Panamanian labor generalities for payroll management

We have tried to cover the most relevant issues that constitute the day-to-day labor operation in the national territory.

Employment benefits

  • Holidays
  • Thirteenth month
  • Seniority premium
  • Compensation.


In the labor aspect, the employer must recognize the worker:

  • Thirty (30) vacation days for every eleven (11) months worked. During this time, the worker is not supposed to work. If the worker works his vacation (by agreement of both parties, employer, and worker), he has the right to receive in addition to the payment of his vacation the amount of the time worked. In the latter case, the worker would receive two (2) times his salary. Both carry the corresponding legal discounts.
  • Holidays are computed based on the worker’s monthly salary (if this is fixed and does not fluctuate), or based on the income the worker has received during the eleven months before the date on which he must enjoy his holidays (this is when the salary is variable, or rent is produced for overtime, commissions or any other type of income that the worker receives and that is considered as salary

Thirteenth Month

  • A special bonus called Thirteenth Month. This bonus, which constitutes one month’s salary, is paid in three (3) games: one third on April 15, one third on August 15, and another third on December 15, of each year. Like vacations, each item is paid by taking the worker’s base salary or the worker’s income during the four-month period that comprises each pay period. The semesters are: from April 16 to August 15, from August 16 to December 15 and from December 16 to April 15. To calculate the thirteenth proportional month, the average time worked from the last paid item to the end date of the relationship is computed.

Seniority Premium

At the end of an indefinite employment relationship, the worker is entitled to receive compensation called Seniority Premium, which is equivalent to one week of salary for each year worked or proportional. For the years completed, this compensation is calculated based on the salary earned by the worker during the last five (5) years, or if he has less time, taking into account the years worked. The proportional part is calculated, taking into account the worker’s income and multiplying it by 1,923% of the total of that proportional income.


The compensation for permanent contracts is calculated based on a scale established in article 225 of the Labor Code.

“Article 225. Section C. For work relationships that start from the effective date of this law, the compensation will be equivalent to 3.4 weeks of salary for each year worked in the first ten years; and each year after ten years, he will be compensated with the equivalent of one week of salary for each year. These indemnities cannot be combined with any other scale ”.