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Employer of Record in Panama

Skuad’s Employer of Record Panama (EOR) solutions make business expansion to Panama easy and hassle-free. Our unique HR platform allows companies to hire exceptionally talented employees in Panama, without having to set up a separate legal entity. It streamlines the process of hiring and onboarding a remote team by handling payroll management, taxation, and other legal compliances. To learn more about Skuad, Book a demo today.

Panama at a Glance

Population: 4.374 million (2020

Currency: Panamanian Balboa (PAB)

Capital city: Panama City

Languages spoken: Spanish

Gross Domestic Product (GDP): 52.94% (2020)


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Employment in Panama

Under Article 78 LC, employment contracts in Panama can be written or verbal, though the written form is recommended. Three different employment contract copies are essential: one each for the employee, employer, and the Ministry of Labor. The contract should preferably be in Spanish and inclusive of terms of payment, benefits, and termination. Whether an offer letter or employment contract in Panama, salary and other payments should be mentioned in US dollars (USD).

Panamanian employment contracts should include the following details in writing.

  • Name of employer and employee
  • Job description
  • Probation period
  • Duration of the contract (period of the project)
  • Salary and form of payment
  • Working hours
  • Place of work
  • Other mutually agreed-upon terms

Fixed-term contracts should be in writing and can be used only in the context of temporary replacement of the employee or for a specific job. Though they cannot exceed 12 months, a period of three years with two renewals is allowed for special services and technical skills. Generally, there is a three-month probation period, which shall be mentioned in the written contract.

Entitlements Explanation
Statutory Working Hours The statutory working hours are 48 hours a week.
Overtime eligibility Overtime can be three hours a day, up to nine hours a week.
Paid public holidays The list of public holidays is as follows.
  • New Year’s Day (January 1)
  • Martyr´s Day (January 10)
  • Carnival/Shrove Tuesday (the day before Ash Wednesday)
  • Good Friday (the Friday before Easter)
  • Labor Day/May Day (May 1)
  • Independence Day (November 3)
  • Colon Day (November 5)
  • Shout in Villa de los Santos (November 10)
  • Independence from Spain (November 28)
  • Christmas Day (December 25)
Holiday Pay
  • Eleven months of continuous employment in the company enables the employees to take 30 days of annual vacation.
  • If desired, leave can be taken in halves, provided there is a mutual agreement between the employer and employee.
  • The accumulation of two vacations is considered on mutual agreement.
  • Employers shall be paid three days before the start of the vacation.
  • The payment for an annual vacation cannot be compensated by any other means.
Medical leave
  • Employees should have spent six out of nine months in employment to get medical benefits.
  • Employees in Panama get paid medical leave of up to one year.
  • Employers shall pay for the first three days of the leave.
  • Afterward, the Panamanian Social Security Fund, Caja de Seguro Social, pays for 26 weeks for the same illness.
  • Extension of medical leave up to one year is sanctioned once a medical certificate is produced.
Maternity leave
  • Female employees can take 14 weeks of paid maternity leave.
  • Six weeks of leave is allowed before the due date.
  • Any further extension of leave due to medical complications can be obtained upon producing a medical certificate.
  • Employees should not be terminated without a valid reason for a year after their rejoining.
  • Adoption leave of 28 days is allowed for adoptive mothers.
  • Pregnant employees are not allowed to work on rest days or overtime.
  • Employers provide three days of paid paternity leave for male employees.
Annual leave accrual entitlement Employees are entitled to enjoy 30 days of annual leave and are also entitled to 10 paid public holidays.
Leave expiry If not taken, annual leave will be carried forward to the next year. Generally agreed upon mutual terms.
Leave cash out Employees can encash their leave at the time of termination.
Accrued leave at termination Employees can encash their leave at the time of termination. The leave encashment sum is calculated as follows.
Annual leave payout = Accrued annual leave days + 3.4 weeks salary x Years of service
Employee protection and anti-discrimination rights Employees are entitled to get protection and anti-discrimination rights under Law 7 issued on February 14, 2018. It protects the following.
  • Honor
  • Dignity
  • The physical as well as psychological integrity of individuals who have faced discrimination
Confidentiality of personal information Confidentiality of the personal information of the employees is protected under Law 81, Protection of Personal Data.

To ensure your expansion endeavors are in compliance with the Panama employment laws, Contact Skuad today.

Contractors vs. Full-time Employees

Whether your company needs to hire a contractor or a full-time employee depends on several factors such as the size of the business, job requirements, and the duration of the project. When it comes to the payroll of a contractor, you need not withhold payroll taxes from the preset payment. When you hire a full-time employee, you need to withhold payroll taxes from their monthly salary.

Benefits of Hiring Contractors

  • Savings on the cost per employee
  • Hire global talent for a limited time
  • Payment on mutually agreed terms
  • Need not provide other benefits
  • Saving on training expenses
  • Diverse work experiences
  • Lesser exposure to lawsuits

Benefits of Hiring a Full-time Employee

  • Can guide and monitor their work
  • Lesser chance of quitting
  • Higher productivity
  • Relationship building
  • Loyalty

Whether you need full-time employees, freelancers, or employees on a contractual basis, Skuad’s EOR services can guide you from start to finish. Book a demo with Skuad experts to avail yourself of tailor-made HR solutions.

Hiring in Panama

Depending on your business requirements, you can hire a contractor or full-time employee in Panama. Payroll, benefits, and compensations are different for a contractor and a full-time employee.

Job search platforms such as Konzerta, LinkedIn, OPCIONEMPLEO, Indeed, Gigajob, and Buscojobs are used by employers to advertise job opportunities in Panama. The benefit of hiring through these job search platforms is that you get varied choices of talent. Also, you can sift through the applicants’ profiles before taking the application further. The drawback is that it is difficult to verify the credibility of the information provided.

Skuad’s Panama EOR service excels in recruiting for international businesses. Our expertise in the field helps you to undertake and manage the most tedious of hiring processes efficiently.

Probation & Termination

Probation Period in Panama

The probation period in Panama does not exceed three months. An employee is entitled to the company’s benefits after this period. An employer can terminate their employees during the probation period without prior notice and compensation.

Termination of Service

Topic Explanation
Notice for termination of employment A written notice, as per the mutually agreed employment contract, should be given before terminating the employment contract. Otherwise, a compensation payment worth 30 days’ salary should be given to the employee.

You can contact Skuad to learn more about how our Panama EOR solutions can aid your hiring process regarding adhering to the probation and termination legislature.

EOR Solution in Panama

Business expansion is a long-drawn process that calls for extensive planning, especially when expanding to a foreign country. It is complicated and can take up to several months to complete but by choosing the EOR route for hiring employees in Panama, you can fast-track the expansion process. Employer of Record Panama (EOR) solutions by Skuad can make expansion to Panama much simpler and a lot quicker for business. Our global outreach and a tech-enriched HR platform ensure compliance with local labor laws by managing employment responsibilities such as monthly payroll, work permits, employment contracts as well as taxation for your employees in Panama.

General Employer of Record Service Terms

Taxes that apply to invoices Education tax, income tax, social security tax
Minimum duration of service Three weeks
Currency accepted US dollars
Required details and documents For foreign employees, the following documents and details are required.
  • A passport that is valid for at least six months beyond the intended duration of stay in Panama
  • A copy of the information page of the passport
  • A completed visa application form Four passport photos
  • An employment contract with a company based in Panama
  • Proof of accommodations in Panama
  • A medical certificate stating that the applicant is in good health
  • Police background check certificate from the applicant’s country of residence.

Outsourcing Employment through an Employer of Record

It is ideal to think ahead if you want to hire directly or by partnering with an EOR service while expanding your business to other countries. An EOR company can supervise and conduct HR-related processes for you, saving you time, labor, and other resources to focus on the business side of things. Skuad’s EOR solutions for Panama can manage recruitment, work permits, employment contracts and payroll, and taxation. Book a demo with Skuad experts to learn more.

Types of Visas in Panama

The table below lists and explains the different types of visas available in Panama.

Visa Category Explanation
Temporary visitor through Marrakech treaty for small companies The visa is allowed for small companies and provides for a five-year stay.
City of Knowledge Work Visa Program Five special work permits are allowed under the City of Knowledge Work Visa Program, along with six years of stay.
Marrying a citizen of Panama If you are married to a Panamanian, you are entitled to a work permit.
Panama specialist workers visa This visa allows for a nine-month work permit and is temporary.
Short stay visas This visa allows a nine-month stay for the following.
  • Businesses to start subsidiaries
  • Investigators
  • Scientists
  • Investors
  • Audiovisual professionals
  • Call center executives
Temporary residency work permit This visa allows six years of residence and a work permit for a foreign employee who works in,
  • The government
  • Semi-autonomous companies
  • Non-diplomats of a foreign government
  • Employees working in a Colon Free Zone company
  • Small businesses dealing with government
  • Media correspondents
Special temporary residency for special reasons A temporary residency of six years is allowed under this visa for foreign employees in,
  • Audiovisual industry
  • Panama-Pacifico Special Economic Zone
  • Food industry
  • Call centers
  • Business executives with a subsidiary in Panama
Cultural, sports, or educational visa The visa allows a three-month, non-extendable stay for foreign employees hired for cultural, scientific, technical, or educational purposes.
Domestic workers visa The visa allows Panamanian citizens to hire a domestic worker for a year-long stay with three renewals.

Knowledge of the different types of Panamanian visas available is crucial if you have plans to expand in the country. Skuad’s industry experts can guide and manage visa-related and procedural tasks for you. Talk to us today to book a demo.

Work Permit

Skuad’s Panama EOR services can assist you in all your HR responsibilities while starting a subsidiary in the country. Skuad’s tech-enriched HR platform can expedite and simplify your expansion activities. Contact Skuad to learn more today.

Work Permits Details
Can Skuad sponsor work permits in Panama? Yes, Skuad can sponsor work permits in Panama.
Processing time A processing time of two to six months is required to obtain a work permit in Panama.
Work permit process There are four steps in securing a work permit.
  • Employers should mention the need for foreign employees in their firm.
  • Employees should visit the Panama Embassy and submit relevant documents to get an immigration visa and permanent residence.
  • Employers should apply for a work permit under the Ministry of Labor.
  • After getting approval, employees can start working in Panama.
Documents needed for a work permit Applicants must provide the following documents.
  • A work permit application completed by an attorney
  • A letter of responsibility from the employer
  • A copy to prove permanent residence from National Immigration Service
  • A copy of the applicant’s residence ID
  • Four passport photos
Passport submission The employee’s original passport is presented during their appointment with the Ministry of Labor.
Work permit validity The work permit is valid for one year and can be renewed after one year.
Work permit processes for different countries The process of securing a work permit is the same for all countries, but there are some exceptions for citizens of some countries.
Where is the application processed? The application is processed in the employee’s home country.
When can an employee travel to Panama? An employee can travel to Panama once they receive their work permit from the Ministry of Labor.
Cost of a business visa A business visa costs USD 109.37.
Duration of business visa processing The duration of processing a business visa is four to five months.
Can you switch a business visa to a work permit? No. You have to go back to your home country and apply for a work permit
Can spouses work on dependent visas? No. They must apply for a separate work permit.
Termination of work permit The work permit should be canceled within a week of the last day of the employment termination notice period or one day after the work permit expires.
Special requirements for work permit cancellation The work permit must be canceled by the employer or an appointed employment agent.

Payroll & Taxes in Panama

Setting Up Payroll in Panama

You must have thorough knowledge about employee laws, payroll requirements, and legislation on taxes before setting up a payroll in Panama. Taxes are imposed on both residents and non-residents who earn an income in Panama. Employers are expected to pay their employees on the 15th or 30th day of each month.

Paychecks are given on the last business day and before closing for the day. They are usually issued through a local bank and the amounts for social security, education tax, and income tax withholding are deducted.

Taxes in Panama

Tax Explanation
Income tax Annual tax income
Gross Income Tax Rate (%)
> USD 11,000 0%
USD 11,000–50,000 15%
USD 50,000 25%
These tax rates apply to the residents and non-residents who earn their income in Panama and stay for more than 183 days per year.
Tax returns Yes, tax returns must be filed for,
  • Mortgage interests
  • Student loans
  • Health insurance premium
  • Joint tax returns for married couples
Financial year-end date The financial year-end date is March 15.
Tax documents form The tax documents form is W-2 (U.S. IRS form).
Employers’ social security and statutory contribution Employers withhold a percentage from each employee’s pay for income tax and social security tax. Further, they contribute 12.25%.
Employees’ social security and statutory contribution Employees contribute 9.75%.
Educational tax The educational tax is 1.25% for employees and 1.5% for employers.
Workers’ compensation insurance premiums These are 0.56–5.67% of the remuneration based on the risk factor in the job.

It can be difficult to navigate formalities surrounding payroll and taxation in Panama. Talk to Skuad experts to get a tailor-made EOR solution for your company’s Panama expansion plans.

Incorporation: How to Set Up a Subsidiary in Panama

Setting up a subsidiary in Panama requires navigating through the subsidiary laws. The HR-related processes can be time-consuming, labor-intensive, and difficult to manage without knowledge of the local language and laws. Three different subsidiary options are available in Panama: branch office, limited liability company (LLC), or representative office. Take advice from EOR experts such as Skuad after deciding on the activities you are planning in Panama and choose what is best.

Laws for the three subsidiaries are different. An LLC is the most preferred subsidiary in Panama. It requires three directors and one shareholder at a minimum share capital for incorporation of USD 1. The Panama subsidiary needs a company secretary and a director who is fit for the role. Accounting records and related documents must be maintained and stored in Panama for five years. An LLC can protect its parent company and function on its own.

LLC Subsidiary Process in Panama

  • Fill an online form with your details
  • Mention the name of your choice for your subsidiary and check for its availability
  • Mention the name of the director who you want to appoint
  • Indicate how you wish to issue share certificates
  • Mention your payment method

What You Need for the Incorporation Process in Panama

Companies are required to work for several weeks or months before starting a subsidiary in Panama. The longer you take, the higher the chances of returns getting delayed. It is better to consult a legal adviser or an expert account who is thorough with Panama’s subsidiary laws.

Skuad provides EOR services and has been doing so for years. You can entrust the process of creating a subsidiary in Panama with us and concentrate on your business expansion. Get in touch with a Skuad expert today to learn more.

Professional Employer Organization (PEO)

A professional employer organization (PEO) is a firm that co-works with its client or employer and provides employees on lease. Further, the PEO handles the responsibilities that come under HR like hiring, payroll, employee benefits and compensations, and employment taxes. Though a PEO proves to be effective when it comes to handling HR responsibilities in volume, it also has drawbacks, as follows.

  • Employers lose control over existing company policies and have to comply if the PEO wants to change them.
  • Employers might have to pay higher service charges to the PEO in case it shifts the employer to a higher-risk category unexpectedly.
  • A potential risk is that the employer or the company still holds the legal liabilities. Once a complaint is registered in terms of employment, the employer would still be held responsible.

The services of a global EOR company are similar to PEO services, but legalized. If you do not require all the HR functions, opting for an EOR service is a better alternative. Note that if your business chooses to partner with a PEO, you will require legal presence all over the country.

Organizations planning to expand into new territories are better suited with a global EOR which becomes the legal employer on behalf of the organization. Instead of associating with a PEO, a co-employment partner, organizations have more to gain by utilizing the services of a EOR solution. The EOR solution safeguards organizations from unexpected policy changes, loss of control, and potential risks as the EOR bears every legal liability for the organization. In addition to these, the EOR handles payroll, tax, and employment law compliances. To know more about Skuad's EOR solution, Contact Skuad today.

Conclusion: What Gives Skuad’s Panama Solutions an Edge?

Are you ready to expand your company’s business operations in Panama? Skuad’s Employer of Record Panama services can make the process fast and easy by handling your Employment requirements in compliance with the local labor laws. If you want to discuss more on how Skuad’s unified employment platform can help with your organization's expansion plans, Book a demo with Skuad today!

EOR in 
best value
Pay monthly at a discounted rate with a 12-month commitment
(billed annually)
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Employ contractors and employees in 160+ countries

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EOR in 
(billed annually)
Pay monthly at a discounted rate with a 12-month commitment
(billed monthly)
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Employ contractors and employees in 160+ countries

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Employ contractors and employees in 160+ countries