Panama (PA)
Panama is one of the most popular expat countries in the Americas in 2026, especially for retirees, remote-income households, investors, entrepreneurs and families who want US-dollar living, strong air connectivity, private healthcare and established expat communities.
Employment Rights
Sick leave, dismissal protection and red flags in Panama.
Panama employment law is governed by the Código de Trabajo (Labour Code, Law 44 of 1995 as amended). All employees — including foreign workers — are entitled to statutory protections. Employers must register employees with the Caja de Seguro Social (CSS). Key features: mandatory 13th-month salary (décimo tercer mes), 30-day annual leave, sector-specific minimum wages, and the 5% labour risk premium. Foreign workers require a work permit — Panama limits foreign workers to 10% of the workforce per company (15% for qualified/technical positions). The Ministerio de Trabajo y Desarrollo Laboral (MITRADEL) handles labour complaints. The minimum wage is sector-specific and region-specific, effective January 16, 2026 (Executive Decree No. 13/2025): ranging from $1.64/hour (agriculture/small company, Region 2) to $5.01/hour (international flight attendants); commerce large companies Region 1: $3.02/hour; construction Region 1: $3.51/hour.
Sick leave
Rules: Employees must notify employer on day 1 and present a medical certificate from a CSS-affiliated doctor or registered physician. First 3 days: employer pays 100% of salary. From day 4: CSS pays 70% of the contribution base salary (salario base de cotización) for up to 26 weeks per illness episode. Employee must have contributed to CSS for the required period. Employer is not required to top up CSS benefit unless the contract provides for it.
Doctor note: Day 1 — notify employer on day one of absence. Medical certificate from a CSS clinic or registered physician required from day 1. A CSS incapacity certificate is required for the CSS subsidy from day 4.
Employer pay: Days 1–3: 100% of salary paid by employer. From day 4: CSS pays 70% of contribution base salary for up to 26 weeks. Many collective agreements require employer to top up to 100% during the CSS benefit period.
Long-term: After 26 weeks: CSS disability assessment (pensión de invalidez) if worker is found permanently incapacitated. CSS invalidity pension: variable percentage of reference salary based on contribution history. Work injury/occupational disease covered under CSS Riesgos Profesionales at 100% wages during treatment.
Dismissal protection
Law: Labour Code Art. 210–213: employer must have "justified cause" (causa justificada) for dismissal to avoid severance liability. Unjustified dismissal entitles the worker to: 3.4 weeks salary per year of service (Prima de Antigüedad — seniority premium). Additional indemnisation of 1 month salary for each year of service is payable in certain cases. Protected categories: pregnant women (cannot be dismissed from notification to end of maternity leave without MITRADEL authorisation); trade union representatives. MITRADEL conciliation is mandatory before labour court proceedings.
Deadline to sue: Unjustified dismissal: 60 working days from the dismissal date to file a claim at MITRADEL or the Labour Court (Juzgado de Trabajo). For compensation-only claims (without reinstatement): 1 year from the dismissal date. Bring: employment contract, payslips, CSS registration evidence, and dismissal notice. Conciliation at MITRADEL is the first step.
Probation
Probation period (período de prueba): maximum 3 months under the Labour Code. During probation, employer may terminate without cause and without severance obligation (CSS contributions must still be made). After 3 months, full labour protections apply. Employer must issue a written notice of non-confirmation at the end of probation if not retaining the employee — silence is deemed confirmation.
Notice periods
Employee resignation: 30 days notice (contract terms may specify more). Employer-initiated dismissal: 30 days notice OR pay in lieu. No graduated statutory notice by tenure — the Labour Code specifies severance (prima de antigüedad) rather than notice scaling. Summary dismissal for serious cause (theft, assault, abandonment after 3 working days): no notice required.
Working time
Max hours: 8 hours/day, 48 hours/week for day shift. Night shift (18:00–06:00): maximum 7 hours/day, 42 hours/week. Mixed shift: 7.5 hours/day, 45 hours/week. Mandatory rest: 30 minutes per 6-hour shift. Maximum overtime: 3 hours/day, not more than 9 hours/week.
Min rest: Minimum 8 hours between shifts. Weekly rest: 1 full day off per week (Sunday is standard unless an alternative is agreed). Mandatory 19 public holidays (Panama has one of the highest numbers in Latin America). Work on public holidays: triple pay (200% premium).
Overtime: Daytime overtime: 125% premium. Night overtime: 150% premium. Overtime on rest days/Sundays: 150% premium. Overtime on public holidays: 200% premium (total = triple normal rate). Maximum 3 hours/day overtime, maximum 9 hours/week. Systematic overtime beyond legal limits is a MITRADEL violation.
Vacation
30 calendar days paid annual leave after 11 months of service (one of the most generous statutory entitlements in the Americas — 15 working days for the first year under some calculations; most authoritative sources confirm 30 calendar days). Leave accrues at a rate of approximately 2.5 days per month from month 1. Thirteenth month salary (décimo tercer mes): 1 month's salary paid in three installments — April 15, August 15, and December 15. Public holidays: 19 mandatory paid days. Unused leave at termination must be paid out.
Anti-discrimination
Labour Code Art. 10 and the Constitution of Panama prohibit employment discrimination on grounds of race, ethnicity, sex, religion, political opinion, nationality, social origin, disability, or marital status. Special protections for pregnant women (inamovilidad laboral). File discrimination complaints with MITRADEL (mitradel.gob.pa) or the Defensoría del Pueblo. No fixed statutory deadline for anti-discrimination claims — act within a reasonable period. Panama City has a growing awareness of workplace discrimination rights but enforcement capacity is limited.
Contract red flags
- !Employer asks you to start local work on tourist/visitor status without a work permit — Panama limits foreign workers to 10% per company (15% for technical/qualified roles)
- !Salary below the sector-specific minimum wage (effective January 16, 2026 per Decree 13/2025): commerce large company Region 1 $3.02/hour; construction Region 1 $3.51/hour; domestic workers $350/month (Region 1); always verify your specific sector and region
- !Salary split between payroll and cash or offshore payments with no CSS and DGI documentation
- !No CSS registration — employer must register workers; you should receive a CSS card (tarjeta de afiliación)
- !Contract labels you as independent contractor (honorarios) when the role has all the hallmarks of employment (fixed schedule, one employer, employer tools, exclusivity)
- !Décimo tercer mes, vacation pay, or overtime waived in the contract — minimum statutory rights are non-waivable under the Labour Code
- !Employer holds your passport or immigration documents — illegal
- !Non-compete clause without scope limitation, geographic restriction, or proportional compensation — Panamanian courts disfavour broad non-competes
- !Probation period stated as more than 3 months — the legal maximum under the Labour Code
- !Settlement document (finiquito) presented without full calculation of prima de antigüedad, vacation, and décimo tercer mes outstanding
Employment Rights
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