Countries › Panama › Guide › 7. Labor and employment › Outsourcing, subcontracting and temporary staffing in Panama: joint liability of the beneficiary, a ban on labor supply and two month agency placements

Outsourcing, subcontracting and temporary staffing in Panama: joint liability of the beneficiary, a ban on labor supply and two month agency placements

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

Panama treats genuine contractors with their own capital, equipment and management as employers, but makes the business that benefits from their work jointly liable for unpaid workers' claims when the work is part of or connected to its line of business. Supplying workers to another company is prohibited except through agencies authorized by MITRADEL, for placements of up to two months, at the district's highest minimum wage and with joint liability. A company that works exclusively or mainly for another is treated as that company's workforce, and sham corporate structures let workers claim from shareholders.

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

Beneficiary jointly liable for contractor workers' claims in core or connected work	yes Código de Trabajo art. 89, as of 2026-10-29 · in force
Maximum temporary placement through an authorized staffing company	2 monthsCódigo de Trabajo art. 95, as of 2026-10-29 · in force
Temporary staffing requires MITRADEL authorization	yes Código de Trabajo art. 95, 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. Contractors, subcontractors and other established businesses that hire workers to perform work for third parties with their own capital, equipment, management and resources are employers, not intermediaries. The direct beneficiary of the work is jointly liable with them for workers' outstanding claims when the work is inherent, related or connected to the beneficiary's business, even if subcontracting was prohibited in their contract. The main contractor is jointly liable with all subcontractors.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 89, 1971-12-30 official text · verified 2026-10-29

2. Where a business works exclusively or mainly for another business, the latter is deemed the employer of all the workers who serve the former, and both are jointly liable for all benefits and indemnities.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 90, 1971-12-30 official text · verified 2026-10-29

3. Arrangements under which one person or business supplies another with some or all of the workers it needs are prohibited. As an exception, with MITRADEL authorization, businesses may supply their own workers to companies that need them temporarily for periods of up to two months under the user's direction, provided the workers receive the highest minimum wage in the district, the user is jointly liable for wages, benefits and indemnities for the period of use, and the user's acts against the worker count as the employer's acts.
Example: A logistics firm needs 10 extra warehouse workers for a six week peak: it may use an authorized agency, which must pay each at least the highest minimum wage in the district. / Same rule; amounts are in balboas at par with US dollars.Código de Trabajo (Decreto de Gabinete 252 de 1971), arts. 94 and 95, 1971-12-30 official text · verified 2026-10-29

4. Where several persons or businesses work in the same premises or as an economic unit and use a worker's services interchangeably, they are a single employer and jointly liable, whoever appears as employer in the contract.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 96, 1971-12-30 official text · verified 2026-10-29

5. Where simulated or fraudulent acts using a legal entity are used to avoid labor obligations, the workers may also claim their labor credits from its shareholders, partners or members; the simulated participation of a company in providing a service does not prevent the individual from being treated as an employee.Código de Trabajo (Decreto de Gabinete 252 de 1971), arts. 92 and 93, 1971-12-30 official text · verified 2026-10-29

6. Managers, administrators and intermediaries represent the employer and bind it in its relations with workers.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 88, 1971-12-30 official text · verified 2026-10-29

7. Sales agents, promoters and collectors are employees of the company they serve unless they do not personally perform the work or act only in isolated transactions; those who work for several companies or are not subject to hours or attendance records are not employees.Código de Trabajo arts. 238 and 242 as replaced by Ley 44 de 1995 arts. 38 and 39, arts. 238 and 242, 1995-08-12 official text · verified 2026-10-29

Arrangement	Legal employer	Joint liability of the client
Genuine contractor with own capital, equipment and management, doing non core work	Contractor	No
Contractor doing work inherent or connected to the client's business	Contractor	Yes (art. 89)
Contractor working exclusively or mainly for one client	Client is deemed employer	Yes (art. 90)
Labor supply without authorization	Prohibited	Arrangement unlawful (art. 94)
Authorized temporary staffing, up to two months	Agency	Yes for the period of use (art. 95)
Group companies sharing premises or workers	All, as one employer	Yes (art. 96)

Who answers to the worker under Código de Trabajo arts. 89 to 96.

Worked example

A bank outsources its call center to a local provider whose only client is the bank. Under art. 90 the bank is deemed the employer of the call center staff and is jointly liable for their severance.
If the provider also served other clients with its own equipment and management, the provider would be the employer, but the bank would still be jointly liable for unpaid claims because customer service is connected to its business (art. 89).

Step by step

Check that contractors have their own capital, equipment and management and serve other clients.
Require proof each month that contractors pay wages and social security for staff assigned to you.
Use temporary staffing only through MITRADEL authorized agencies and for no more than two months per need.
Build indemnities into outsourcing contracts, knowing they do not limit your liability to the workers.

Common traps

A clause banning subcontracting does not shield the beneficiary from joint liability.
A captive service company working mainly for one client makes the client the employer.
Using unauthorized agencies or placements beyond two months amounts to prohibited labor supply.
Corporate structures used to evade labor duties expose shareholders to claims.

Sources

← Unions, collective bargaining and strikes in Panama: one company union, a duty to bargain on request, agency fees and strikes that close the workplaceRemote work in Panama: telework under Ley 126 de 2020, written and MITRADEL stamped agreements, reversibility, equipment and connectivity costs →

Get rule changes weekly

Free. One email a week from The LatAm Thread.

One more step after you press the button: we take you to Substack, where your email is already filled in. Confirm there to start. No spam, unsubscribe anytime, we never share your address. By subscribing you agree to the privacy policy.