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Employment Terms and Conditions

Panama - Employment Terms and Conditions


The working week in Panama is Monday to Friday for most workers. The working day generally begins at 8 am and breaks at noon for lunch and restarts at 2pm, finishing at 5 or 6 pm. Those who work in the retail sector will be expected to work on Saturdays, usually on a rota and retail hours are generally 9 am to 6 pm. Workers are permitted to work a maximum of 8 hours each day and a maximum of 48 hours each week.

There are 11 bank holidays each year. These days include the Christmas and New Year’s holidays, Easter, Labor Day, Independence Days and Panama City day. Workers are not necessarily given any more leave than this although most employers will offer more leave than this.

The Labour Code has been established to set out the rights of foreign nationals working in the country and also applies to Panamanian nationals who are working abroad. All workers are entitled to a formal written contract of employment when they begin a new job. If a written contract is not supplied then any information given verbally to the employee is taken as part of the formal contract.

Trade unions are common in Panama but tend to be used more in blue collar work. The trade unions can work with the employee and employer to iron out disputes and negotiate salaries. It is not compulsory to join a union and if you do it is considered to be a fairly normal thing to do.

Panama has a minimum wage structure, which is regularly reviewed. There is no tier system with different aged workers earning different amounts. The minimum wage applies to all workers. If you should fall ill or be injured than you are entitled to 18 days paid leave. The employer is not able to recover the cost of this from the government.

There is a compulsory maternity leave system which begins 6 weeks before the expected due date. A minimum of 14 weeks should be taken. If the birth is later than the due date the new mother can take paid leave for 8 weeks after the birth. An employee who is on maternity leave cannot have their contract altered or be penalized in any way. For the first year back after maternity leave a worker cannot be sacked without very good cause. There are currently no arrangements for paternity leave or rights for those who are adopting or fostering children.

Workers who have been in their job for a period of two years or more can only be dismissed with a very good reason. Those who move to a different section of the same company will be considered to have been in continuous employment. Temporary workers are not entitled to the same rights as those with permanent jobs. Most temporary jobs last for between three and five months. The contract is specified for that period of time and will detail the rights as agreed between the worker and the employer or agency.

Employees are entitled to compensation if their employment is terminated and the reason does not matter. Workers will receive a week’s wages for each complete year of work. Those who have worked for less than a year will be compensated on a pro rata basis. If a worker has been in the job for less than 2 years they are entitled to a month’s wages as a notice period. Those who have been employed for more than 2 years will receive a payment of 6.54% of all monies earned as a compensation payment. An employee must be informed in writing of the reasons for termination of employment.

Those who are being made redundant are entitled to the same rights as those who are being terminated for an ‘unjustified cause’. Most employers will establish a consent agreement with employees prior to the redundancy taking place.

The employer and the employee will make contributions to the social security fund for the employee’s state pension. These contributions are not taxed and when the employee can claim the pension they will find it averages between 60 and 70% of their monthly salary. There are not normally private pensions offered by employers.


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