The social security system in Panama was created to protect permanent workers and covers them for sickness, maternity, disability and old age. The system is run by the Ministry of Social Development and also provides services to those in poverty-stricken areas.

The social insurance system covers employees and employers in both private and public sector workers as well as those in domestic services. Those who are self employed can make voluntary contributions. Expats are covered under this system provided they have been working in Panama for a company based there. Those who work for international companies on a contract issued in another country are not eligible.

Under the social insurance system the worker contributes 6.75% of their gross pay provided they earn a minimum of 100 balboas or if they are on the pension of 175 balboas which is paid out by the social security fund. Those who are self employed can contribute 9.5% of their declared earnings and the minimum amount of earnings must be 300 balboas. The employer will contribute 2.75% of the worker’s earnings. The government contributes 1.04% of the wage as well as adding the proceeds of a number of taxes to the social insurance fund.

Those who wish to qualify for the old age pension must be a minimum age of 62 for men and 57 for women, each with a minimum number of 180 months of contributions to the social security fund. In order to draw the pension the worker must be retired and this benefit cannot be claimed early, although if the worker wishes to continue working they can do so and defer the pension. Those who are eligible for this payment but who wish to live outside Panama can still do so. A settlement is payable for those who have not made the right number of contributions.

The old age pension is a percentage of average earnings, best on the 7 years which were best paid. It is a total of 60% of the earnings and an extra 1.25% for each year of contributions over and above the minimum 180 months. For those who choose to work beyond the retirement age there is also an additional 2% for each complete year worked beyond the retirement age. A minimum of 175 balboas is paid each month and supplements can be paid for a spouse and dependent children. The maximum that can be paid is 1500 balboas. The settlement for those who have not made the minimum number of contributions consists of one month’s minimum pension for each period of 6 months of contributions.

A disability pension can be claimed by those who have lost a minimum of 2/3 of their earnings through injury. In order to claim a person must have a minimum of 3 years of contributions and this pension can be paid for up to 2 years, although this can be extended. The degree of disability can be assessed at any time by the social security fund but the Medical Qualification Commission. This can also be paid to a Panamanian worker in another country and it should be noted that this does not automatically become the old age pension when the worker retires. A grant is payable if the worker does not have the minimum number of contributions, but they must have at least 1 year of contributions for the grant.

The disability pension is paid at 60% of the average earnings for the best paid 7 years of the worker’s career. For those who have paid more than 180 months of contributions there is an extra 1.25% for each complete year above the 180 months. If the contributions total less than 7 years the 60% is an average of earnings for the year. Supplements can be paid for a spouse and any dependent children. The minimum payable is 175 balboas. The disability grant is 1 month’s minimum pension for each 6 month period of contributions.

The social insurance system also covers sickness and maternity benefits. The worker contributes 0.5% of earnings to the fund and the employer will donate 8%. Self employed workers can donate 8.5% if they wish to. Those who need to claim sickness benefits must have made contributions for at least six months out of the previous 9, while those who wish to claim maternity benefits must be certified by a doctor as pregnant and have made 4 months of contributions out of the previous 8 months prior to the claim.

Sickness benefit amounts to 70% of the average earnings from the previous 2 months prior to the claim. In order to claim the worker must wait 3 days after falling ill and the benefit can be paid for up to 52 months, although can be extended for up to 26 weeks or more after assessment by the Social Security Fund. There is no minimum or maximum payment for this benefit.

Maternity benefit amounts to 100% of the average earnings in the previous 9 months and can be paid for 6 weeks before the predicted due date and for up to 8 weeks after. There is no long term provision for paid maternity or paternity leave.

Medical benefits that are provided by the fund or the ministry of health include general medical care, dental care, maternity care and hospitalisation. Workers who need to seek medical care privately may claim the costs back from the funds. Medical benefits extend to dependents too which includes children and dependent parents.

There are no statutory benefits for those who become unemployed. All employees who lose their jobs should receive a severance payment when they leave their work.

Useful Resources

Ministerio de Desarrollo Social (Ministry of Social Development)
http://www.mides.gob.pa