How to Comply with Labor Legislation When Creating a Company in Panama

The Labor Code of Panama is the main legal framework that regulates labor relations in the country. It establishes minimum conditions for work, the protection of employee rights and the obligations of employers. To comply with these regulations, entrepreneurs must be clear about the following key areas:

• Working days: The standard workday is 8 hours a day or 48 hours a week. However, there are exceptions depending on the type of work.
• Annual vacation: Workers are entitled to 30 days of paid vacation after a full year of service.
• Dismissal considerations: The legislation strictly regulates dismissals and establishes compensation, depending on the time worked and the cause of the termination.

Having adequate legal advice can make it easier to navigate these regulations. At Limitless Legal, we offer comprehensive employment support to comply with every aspect of this law.

Hiring staff in Panama requires employers to respect work quotas and to process appropriate permits. According to the law:

• Fee for foreigners: Companies are required to ensure that at least 90% of their staff is Panamanian, although there are exceptions in specialized sectors.
• Work Permits: Foreigners need a work permit issued by the Ministry of Labor and Labor Development, in addition to a residence permit.

When hiring foreigners, we recommend having prepared documentation and working with a firm such as Limitless Legal to ensure that processes are handled properly.

If you are hiring employees in Panama, here are the main steps you should take:

1. Tax incorporation: Make sure that your company is duly registered with the Directorate General for Revenue (DGI).
2. Registration with the Social Security Fund: Every employee must be affiliated with the Social Security Fund (CSS), and employers must cover the corresponding contributions.
3. Employment contracts: Make sure that contracts include all the elements required by law, such as salary, duration, and benefits. You can choose contracts for a definite period, an indefinite period or for a specific work.

These procedures, although essential, can be complex. Don't hesitate to seek professional assistance to avoid errors that could slow down your operations.

In Panama, the minimum wage varies by geographic region and economic sector. In addition to meeting the minimum wage required by law, employers must understand:

• What is considered salary: It includes cash payments, commissions, bonuses, and other benefits granted to the worker.
• Extra payments: Like the thirteenth month, which must be paid in three annual installments.
• Additional benefits: Some employers choose to offer insurance, transportation or food vouchers as additional incentives.

Both compliance with these wage regulations and the proper calculation of benefits are key to avoiding legal conflicts and maintaining job stability in your company.

Although we have covered the essential aspects, it is important to highlight other relevant points:

• Trial period: The law allows for a trial period of up to 3 months, during which the contract can be terminated without compensation.
• Internal regulations: Every company with more than 10 employees must implement internal regulations approved by the Ministry of Labor.
• Registration with local authorities: Some provinces require additional local permits to operate businesses.

Establishing clear and fair working relationships from the start will ensure your company's long-term success.