Employ Candidates Compliantly in Panama

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  1. Overview: Panama
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Work permit for hiring expats via PEO
  5. Expand without a company set up
  6. Contractor vs. employee: which is better?
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Global HR Compliance in Panama

If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Panama Guide below will help you understand the nuances of labor legislation in the country.

Companies hire international workforce for various reasons but in most cases they are:

  • entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
  • hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.

Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.

If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of Panama, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in Panama and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.

We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Panama.

See Hiring and Firing Workforce in Panama Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Panama or would like to get more details.

Hiring and Firing Workforce in Panama Guide

# Employment contracts
The labour contract shall be in writing and shall be signed upon commencement of an employment relationship. In the absence of a written Labour Contract, the facts or circumstances alleged by the employee that should be evidenced in said contract shall be presumed as true (except where there is proof to the contrary).

The following works areas are exempted from the previous requirements:

  • Farming
  • Domestic Service
  • Casual work of work of Short Duration
  • Specific work of low value
  • Work of low value in unpopulated areas.

The Labour Contract may be entered into for a definite period, for a specific work or for indefinite period. Likewise, in the Labour Contract, the parties may establish different work hours, provided that the hour limits established in the Labour Code are not exceeded.

# Minimum (Statutory) Employment Rules and Regulations in Panama

# Hours of work:
The Labour Code divides the day into two long working periods: daytime period, that goes from 6:00 a.m. to 6:00 p.m. and night period, that goes from 6:00 p.m. to 6:00 a.m.

In turn, the Labour Code provides three kinds of working hours, namely: daytime work hours that are fulfilled entirely during the daytime period and its maximum duration is eight hours and 48 hours per work week; mixed work hours which include working hours in both periods, but no more than three hours during the night period and its maximum duration is seven hours and thirty minutes and 45 hours per work week; the night work hours which include more than three working hours in the night period and its maximum duration is seven hours and 42 hours per work week.

# Probation period:
When the rendering of the service demands certain special competence or skill, the employer may include in the Labour Contract a probation period of up to three months, where any of the parties may terminate the labour relationship without any liability.

The probation period shall not be valid if it relates to a position that an employee has previously held in the same company.

# Annual leave:
The employee has the right to have thirty days paid vacation for every eleven continuous months of work.
During a day, the employee shall have a rest period of a least half an hour and not more than two hours.

# Parental leave:
There is no labour privilege for the male employees; on the other hand, the pregnant employees are protected against the direct action of dismissal of their employers during the pregnancy, during the maternity leave and until 1 year starting from the date in which the employee returns to work after childbirth.

During all these periods, the employees can only be dismissed with justified cause and by means of a prior judicial authorization.

# Sick leave:
From the beginning of the labour relationship, the employee shall start to accrue a sick leave fund at the ratio of twelve hours for each twenty-six worked days or eighteen days per year.

# Overtime:
The law states that employers cannot ask their employees to work overtime, except in specific cases like agricultural workers, export companies, some works performed in the Special Economic Area Panama Pacific, etc.
Otherwise, the law allows up to 3 hours per day and a maximum of 9 hours per week of overtime, with the agreement of the employee.

# State minimum salary:
The Panama minimum wage rate ranges from 1.22 to 2.36 Panamanian balboas per hour, depending on the region and sector. The agricultural sector has the lowest minimum and the constuction sector has the highest. Panama’s minimum wage was last changed in January 2012.

# Employee dismissal:
The Labour Code contemplates formal requirements and exact procedures for the termination of the Labour Contract.

The employer may dismiss instantly and unjustifiably all those employees with less than two years of service, with the only obligation of paying them the compensation, labour benefits, and one month of salary in concept of notice.
Being employees with more than two years of service, the employer may dismiss all those employees who incur in the justified causes of dismissal strictly classified in the Labour Code. The dismissal must be notified in writing, clearly describing the conditions of mode, time and place related to the supposedly fault committed by the employee.

The resignation of the employee is valid provided it is in writing and duly confirmed (sealed) before the Ministry of Labour and Labour Development. The employee is under the obligation to notify the employer of his decision of waiving the work post, with fifteen days in advance.

Being employees with less than two years of continued services, the employer may announce to the employee his decision of dismissing him with thirty days in advance and thus avoiding to pay the notice (one month of salary).

Acumen International can help you fast-track your possibilities of entering and expanding your business in Panama by providing you with our Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any need to set up a legal entity first or afterwards.

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