Countries › Panama › Guide › 16. What is normal abroad but not here › Fortnightly pay and no salary cuts, even by agreement

Fortnightly pay and no salary cuts, even by agreement

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

Abroad, monthly payroll is common and an employee can agree to a pay cut. In Panama salary must be paid in full at intervals of no more than a fortnight, in legal tender, and the agreed salary cannot be reduced for any reason, even with the worker's consent. Only a serious national crisis, fortuitous event or force majeure verified by the labor authorities allows a temporary cut in hours, with union or worker consent and a recovery plan.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates freely; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar and that the dollar circulates without restrictions in commercial and financial transactions (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
Salary reduction by agreement	Not allowed, even with consent; only temporary hour cuts in proven crisis or force majeure textCódigo de Trabajo art. 159 (Ley 44 de 1995), as of 2026-10-29 · in force

The rule

1. Salary must be paid in full in each pay period, including ordinary and overtime hours, and whatever the form of salary it cannot be paid at intervals longer than a fortnight. Commissions and production premiums are settled each period unless the parties agree monthly settlement, paid by the next pay period at the latest; collective performance premiums and profit sharing may be paid at intervals of up to a year.
Cost to do it: Twice monthly payroll runs.
Example: A B/.3,000 monthly salary is paid as B/.1,500 every fortnight. / US$1,500 twice a month instead of US$3,000 once.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 148, 1971-12-30 official text · verified 2026-10-29

2. Salary must be paid in legal tender, at least to the full legal minimum; payment in goods, vouchers, tokens or coupons is prohibited. It may be paid by cheque for office staff when the bank is open and the cheque can be cashed during working hours, by bank transfer when the worker can open or use their own account and the employer bears the cost (not where the worker has no access to an ATM), or as agreed in a collective agreement.
Cost to do it: Bank transfer fees are for the employer.
Example: An employer that pays by transfer cannot deduct the bank's transfer fee from the worker's pay. / Same in US dollars.Código de Trabajo art. 151 as worded by Ley 126 de 2020 art. 21, art. 151, 2020-02-19 official text · verified 2026-10-29 · changed: Ley 126 de 2020 (telework law) added bank transfer as an allowed payment method.

3. The agreed salary cannot be reduced for any reason, even with the worker's consent. Only when a serious national economic crisis, fortuitous event or force majeure, duly proven before the administrative labor authorities, endangers the business may hours or the working week be modified or reduced temporarily, with the consent of the union or, where none exists, of the workers, and with agreed methods to recover the previous working time.
Cost to do it: No fee; an unlawful cut leaves the employer owing the difference.
Example: A worker who signs a letter accepting a cut from B/.2,000 to B/.1,800 a month can still claim the B/.200 a month difference. / About US$2,400 a year per worker.Código de Trabajo art. 159 as replaced by Ley 44 de 1995 art. 22, art. 159, 1995-08-14 official text · verified 2026-10-29

4. Every worker has the right to freely dispose of their salary, and any provision or agreement to the contrary is void, except the deductions the Code authorises.
Cost to do it: No fee.
Example: A clause making the worker spend part of the salary in the company store is void. / Same in US dollars.Código de Trabajo (Decreto de Gabinete 252 de 1971), art. 150, 1971-12-30 official text · verified 2026-10-29

Practice abroad	Panama
Monthly payroll	Pay periods of a fortnight at most
Voluntary pay cut letter	Void; salary cannot be reduced even with consent
Pay in vouchers or company credit	Prohibited; legal tender, cheque or transfer at employer cost
Monthly commissions	Allowed by agreement, paid by the next pay period

Pay practices abroad versus Panama (Código de Trabajo arts. 148, 150, 151 and 159).

Worked example

A regional group moves a Panamanian employee on B/.4,000 a month onto its global monthly payroll. To comply, it must pay at least B/.2,000 each fortnight, and it cannot use the move to reduce the package, even if the employee agrees.
In a downturn without a verified crisis or force majeure, cost cuts must come from other measures (for example ending contracts with the corresponding payments), not from lowering the agreed salary.

Step by step

Run payroll at least twice a month and settle commissions on each run or by the next one.
Pay by transfer only where workers have their own account and ATM access, and absorb the fees.
Never document a salary reduction as a voluntary agreement; if business conditions require it, seek authorisation through the labor authorities.
Check variable pay plans so that bonuses and commissions are not withheld beyond the Code's periods.

Common traps

A consent letter to a lower salary does not protect the employer.
Changing the way variable pay is calculated can amount to a salary reduction.
Thirteenth month and other legal payments come on top of the fortnightly salary.

Sources

← A mandatory thirteenth month paid in three installmentsTerritorial tax: foreign source income is not taxed →

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.