Countries › Panama › Guide › 7. Labor and employment › Employment contracts in Panama: written contracts filed with MITRADEL, one year fixed terms, three month probation and the presumption of an indefinite relationship

Employment contracts in Panama: written contracts filed with MITRADEL, one year fixed terms, three month probation and the presumption of an indefinite relationship

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

Panama's Código de Trabajo requires most employment contracts to be in writing, signed in three copies, with one copy sent to the Ministerio de Trabajo y Desarrollo Laboral (MITRADEL). Contracts are indefinite, fixed term (one year maximum, three years for specially trained technical staff) or for a specific job, and successive or misused fixed term contracts convert into indefinite ones. A probation clause of up to three months is valid only if written and only for roles that need special skill.

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

Maximum length of a fixed term employment contract	12 monthsCódigo de Trabajo art. 74, as of 2026-10-29 · in force
Maximum fixed term for services requiring special technical preparation	36 monthsCódigo de Trabajo art. 74, as of 2026-10-29 · in force
Maximum probation period (written clause, special skill roles)	3 monthsCódigo de Trabajo art. 78 (Ley 44 de 1995), as of 2026-10-29 · in force
Written employment contract required, with a copy filed at MITRADEL	yes, with listed exceptions Código de Trabajo art. 67 (Ley 44 de 1995), as of 2026-10-29 · in force
Minimum age to contract as a worker	14 yearsCódigo de Trabajo art. 83, 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 in writing and signed at the start of the relationship in three copies: one for the employer, one handed to the employee at signature and one sent to the Dirección General de Trabajo or a MITRADEL regional office, which keeps a daily register of contracts filed. Exceptions are farm and ranch work, domestic service, occasional work of up to three months, specific jobs worth up to B/.200 and work in towns of up to 1,500 inhabitants (unless the job is worth more than B/.5,000 or the employer permanently employs more than ten workers). Repeated breach is fined B/.50 to B/.200.
Cost to do it: No filing fee is set in the Code; the fine for repeated failure is B/.50 to B/.200 (US$50 to US$200).
Example: A company hiring a sales manager signs three copies and files one with MITRADEL; failing to do so repeatedly can cost B/.200 per inspection. / Up to US$200 fine for repeated failure to file.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. The written contract must state the parties' details, the people who depend on the worker, the specific work, the place of work, the duration (fixed, indefinite or for a specific job), the length and division of the working day, the salary with the form, day and place of payment, and the place and date of signature.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 68, 1971-12-30 official text · verified 2026-10-29

3. Contracts may be for an indefinite time, a fixed time or a specific job. A fixed term contract must always be in writing and cannot exceed one year; for services needing special technical preparation it can run up to three years, and if the employer paid for that training it can be extended twice.Código de Trabajo (Decreto de Gabinete 252 de 1971), arts. 73 and 74, 1971-12-30 official text · verified 2026-10-29

4. A fixed term clause cannot be used to fill a permanent position temporarily. It is valid only if written into the contract, except where the nature of the work allows it, to replace a worker on leave, vacation or other temporary absence, or in other cases the Code provides. Breach makes the relationship indefinite by operation of law.Código de Trabajo art. 75 as replaced by Ley 44 de 1995 art. 9, art. 75, 1995-08-12 official text · verified 2026-10-29

5. The relationship becomes indefinite if the worker keeps working after the fixed term ends, keeps doing the same tasks after a specific job is finished, or where successive fixed term or job contracts, or their number and total length, show an intention to hide an indefinite relationship. Successive contracts are not treated as a chain for new permanent activities, during the employer's first year of activity, or for arrangements approved by MITRADEL or agreed with the union, but if the chain continues for more than two years the contract is indefinite from the first one.Código de Trabajo arts. 77 and 77-A as replaced and added by Ley 44 de 1995 arts. 11 and 12, arts. 77 and 77-A, 1995-08-12 official text · verified 2026-10-29

6. A probation period of up to three months is valid when the service requires special skill or dexterity and the clause is expressly written into the contract. During probation either party may end the relationship without liability. Probation is not valid when the worker is rehired for a position previously held in the same company.Código de Trabajo art. 78 as replaced by Ley 44 de 1995 art. 13, art. 78, 1995-08-12 official text · verified 2026-10-29

7. Any person aged fourteen or over may contract as a worker, subject to the Code's limits on child labor. A confidential employee (trabajador de confianza) is defined by the duties actually performed: general management, supervision or representation of the employer.Código de Trabajo (Decreto de Gabinete 252 de 1971), arts. 83 and 84, 1971-12-30 official text · verified 2026-10-29

8. Commercial agents, traveling salespeople, promoters and collectors who work for several companies, or who are not subject to working hours or attendance records, are not employees; any one of these situations is enough to rule out an employment relationship.Código de Trabajo art. 242 as replaced by Ley 44 de 1995 art. 39, art. 242, 1995-08-12 official text · verified 2026-10-29

Type	Form	Maximum length	Converts to indefinite when
Indefinite	Written (art. 67 exceptions apply)	None	Not applicable
Fixed term	Always written	1 year; 3 years for specially trained technical staff	Worker keeps working after expiry, successive contracts hide a permanent post, or the clause covers a permanent position
Specific job (obra determinada)	Written clause, unless an art. 67 exception applies	Until the job ends (one extension allowed)	Worker keeps doing the same tasks after the job ends
Probation clause	Written clause	3 months	Invalid for a position the worker held before

Contract types under the Código de Trabajo, arts. 73 to 78.

Worked example

A foreign owned services company opens in Panama City and hires an analyst at B/.1,800 (US$1,800) a month on a one year fixed term contract to staff its permanent finance function.
Because the post is permanent, the fixed term clause breaches art. 75 and the relationship is indefinite from day one, so ending it at month twelve without a legal cause is an unjustified dismissal.
If the company is in its first year of activity, art. 77-A means successive fixed term contracts are not treated as a chain, but once the chain passes two years the contract is indefinite from the first one.

Step by step

Decide the contract type: indefinite for permanent posts; fixed term only for genuinely temporary needs or substitutions.
Write the contract with every art. 68 element, including the working schedule and pay day.
Add a probation clause of up to three months only for roles needing special skill, and never for rehires into the same position.
Sign three copies on day one, give one to the employee and file one with MITRADEL.
Diary the end date of fixed term contracts so the employee does not keep working past it.

Common traps

Letting a fixed term employee work one day past expiry makes the contract indefinite.
A probation clause that is not written, or is used for a role that does not need special skill, gives no protection.
Workers who have completed two years of continuous service gain stability: from then on dismissal needs a legal cause (see termination and severance).
Labeling a salesperson as an independent agent fails if they work only for you and keep your hours.

Sources

← 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 reformMinimum wage in Panama 2026 and 2027: hourly rates by region, activity and company size under Decreto Ejecutivo 13 de 2025 →

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