Countries › Panama › Guide › 7. Labor and employment › Pay rules and the thirteenth month salary in Panama: what counts as salary, fortnightly payment, deductions and the décimo tercer mes

Pay rules and the thirteenth month salary in Panama: what counts as salary, fortnightly payment, deductions and the décimo tercer mes

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

Salary in Panama is broadly defined and must be paid in full at least every fortnight, in legal tender or, since 2020, by bank transfer at the employer's cost. Agreed salaries cannot be cut, even with the worker's consent, and only listed deductions are allowed. On top of salary, employers owe the décimo tercer mes, a thirteenth month bonus of one day's salary for every eleven days worked, paid in three installments and carrying special social security contributions of 10.75 percent for the employer and 7.25 percent for the employee.

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 pay period	15 daysCódigo de Trabajo art. 148, as of 2026-10-29 · in force
Maximum share of salary paid in kind	20 %Código de Trabajo art. 144, as of 2026-10-29 · in force
Maximum deduction per pay period to repay salary advances	15 %Código de Trabajo art. 161, as of 2026-10-29 · in force
Number of thirteenth month installments a year	3 installmentsDecreto de Gabinete 221 de 1971 art. 3, as of 2026-10-29 · in force
Employer contribution on thirteenth month salary	10.75 %Ley 51 de 2005 texto único art. 96 numeral 4, as of 2026-10-29 · in force
Employee contribution on thirteenth month salary	7.25 %Ley 51 de 2005 texto único art. 96 numeral 5, 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. Salary covers everything the employer pays because of the employment relationship: money and in kind payments, bonuses, premiums, commissions, profit sharing and any other income received by reason of the work. Occasional sums to perform the job (representation expenses, transport, tools) and travel allowances for extraordinary lodging, meals or transport are not salary, but permanent representation allowances are.Código de Trabajo (Decreto de Gabinete 252 de 1971), arts. 140 and 147, 1971-12-30 official text · verified 2026-10-29

2. Salary may be fixed only by time unit (month, fortnight, week, day or hour) or by task or piece. Time based pay may be supplemented by premiums, commissions and profit sharing, but the base salary can never be below the legal or agreed minimum.Código de Trabajo art. 142 as replaced by Ley 44 de 1995 art. 19, art. 142, 1995-08-12 official text · verified 2026-10-29

3. In kind salary means only food, housing and clothing for the worker's or family's immediate consumption; it is valued at 20 percent of total salary unless set otherwise and can never exceed 20 percent of total salary.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 144, 1971-12-30 official text · verified 2026-10-29

4. Salary must be paid in full each pay period, and pay periods cannot exceed a fortnight. Commissions and production premiums are settled each period unless the parties agree monthly settlement; collective performance premiums and profit sharing may be paid at intervals of up to one year.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 148, 1971-12-30 official text · verified 2026-10-29

5. Salary must be paid in legal tender. Payment by cheque is allowed for office staff when the bank is open, and by bank transfer when the worker can open or use their own account and the employer bears the cost; transfers cannot be used where the worker has no access to an ATM.Código de Trabajo art. 151 as worded by Ley 126 de 2020 art. 21, art. 151, 2020-02-18 official text · verified 2026-10-29 · changed: Ley 126 of 18 February 2020 added bank transfer as a permitted payment method.

6. The agreed salary cannot be reduced for any reason, even with the worker's consent. Only in a serious national economic crisis, fortuitous event or force majeure verified by the labor authorities may hours or the working week be cut temporarily, with the union's consent or the workers' where there is no union.Código de Trabajo art. 159 as replaced by Ley 44 de 1995 art. 22, art. 159, 1995-08-12 official text · verified 2026-10-29

7. Only listed deductions are allowed, including income tax, the employee's social security contribution, repayment of salary advances (capped at 15 percent of the salary for the period), home purchase installments up to 30 percent of salary, cooperative and savings quotas and court ordered maintenance. Salary is unattachable up to the legal minimum, and vacation pay, pensions and indemnities are fully unattachable.Código de Trabajo art. 161; art. 162 as replaced by Ley 44 de 1995 art. 24, arts. 161 and 162, 1995-08-12 official text · verified 2026-10-29

8. For indemnities and other benefits, salary means the average earned for ordinary and overtime hours actually worked in the six months or the thirty days before the right arises, whichever is more favorable to the worker.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 149, 1971-12-30 official text · verified 2026-10-29

9. Every employer must pay its workers a special bonus called the décimo tercer mes, calculated as one day of salary for every eleven days, or fraction, of work actually performed, continuous or not. Days off for occupational or non occupational illness, work accidents, maternity, leave and vacations count as days worked. The bonus is paid in three installments of one third each and is unattachable.Decreto de Gabinete 221 de 18 de noviembre de 1971, Gaceta Oficial 16989, arts. 1 to 3, 1971-11-18 official text · verified 2026-10-29

10. The second installment, payable on 15 August each year, has been paid by the employer directly to the worker since 1984 (it had been deposited for workers' housing programs).Ley 17 de 22 de agosto de 1983, art. 1, 1983-08-22 official text · verified 2026-10-29

11. Thirteenth month payments are deductible for the employer and exempt from occupational risk premiums and other charges, except social security contributions and income tax.Ley 20 de 12 de agosto de 1992, art. 2, 1992-08-12 official text · verified 2026-10-29

12. Each of the three thirteenth month installments carries a special employer contribution of 10.75 percent and a special employee contribution of 7.25 percent to the Caja de Seguro Social; the installments are not salary for ordinary contribution purposes.
Example: A B/.500 installment costs the employer B/.53.75 in contributions and the employee B/.36.25. / US$500 installment: US$53.75 employer, US$36.25 employee.Texto único de la Ley 51 de 2005, orgánica de la Caja de Seguro Social, with the reforms of Ley 462 de 2025, Gaceta Oficial 30284-B, arts. 86 numeral 1 and 96 numerals 4 and 5, 2025-05-22 official text · verified 2026-10-29

Item	Rule	On a B/.600 installment
Accrual	One day of salary per 11 days worked	Not applicable
Payment	Three installments of one third each; second on 15 August, third on 15 December	B/.600
Employer special contribution	10.75 percent	B/.64.50
Employee special contribution	7.25 percent	B/.43.50
Net to employee before income tax	Installment less 7.25 percent	B/.556.50

Thirteenth month installments and contributions on a B/.600 (US$600) installment, Decreto de Gabinete 221 de 1971 and Ley 51 de 2005 texto único art. 96.

Worked example

An employee earns B/.1,500 (US$1,500) a month, paid on the 15th and the last day of each month (art. 148 caps pay periods at a fortnight).
The employer may not cut this salary, even by agreement (art. 159). Commissions earned are added to each fortnightly payment unless monthly settlement is agreed.
For a thirteenth month installment of B/.500, the employer pays B/.53.75 of special contributions and withholds B/.36.25 from the employee; the installment does not attract occupational risk premiums (Ley 20 de 1992 art. 2).

Step by step

Set pay days no more than fifteen days apart and pay by bank transfer only if the employee has access to their own account and an ATM, at the employer's cost.
Keep payroll records showing ordinary pay, overtime and premiums or commissions separately.
Accrue the thirteenth month from day one and pay each installment on time with its special contributions.
Limit deductions to those in art. 161 and keep written authorizations.

Common traps

The thirteenth month decree as published in 1971 set the first installment on 15 March; that date was later changed by a 1972 cabinet decree whose text is not available on Legispan, so confirm the current first installment date with MITRADEL before relying on it.
Regular bonuses and allowances are usually salary and feed into vacation, thirteenth month and severance calculations.
A salary reduction agreed with the employee is still void under art. 159.
Repayment of advances cannot exceed 15 percent of the salary for the period, however large the advance.

Sources

← Working hours and overtime in Panama: 48 hour day week, 25 to 75 percent overtime surcharges, Sunday at 50 percent and national holidays at 150 percentVacation and leave in Panama: 30 days per 11 months, 14 weeks of maternity leave, 3 days of paternity leave, sick leave fund and breastfeeding breaks →

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.