Located in Central America, Panama was originally home to indigenous tribes at the time of the Spanish conquest in the 16th century. Following independence from Spain, it joined an alliance eventually known as the Republic of Colombia. However, it subsequently seceded from Colombia, paving the way for the Panama Canal to be built by the US Army Corps of Engineers between 1904 and 1914. Income from canal tolls continues to represent a significant part of Panama’s GDP.
Panama has distinct geography with its central line of mountains and hills forming the continental divide. Its wildlife is considered the most diverse in the region and is home to many South American species such as several varieties of monkeys like white-faced capuchins and squirrel monkeys, as well as Geoffroy’s tamarin which are unique to its land. Its jungles contain big cats such as jaguars and pumas while its coral reefs sport a multitude of tropical fish.
The majority of Panamanians speak Spanish as their first language while native languages such as Ngäbere are spoken widely in the tribal territories.
According to Panama's Labor Code, permanent work is one that constitutes an occupation of permanent necessity in the company or establishment and that has as its object normal and uniform activities of the employer, and corresponds to the contract for an indefinite period. Contracts for a definite term cannot be used to fill positions of a permanent nature.
A fixed-term contract is considered to be made for an indefinite period in the following cases:
If the term of a contract for a definite time expires but the employee continues to provide services.
If a contract is concluded to execute specific work and the worker continues performing the same tasks after the work is completed.
Seasonal work is work that is executed at a certain time every year, forms part of the normal and uniform routine of the employer's activities, and constitutes a form of a contract for an indefinite period. Seasonal workers are recognized as permanent workers when 2 full seasons have been worked consecutively.
In Panama, it is not mandatory to conclude all employment contracts in writing. Contracts about the following subjects do not need to be concluded in writing:
Agricultural or livestock work
Domestic service
Accidental or occasional work that does not exceed 3 months' duration
Specific work of which the value does not exceed PAB 200 (Panamanian balboas)
Services and work contracted in villages with no more than 1500 inhabitants, except in the case of work with a value greater than PAB 5,000 or by employers who permanently employ more than 10 workers.
Contracts concluded in writing must be signed in three copies: one for the employer, one for the employee, and one to be submitted to the General Directorate of Labor. The written contracts must contain details on identity of each party, job nature, duration of contract, salary, signature of both parties, etc.
Panama's Labor Code allows the use of temporary workers. Temporary work agencies must receive prior authorization from the Ministry of Labor and Social Welfare, which allows the operation of companies dedicated to providing workers to other employers that need to use them temporarily, for periods not exceeding 2 months.
Temporary work agencies and employers that utilize their workers must obey the following rules:
The minimum wage that workers must receive will be the highest set in their respective districts.
The companies that use the services of the workers will be jointly and severally responsible, with the employing company, for wages, benefits, and compensation corresponding to the period in which, on each occasion, they use their services.
The temporary worker's acts are considered the employer's own acts for all legal purposes.
The Ministry of Labor and Social Welfare is empowered to regulate this provision and ensure that these companies do not circumvent the provisions regarding worker placement. Contracts that require an agency to provide all employees to a user company are prohibited.
According to Panama's Labor Code, employment contracts can include a probationary period of up to 3 months. A probationary period can only be included when the job requires certain specialized skills. The probationary period must be expressly stated in the written employment contract.
During this period, either of the parties may terminate the employment relationship without any liability. The probationary period is invalid if the worker is rehired for a role they previously held within the same company.
In Panama, the labor law provides that the standard workweek is 48 hours, and the standard working day is 8 hours. Employees who work longer hours are eligible for overtime. Working hours for persons below 16 years of age cannot exceed 6 hours per day. Working hours for persons under 18 years of age cannot exceed 7 hours per day.
The maximum length of a night shift is 7 hours, and the corresponding maximum working week for night workers is 42 hours.
The maximum duration of the mixed day and night shift is 7.5 hours, and the respective maximum working week is 45 hours.
Night shifts of 7-hour and 7.5-hour mixed day/night shifts are to be remunerated as 8 hours of daytime work to calculate the legal minimum wage or to calculate wages paid in a company with a shift of work in several periods.
Panama's labor law stipulates that employees are entitled to 30 days of annual leave for every 11 continuous months of work, accrued at the rate of 1 day for every 11 days in the employer's service.
Employees are to be paid their average monthly, weekly, or daily salary for each day of annual leave. The sums that the employee must receive must be settled and paid 3 days in advance of the date on which the employee begins their annual leave.
Employees must enjoy their annual leave without interruption. The annual leave period may only be divided into a maximum of 2 equal parts when such division is allowed in a collective bargaining agreement or prior agreement with the employee. The employer must indicate, at least 2 months in advance, and after consultation with the employee, when the employee is to take annual leave.
According to Panama's Labor Code, an employee accrues 12 hours of sick leave for every 26 shifts worked, up to 144 hours (18 working days) per year. Employees are entitled to receive their normal wages from their employer while on sick leave. Employees may accumulate sick leave over 2 years, but then must use the leave, in whole or in part, during the third year of service. Employees must provide medical certificates to avail themselves of this leave.
When an employee has exhausted all the sick leave to which they are entitled, they may take additional leave and deduct those days from their annual leave.
Effective October 11, 2025, employers must submit a formal request to the Ministry of Health to verify the authenticity of Medical Certificates of Incapacity. Medical certificates must be:
Issued by a duly licensed physician
Pre-numbered and registered with the General Health Office
Contain the physician's name, address, and phone number
Contain the name of the public institution or private company issuing the certificate
Contain the exact date and time of the start and end of the incapacity
Employers may take disciplinary action against employees who submit false medical certificates, including dismissal for just cause, once the invalidity is confirmed by the relevant Regional Health Authority.
Panama's labor law provides a total of 14 weeks of paid maternity leave: 6 weeks before the delivery and 8 weeks following delivery. In no case may the total leave period be less than 14 weeks. If the due date is delayed, the prenatal period of leave is extended so the employee has the right to 8 weeks of leave after birth.
To qualify to receive state maternity benefits, an employee must have at least 9 months of contributions before the seventh month of pregnancy. Employees who qualify for the state maternity benefit are entitled to 100% of their average weekly earnings over the previous 9 months for the 14 weeks of maternity leave. If an employee does not qualify for state maternity benefits, the employer must pay the employee her regular wages during maternity leave.
Employees in Panama are entitled to 3 working days of paid paternity leave. Employees must give their employer at least 1 week of notice of their partner's delivery date and provide a birth certificate certifying they are the child's father. This 3-day paid leave qualifies as service time to the employer.
According to Panama's Labor Code, the following categories of employees must receive a notice of 30 days or payment of 30 days' wages in lieu of notice before dismissal:
Employees who have less than 2 years of continuous service with the employer
Domestic workers
Permanent or plant workers, those working in small businesses, or in the agricultural, livestock, agro-industrial, or manufacturing sectors
Employees in ships dedicated to international service
Apprentices
Establishment workers in retail merchandise sales and companies with five or fewer employees.
Employees who have worked for more than 2 years generally can only be fired for just cause.
According to Panama's Labor Code, employers must provide seniority pay to permanent employees when they are terminated. Seniority pay is calculated at a rate of 1 week's salary for each year worked since the beginning of the employment relationship, irrespective of the reason for termination. In the case of fixed-term contracts, if the employer terminates the contract without just cause before the expiration of the term or the total execution of the work, the employer must pay compensation equal to the wages due for the remaining term of the contract.
If the employee is dismissed unfairly or without prior authorization, they are entitled to the following compensation from the Severance Fund (Fondo de Cesantía):
For less than 1 year of service, 1 week's salary for every 3 months of work, provided it cannot be less than 1 week's salary
For 1 to 2 years of service, 1 week's pay for every 2 months of work
For 2 to 5 years of service, 3 months of salary
For 5 to 10 years of service, 4 months of salary
For 10 to 15 years of service, 5 months of salary
For 15 to 20 years of service, 6 months of salary
For more than 20 years of service, 7 months of salary
