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Leave Policy in Panama

Updated on:
16 Jan, 2024
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The leave policy in Panama is regulated under the Labor Code and several employment and work provisions, including all leave entitlements and benefits. According to Labor Code, annual leave is 30 days per year. Only an employee who has worked for 11 months for one employer is eligible for a paid annual leave.

The annual leave in Panama is calculated by counting all weekly rest days, national holidays, and sick leave days. This offers a break from a more conventional approach found in most jurisdictions where public holidays, sick days, and weekly rest days are separate from annual leave and are paid accordingly. The annual leave is granted for one day for every 11 days worked.

Under Panama's labor code, annual leave is mandatory, even if employment contracts do not state so explicitly.

Granting more annual leave days is considered by the employer on a case-by-case basis and is subject to contractual agreements, collective bargaining, or employer-employee negotiation. In certain cases, an employee and an employer may agree to suspend an employment contract in which case the employee is still entitled to all due benefits before the suspension of the employment contract commences. Then again, if an employment contract suspension period exceeds 15 days in 11 months, employers may — using contractual powers — deduct payments for all days not worked in excess.

Public holidays

The number of public holidays in Panama is 11 and includes 

Date Holiday
January 1st New Year’s Day
January 9th Martyr's Day
February 18th Carnival/Shrove Tuesday
April 2nd Good Friday
May 1st Labor Day
November 3rd Independence Day
November 5th Colon Day
November 10th Shout in Villa de los Santos
November 28th Independence from Spain
December 8th Mother Day
December 26th Christmas Day (observed, in lieu of December 25th, which falls on Sunday)

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Types of leave in Panama

As a general rule, all payments made to workers — including all benefits for different types of leaves — are regulated under Article 149 of the Labor Code. In Panama, benefits — and minimum salaries or wages — are calculated hourly for private companies and monthly for public companies.

The leaves and benefits in Panama are not extensive and open up more room for employers to get creative and craft more generous benefits packages to attract skilled workers.

That said, Panama has basic, statutory benefits that workers are entitled to, such as:

Sick leave

Sick leave in Panama is included in annual leave, as mentioned above. In some cases, however, some employees are entitled to Temporary Disability benefits, which apply according to Law No. 51 of December 2005.

The cases or situations in which an employee is eligible for Temporary Disability benefits at full regular salary or wage rate include being injured or having contracted a disease at or outside work. The maximum duration each employee is entitled to be absent from work and receive benefits is 12 months, extendable to another six months if the extension is shown to lead to medical discharge for healing. If a Temporary Disability leave is interrupted by an employment activity for over six months, a disabled employee is entitled to apply for a new Temporary Disability leave.

Moreover, according to Article 200 of the Labor Code, all employees are entitled to a disability leave once they enter into an employment arrangement. The disability leave is granted for up to 12 hours for every 26 days worked or 144 hours per year and paid at the full or partial salary or wage rate per month or week, depending on each employee's case. The disability leave can be accrued for up to two consecutive years and must be used in the third consecutive year in part or fully.

The sick leave policy in Panama may be overly complicated for employers unfamiliar with doing business in Panama. Granting sick leave in Panama is, as just mentioned, considered on a case-by-case basis and is subject to a wide range of considerations, including employee contribution, degree and duration of disability, whether sick leave can be extended or not, an employee's accrued leaves, and more.

Maternity leave

Maternity leave in Panama is regulated under the Social Security Fund ("Caja de Seguro Social") where eligible pregnant female workers are entitled to up to 14 weeks of paid leave (six of which are before childbirth and eight weeks afterward). To be eligible, a pregnant female worker needs to have contributed to the Social Security Fund at least nine months in the last 12 months before their seventh month of pregnancy.

The breastfeeding break in Panama is regulated under Article 114 of the Labor Code whereby nursing mothers are entitled to fifteen minutes every three hours or half an hour twice a day of any given working day as a nursing break. The nursing breaks are counted as hours worked.

If you're uninitiated into labor practices in Panama, however, you may be at risk of violating one or more laws or regulations when you develop your maternity benefits. At Skuad, we are experts in benefits, including maternity benefits. Using our in-house legal expertise and extensive labor market knowledge, you know that your employees are receiving the best benefits package.

Paternity leave

Paternity leave in Panama is regulated under Law No. 238 of 2021. This law expands on the maternity leave benefits that pregnant female workers are entitled to. To be eligible for paternity leave as per Law No. 238, a father of a pregnant woman must:

  • Be married to an unemployed woman and as such is eligible for up to one year of paternity leave after delivery
  • Have a wife, employed or not, who dies during childbirth and as such is eligible for up to one year of paternity leave after delivery

For Panama's credit, paternity leave does not count as any statutory leave and can be applied and compensated for separately.

Unexpected family events, such as a death of a spouse or childbirth, could disrupt professional and personal lives. In Panama, paternity and maternity benefits may leave employees wondering how to "reset" after an unexpected family event. And depending on ad hoc arrangements or an employer's generosity may cause more harm than good. Instead, by having a contingency plan for employees in case an unexpected family event arises, you ensure that business operations can sustain during abrupt staff changes and that your employees can take the necessary leave needed. This way, your employees can return to work more productive after an unexpected family event.

Stay compliant to leave policy in Panama with Skuad

At Skuad, we are experts at crafting benefits packages and more. Understanding how the labor market works in Panama, we are best positioned to provide you with world-class legal advice on paternity and maternity benefits.

Talk to our experts and let us guide you through your benefits package development in Panama and beyond.  

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