What to Consider when Hiring in Panama

The Republic of Panama is a place that is consistently thought of as a point of transit. Due to the geographical hosting of the Panama Canal, this place is rarely considered a destination, and instead commonly thought of as a pit-stop in a longer journey. However, with over 4 million permanent residents, a number of thriving industries (such as agriculture and importing/exporting), and the third largest GDP in Central America, Panama is a nation with a growing number of employers and investors from around the world. If you are considering opening up a workplace in Panama, there are a number of considerations to be made first.

Primarily, the Republic of Panama has a strict Labor Code that regulates the appropriate parameters for employees in this country and has also created a State protection benefit for all employees. The Labour Code was developed with the intention of supporting continued growth and development of all industries within the Republic of Panama, while also supporting the health, safety and well-being of the individuals employed within the nation.

Any foreigners that plan to work, or to open any operations, are expected to first obtain a Visa and a Work Permit before beginning any employment duties in Panama. Within any workplace in Panama, the Labor Code stipulates that a maximum of 10-15% of the workplace can be foreign workers. Employers can hire up to 15% foreign workers, if the roles that these foreign employees will be performing are based on higher technical qualifications, or if the employees have been employed with the company for a long period of time.

Additionally, all employees (both foreign and citizen) must sign a written employment contract that is sealed before the Ministry of Labor at the commencement of their working relationship. Fixed term contracts are not standard in Panama – employment relationships are started with the intention of running on indefinite contracts, unless the terms of hire clearly stipulate that the employee is being hired for a temporary position (such as covering for an employee that is on sick leave). Employees must be paid at least twice per month and can have their wages fixed based on any term of time (hourly rate, daily rate, weekly rate, bi-weekly rate, or monthly rate).

If unions exist in a workplace then the use of collective agreements is standard practice, with a collective agreement set for a minimum of two years, up to a maximum term of 4 years. After the expiration of the collective agreement, the previous agreement will remain effective until a new agreement has been created and negotiated.

There are a number of other legislations that must be considered when opening operations in Panama, including:

  • Pension and Benefits
  • Working Time and Holidays
  • Termination based on Just Cause vs. Without Cause
  • Resolution of Employment Disputes
  • Vacation Time
  • Protection Against Discrimination
  • Rules Regarding the Employment of Minors (between ages 14-18)
  • Basic Employee Rights

While not considered a “developed” country, Panama has still created labor legislation that serves the best interest of their employees as well as regulations that protect the best interests of organizations as well. Their minimum requirements are structured similarly to other nations of the Western world, and their employment practices are fair and just for both employees and employers.

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