-29 · in force
Hourly minimum, financial and insurance activities (national)	3.58 PAB per hourDecreto Ejecutivo 13 de 2025 art. 2, as of 2026-10-29 · in force
Paid vacation per 11 months of continuous work	30 daysCódigo de Trabajo art. 54, as of 2026-10-29 · in force
Unjustified dismissal indemnity, first ten years (post 1995 hires)	3.4 weeks per yearCódigo de Trabajo art. 225, as of 2026-10-29 · in force
Maximum probation period	3 monthsCódigo de Trabajo art. 78, as of 2026-10-29 · in force
Minimum share of Panamanian (or assimilated) ordinary workers	90 %Código de Trabajo art. 17, as of 2026-10-29 · in force
Exchange rate used for USD conversions	1 PAB per USDBalboa at par with the US dollar (Superintendencia de Bancos), as of 2026-10-29 · in force

The rule

1. The employment contract must be written, signed in three copies and one copy filed with MITRADEL, with limited exceptions.Código de Trabajo art. 67 as replaced by Ley 44 de 1995 art. 8, art. 67, 1995-08-12 official text · verified 2026-10-29

2. Minimum wages are hourly and vary by activity, company size and region; the current decree has applied since 16 January 2026.Decreto Ejecutivo 13 de 31 de diciembre de 2025, arts. 2 and 5, 2025-12-31 official text · verified 2026-10-29

3. Employer social security contribution of 13.25 percent of salaries until 28 February 2027, 14.25 percent until 28 February 2029 and 15.25 percent from 1 March 2029; employee contribution 9.75 percent; thirteenth month installments carry 10.75 and 7.25 percent.
Cost to do it: On a B/.1,500 monthly salary: B/.198.75 a month now, B/.228.75 from March 2029.Texto único de la Ley 51 de 2005 with the reforms of Ley 462 de 2025, art. 96, 2025-05-22 official text · verified 2026-10-29 · changed: Ley 462 de 2025 phased in a two point rise in the employer rate.

4. The décimo tercer mes accrues at one day of salary per eleven days worked and is paid in three installments.Decreto de Gabinete 221 de 1971, arts. 2 and 3, 1971-11-18 official text · verified 2026-10-29

5. Vacation is 30 days per 11 months of continuous work, paid in advance.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 54, 1971-12-30 official text · verified 2026-10-29

6. Every indefinite contract pays a seniority premium of one week's salary per year worked on termination for any reason, and employers must fund it, together with 5 percent of the monthly indemnity share, quarterly in a trust based cesantía fund.
Cost to do it: Seniority premium accrual on B/.1,500 a month: about B/.346.15 a year (one week).Código de Trabajo arts. 224 and 229-A to 229-B as replaced and added by Ley 44 de 1995 arts. 35 and 37, arts. 224, 229-A and 229-B, 1995-08-12 official text · verified 2026-10-29

7. After two years of continuous service, an indefinite contract can be ended only for a legal just cause; unjustified dismissal costs 3.4 weeks of salary per year for the first ten years plus the seniority premium.Código de Trabajo arts. 211, 212 and 225 as replaced by Ley 44 de 1995 arts. 31 and 36, arts. 211, 212 and 225, 1995-08-12 official text · verified 2026-10-29

8. At least 90 percent of ordinary workers must be Panamanian or assimilated, and foreign specialists may not exceed 15 percent of the workforce without approval; every foreign worker needs a MITRADEL permit.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 17, 1971-12-30 official text · verified 2026-10-29

Item	Rule	Until Feb 2027	From Mar 2029
Salary	Contract	B/.1,500.00	B/.1,500.00
Employer social security	13.25 percent, then 15.25 percent (Ley 51 texto único art. 96)	B/.198.75	B/.228.75
Seniority premium accrual	One week per year (Código de Trabajo art. 224)	B/.28.85	B/.28.85
Total of the items above		B/.1,727.60	B/.1,757.60

Monthly employer cost of a B/.1,500 (US$1,500) salary, items that can be computed from the cited rules. Excludes occupational risk premiums, other payroll levies and the thirteenth month itself, whose accrual follows the decree's day count. Weekly salary taken as monthly salary times 12 divided by 52.

Worked example

A regional office hires an accountant at B/.1,500 (US$1,500) a month on an indefinite contract with a three month probation clause.
Each month it pays the salary in two fortnightly payments, withholds B/.146.25 of employee social security plus income tax under the individual schedule, and pays B/.198.75 of employer social security (B/.228.75 from March 2029).
It also accrues the thirteenth month, vacation and a seniority premium of about B/.346.15 a year, deposited quarterly in a cesantía fund trust, and must check that the salary is above the minimum for its activity (for an accounting firm with 15 or more employees, B/.3.18 an hour).

Step by step

Register the business as an employer with the Caja de Seguro Social and set up payroll reporting.
Classify the business under the minimum wage decree and set salaries at or above the applicable hourly rate.
Sign written contracts in three copies and file one with MITRADEL; add probation clauses only where valid.
Open a cesantía fund trust with an authorized manager and contribute every quarter.
Check the 90 percent and 15 percent staffing ratios and obtain MITRADEL permits before foreign hires start.
Adopt internal work rules, schedules and an overtime policy within the legal caps.
Diary the two year stability threshold for each hire and the March 2027 and March 2029 contribution increases.

Common traps

The seniority premium is due on every exit from an indefinite contract, including resignations.
Fixed term contracts for permanent posts convert into indefinite contracts.
Salary cuts are void even with the employee's consent.
Labor cost budgets made before Ley 462 de 2025 understate employer contributions from 2027.

Sources

← Digital services and Panamanian tax: withholding on cross border services today and the ITBMS proposal for foreign platforms announced in August 2026Employment contracts in Panama: written contracts filed with MITRADEL, one year fixed terms, three month probation and the presumption of an indefinite relationship →

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