Employer of Record in Panama

Employment Laws and Regulations in Panama

Employment Contracts

The Código de Trabajo of Panama, in force since 1971 and last substantially amended in 1995, governs every employment relationship in the country and is administered by the Ministerio de Trabajo y Desarrollo Laboral. Indefinite-term contracts are the default for ongoing roles, while fixed-term contracts (contratos a plazo fijo) may only be used when the nature of the work objectively justifies a time limit. Fixed-term contracts are limited to a maximum of one year and are renewable only when the underlying conditions persist.

Written contracts in Spanish are mandatory and must specify the parties, job title, workplace, salary, working hours, payment frequency, and start date. Verbal agreements remain technically valid but expose employers to evidentiary risk in any dispute with MITRADEL or before the labour tribunal. The EOR drafts and signs contracts on your behalf, ensuring compliance with Articles 15–35 of the Código de Trabajo.

Working Hours and Overtime

The standard workweek in Panama is 48 hours, arranged as 8 hours per day over 6 days, under Article 225 of the Código de Trabajo. Night shifts (7 pm to 7 am) are capped at 7 hours per day and 42 hours per week. The law also provides for a mixed shift (jornada mixta) of up to 7.5 hours per day and 45 hours per week. Employers may distribute the daytime workweek over 5 days as long as the daily limit of 9.6 hours is not exceeded. Every employee is entitled to at least 36 consecutive rest hours per week, normally taken from Saturday afternoon through Monday morning.

Overtime above the standard 48-hour week is paid at a premium rate set by the labour code. Work performed during daytime hours earns a 25% premium; work during night hours or extensions of mixed shifts earns 50%; and work on a weekly rest day earns 50%. Work on a legal holiday or public holiday earns a 100% premium (double pay). These rates apply to hourly wages and are calculated on top of the ordinary rate, not as a replacement. No employee may work more than 12 hours in a single day. Executives, managers, and employees in positions of trust as defined in the labour code are excluded from the overtime regime.

No employee may work more than 4 hours of overtime per day, and the combined ordinary plus overtime workday may never exceed 12 hours. Overtime is calculated and paid on a monthly basis and is included in the base for 13th-month and severance calculations. The CSS and DGI may audit payroll records to ensure compliance with these limits, and violations carry penalties up to 5% of payroll.

Minimum Wage

Panama uses a tiered minimum-wage structure that varies by economic activity, region, and employer size. The latest update, Decreto Ejecutivo 13 of December 31, 2025, published in the Gaceta Oficial on January 6, 2026, established 59 different wage rates covering 74 economic activities, effective January 16, 2026. The decree is valid through the 2026–2027 period. Panama is divided into two regions: Region 1 includes Panama City, San Miguelito, Colón, David, Santiago, and Chitré; Region 2 comprises all other districts. Minimum wages range from approximately B/. 400 to B/. 650 per month depending on the activity and region, roughly USD 400–650 at the current exchange rate. For example, unskilled workers in Region 1 may have a minimum of around B/. 490 monthly, while security personnel might be B/. 565 in both regions. The decree reflects a staggered wage increase negotiated by the Comisión Nacional de Salario Mínimo to balance worker and employer interests. For the specific rate applicable to any given role and region, consult the MITRADEL minimum wage consultation system.

Probation Period

Probation periods in Panama may last up to three months for indefinite-term contracts under Article 212 of the Código de Trabajo. During this period, either party may terminate the employment relationship without notice and without paying severance, provided the termination is not discriminatory and respects fundamental rights. After the three-month probation expires, full notice and severance protections apply automatically. Probation must be expressly included in the written employment contract to be enforceable, and the clause must explicitly state the trial period duration and conditions.

Leave Entitlements

Panama’s Código de Trabajo provides a comprehensive set of statutory leave entitlements, covering paid annual vacation, sick leave funded jointly by the employer and CSS, maternity leave, paternity leave, and a small number of additional family-event leaves. These entitlements are non-negotiable minimums; collective bargaining agreements may improve on them, but no contract may offer less.

Annual Leave

Paid annual leave in Panama is 30 calendar days per year under Article 236 of the Código de Trabajo. The right to leave accrues after the worker has completed 11 months of continuous service. The employee may request dates within a 12-month window following the accrual date. Vacation must be paid at the ordinary salary rate (gross monthly salary), and the employer must pay the full vacation amount at least three days before the vacation begins. Any accrued and unused leave must be paid out in cash upon termination. Employees cannot be required to forgo leave in exchange for payment during ongoing employment, except in extraordinary circumstances authorised by MITRADEL.

Sick Leave

Sick leave in Panama is funded jointly by the employer and the CSS. The employer pays 100% of the salary for the first three days of non-occupational illness under Article 239 of the Código de Trabajo. From the fourth day onward, the CSS Seguro de Salud (health branch) pays a daily allowance equal to 70% of the ordinary salary, subject to the CSS ceiling of 10 minimum wages, for up to 26 weeks per illness episode. A medical certificate (incapacidad) issued by a CSS physician or authorized private doctor must be filed with the employer and the CSS within 48 hours. The employee is entitled to 18 days or 36 days of paid sick leave per year, depending on the severity and frequency of illness; for work-related injuries and occupational illnesses, the Seguro de Riesgos Profesionales (occupational risk insurance) handles all medical and wage-loss costs.

Maternity Leave

Maternity leave in Panama is 14 weeks of paid leave under Article 236 of the Código de Trabajo: 6 weeks before the expected delivery date and 8 weeks after birth. If delivery is delayed, the employee is entitled to leave for the 8 weeks following delivery whenever it occurs. Pay during maternity leave is 100% of the ordinary salary, funded by the CSS Seguro de Salud, subject to the CSS salary ceiling. The mother is entitled to job protection during pregnancy and for the six months following return to work; she cannot be dismissed without prior written authorisation from MITRADEL, except for proven serious cause. Nursing mothers are entitled to unpaid time off during work hours to breastfeed for the first six months after birth.

Paternity Leave

Fathers receive 3 days of paid paternity leave following the birth of a child under Article 241 of the Código de Trabajo. The leave is paid by the employer at 100% of the ordinary salary and must be taken within 30 days of birth. The same entitlement applies to legal adoption of a child under age five. Some collective agreements and larger employers extend paternity leave to 5 or 7 days, but the statutory floor is 3 days.

Other Statutory Leave

The Código de Trabajo provides additional paid leave for specific life events:

• Marriage leave: 5 working days for the employee’s own marriage under Article 54.
• Bereavement leave: 3 working days for the death of a spouse, parent, child, or sibling under Article 239.
• Voting leave: Sufficient time off to vote in national, regional, or municipal elections, without loss of pay.
• Union activity leave: Time off for union representatives to participate in required activities, as recognised by MITRADEL.

Under Article 239 of the Código de Trabajo, Panama’s statutory leave framework provides one of the most comprehensive entitlement packages in Latin America. The table below summarises every statutory leave type and its key eligibility conditions.

Statutory Employee Benefits

Panama provides a comprehensive statutory benefit package anchored by the Caja de Seguro Social (CSS) social insurance system, the mandatory décimo tercer mes 13th-month bonus, professional risk insurance, and educational benefits. The CSS covers health care through its public clinic and hospital network, sickness and maternity benefits, and disability, old-age, and survivor pensions under the Seguro de Invalidez, Vejez y Muerte (IVM) branch.

On top of CSS coverage, every employee accrues an educational insurance benefit equal to 1.50% of monthly salary funded by the employer and 1.25% by the employee. Professional risk insurance (Seguro de Riesgos Profesionales) is mandatory and pays for workplace accident treatment, rehabilitation, and indemnities for permanent injuries; the employer contribution rate varies from 0.33% to 6.25% depending on the industry risk category. The 13th-month bonus (décimo tercer mes), equal to the average of monthly salaries earned during each 4-month period (March 31, July 31, and November 30), must be paid in three equal installments on April 15, August 15, and December 15 each year. These benefits are foundational to Panama’s employment model and are non-negotiable; no contract may eliminate or reduce them below the legal floor.

Recent Regulatory Updates (2026)

The most significant 2026 update is the new minimum wage schedule established by Decreto Ejecutivo 13 of December 31, 2025. The decree introduces 59 regional and sectoral rates effective January 16, 2026, with increases ranging from B/. 9.50 to B/. 15.00 per month depending on the economic activity and region. The decree is valid through the 2026–2027 period and affects over 400,000 workers nationwide.

On the payroll side, the CSS employer contribution remains at 13.25% through February 2027 under Law 462 of March 2025, which reformed the CSS’s Organic Law and implemented a phased increase in employer contributions through 2029 to address the social security system’s sustainability. The educational insurance tax remains at 1.50% for employers and 1.25% for employees. The DGI confirmed the 2026 income tax brackets through official decree, maintaining the progressive structure: 0% exemption up to B/. 11,000 annually, 15% on income from B/. 11,000 to B/. 50,000, and 25% above B/. 50,000.

MITRADEL has also continued discussions on labour code modernisation, including potential reforms to remote work recognition, digital nomad status, and severance calculations, though no major amendments have been enacted as of April 2026.

Work Permits and Visas in Panama

Work Permit Requirements

Who Needs a Work Permit

Every foreign national who is not a Panamanian citizen or permanent resident needs immigration authorisation to take up paid employment in Panama. Citizens of most countries can enter visa-free or with a tourist card for 30 to 180 days depending on nationality, but tourist status does not authorise work. To take up an employment contract, the foreign hire needs a residence visa (Visado de Residencia) issued by the Dirección General de Migración, followed by a Carnet de Residencia (residence card) for the ongoing permit. Citizens of Central American countries party to regional free-movement agreements still require a formal work permit and residence status.

Eligibility and Required Documents

Eligibility for a work-based residence permit normally requires confirmation of a job offer from a Panamanian employer, proof of relevant qualifications for the role, a clean criminal record, and evidence that the position cannot easily be filled by a Panamanian citizen. The standard dossier includes a valid passport with at least one year of remaining validity, a signed Panamanian employment contract in Spanish, apostilled diplomas and professional certificates, an apostilled criminal-record extract from the home country, a recent medical certificate (no more than three months old), and proof of payment of application fees. Foreign hires applying under the Marrakesh Agreement or Professional Worker visa may have streamlined document requirements depending on their category.

Processing Time and Validity

The Dirección General de Migración typically issues the residence visa within 6 to 12 weeks of receiving a complete dossier, after which the worker enters Panama and applies for the residence card (Carnet de Residencia) within 30 days. Initial residence permits are issued for one year and renewed annually for the duration of the employment contract, provided the employee maintains CSS enrollment and tax compliance. The worker must also register with the Junta Central Electoral to receive a Cédula de Identidad y Electoral (national ID), which is required to open a Panamanian bank account and enroll with CSS.

Renewal Process

Renewals must be filed at least 30 days before the residence permit expires, with an updated employment contract, renewed medical certificate, and proof of continued enrollment in CSS and tax filings. Foreign employees can usually continue working during the renewal review provided the application was filed on time and with complete documentation. MITRADEL and the immigration authorities coordinate on labour eligibility, and the employer (or EOR) must ensure that the foreign worker’s role still meets the quota and sector requirements for the applicable visa category.

Common Visa Types for Foreign Workers

Foreign workers in Panama may qualify for several visa categories, each with distinct eligibility criteria, processing timelines, and pathways to long-term residence. The Dirección General de Migración administers these programs, and MITRADEL reviews the labour aspects of work permits. An employer of record can sponsor most categories on behalf of the foreign worker, though some categories require the worker to apply through consular channels before arrival.

Several visa types fall outside the employment framework and do not authorise work:

• Tourist card or 180-day visa-free entry: for scoping visits, conferences, and training. Does not authorise paid work.
• Business visa: for client meetings and contract negotiations without taking up payroll. Short-term stays only.
• Student visa: for full-time academic pursuit. Work is restricted to campus-based employment.

How an EOR Handles Work Permits

An employer of record in Panama can sponsor the residence visa directly because it is already registered with the DGI, holds an RUC (tax ID), and has an active CSS employer account. The EOR prepares the employer letter, gathers and submits the corporate documentation, files the application with the Dirección General de Migración, and coordinates the apostille and translation steps. The employee is responsible for providing a valid passport, apostilled diplomas, the home-country police record, and the medical certificate. Depending on the visa category and the completeness of the dossier, processing typically takes 6 to 12 weeks. An EOR also handles renewal coordination and ongoing compliance with CSS and tax obligations to keep the work permit status valid.

Because the residence visa process extends the onboarding timeline significantly, most companies budget for 8 to 12 weeks from initial agreement to first day of work for foreign hires, compared with 1 to 2 weeks for Panamanian nationals. The EOR removes the administrative burden of immigration compliance so that you can focus on the hiring decision and role setup.

Payroll, Taxes, and Social Security in Panama

Employer Contributions

Employers in Panama pay combined statutory contributions of approximately 14.75% of gross salary across the four CSS and education branches. The main employer obligation is the CSS contribution at 13.25% (effective April 1, 2025 through February 2027), plus the educational insurance tax at 1.50%, plus occupational risk insurance which varies from 0.33% to 6.25% depending on industry. Each contribution line has a cap or base expressed in relation to the minimum wage or a fixed ceiling, so high-salary employees may have reduced contributions on some lines.

Remittance of employer contributions is due by the fifth working day of the following month. Late payments incur interest at a daily rate of 1% plus penalties. The EOR handles all CSS filings, occupational risk insurance enrollment, and tax submissions on your behalf.

Employee Contributions

Employees in Panama contribute a combined 10.75% of gross pay to the CSS and educational insurance schemes before income tax is calculated. The 9.75% CSS deduction covers pension, health, and family benefits under the Seguro de Invalidez, Vejez y Muerte, and the Seguro de Salud branches. The 1.25% educational insurance is deducted separately. All deductions are withheld from gross salary at source by the employer and remitted to CSS along with the employer share.

Income Tax

Panama taxes employment income on a territorial basis – only income earned in Panama is subject to tax; foreign-source income is exempt. Income tax is progressive and applies to monthly salary after CSS and educational insurance deductions are subtracted. The DGI administers income tax withholding, and employers must file monthly returns and remit withheld tax by the fifth working day of the following month.

Thresholds and rates are expressed in US dollars because Panama’s legal tender is the US dollar (balboa). The employer withholds income tax monthly and remits it to the DGI by the fifth working day of the following month. No personal exemptions, spouse deductions, or dependent allowances are available under current law; the tax is calculated on gross income minus CSS and education contributions only. A company may request a tax certificate (Certificado de Cumplimiento) from the DGI to prove compliance.

Payroll Cycle

Panama payroll is normally paid monthly, although biweekly cycles are permitted for certain roles and collective agreements. Salaries must be paid in US dollars or Panamanian balboas (pegged 1:1 to USD) by bank transfer or certified cheque; cash payment is not permitted for amounts exceeding B/. 500 per employee. Pay slips (talón de pago) must be issued each payment cycle and must show gross salary, each deduction (CSS, education, income tax), and net pay. CSS contributions and income tax withholdings must be remitted by the fifth working day of the following month through the CSS online portal and the DGI portal, respectively.

13th Month Salary and Bonus Pay

The décimo tercer mes (13th-month bonus) is mandatory in Panama and is not optional. It is regulated under Article 227 of the Código de Trabajo. The 13th-month bonus is calculated as the average of monthly salaries earned during each 4-month accrual period (April 1 through July 31, August 1 through November 30, and December 1 through March 31), paid in three equal installments on April 15, August 15, and December 15 each year. The payment is based on actual ordinary earnings, including overtime, commissions, and other regular pay, but excluding one-off bonuses or termination payments.

The 13th-month bonus is subject to CSS contributions but is exempt from income tax under Código de Trabajo Article 227. Employees who join or leave during the accrual period receive a pro-rata 13th-month bonus proportional to the months actually worked. There is no statutory 14th-month bonus in Panama, although some collective bargaining agreements and profit-sharing arrangements may provide additional annual bonuses at employer discretion. The 13th-month is foundational to Panama’s compensation model and is treated as a legal entitlement, not a discretionary benefit.

Cost of Hiring Through an EOR in Panama

EOR Service Fees

EOR service fees in Panama typically range from $300 to $600 per employee per month, depending on the provider, the seniority of the role, and the breadth of services included. The fee usually covers employment contract drafting and translation, monthly payroll processing in USD or balboas, CSS and income tax filing, statutory benefits administration including the décimo tercer mes calculation and three-installment payout, occupational risk insurance enrolment, termination support, and basic HR administration. Work permit sponsorship for foreign hires is normally billed as a separate one-time fee ranging from $500 to $2,000 depending on visa category and complexity. See the Remote People pricing page for current EOR service fees.

Total Employment Cost Breakdown

For a $1,500 monthly gross salary, the total employer cost in Panama is approximately $2,179 per month, which is roughly 45% above gross once all mandatory contributions and an estimated $450 EOR fee are included. The actual occupational risk insurance rate depends on the industry; office work averages 0.33–1%, while construction or heavy industry can reach 6.25%, raising the total by an additional 1–2 percentage points. The 13th-month bonus adds another full month of payroll cost amortised across the year, so the effective annual employer cost is closer to 55% above the base salary when the 13th-month accrual is included. For more detail on the full benefits package, see the Panama employee benefits guide.

Ready to hire in Panama? Get started with Remote People and we will handle employment contracts, payroll, CSS registration, tax withholding, and full Panama compliance, with no local entity needed.

Benefits of Using an EOR in Panama

An employer of record in Panama delivers speed, compliance, and cost certainty in a single package. Onboarding a Panamanian employee through an EOR typically takes 1 to 2 weeks, compared with the 2 to 4 months required to incorporate a local business entity, obtain a tax ID, register with CSS, contract occupational risk insurance, and set up local banking. The EOR also assumes full compliance liability for the Código de Trabajo, all CSS and tax filings, and work permit sponsorship for foreign hires, removing the most significant operational risks from the foreign employer.

• Speed to market: Onboard your first Panamanian employee in 1–2 weeks without entity setup, legal incorporation, or local banking infrastructure.
• Compliance assurance: The EOR ensures full adherence to the Código de Trabajo, CSS registration, occupational risk insurance, and DGI tax filings, with liability on the EOR if rules are broken.
• Cost efficiency: Pay a flat monthly EOR fee per employee ($300–$600) instead of fixed overhead costs of a Panamanian entity, accounting department, and HR staff.
• Local expertise: The EOR navigates CSS contribution rate increases, occupational risk insurance categories, minimum wage updates by sector and region, and sectoral labour regulations on your behalf.
• Flexibility to scale: Grow or shrink your Panama headcount without the legal and financial cost of unwinding a local entity; add or remove hires month to month.
• Work permit sponsorship: The EOR sponsors residence visas for foreign hires, managing the Dirección General de Migración application and renewal cycles.
• Employee experience: Employees benefit from on-time, compliant payroll, full CSS coverage, the guaranteed décimo tercer mes bonus, statutory leave, and employment contracts that protect their rights under Panamanian law.

The model is also flexible. A company can scale up or down without the legal and financial cost of unwinding an entity, and the same EOR provider can typically support hires in neighbouring markets such as employer of record in Costa Rica or EOR in Colombia. An EOR is particularly valuable in Panama because of the CSS’s ongoing contribution rate increases and the complexity of regional and sectoral minimum wage variations, which change annually and require expert navigation to stay compliant.

Termination and Offboarding in Panama

Notice Periods

Panama’s Código de Trabajo imposes mandatory notice periods for dismissals without just cause. The length of notice depends on the employee’s tenure at the time of dismissal, ranging from 30 days for employees with less than two years of service to longer periods for more senior staff. An employer may pay notice in lieu – that is, pay the full amount of salary due during the notice period in a lump sum – instead of keeping the employee on payroll for the notice duration. Notice periods do not apply during the three-month probation period; an employer may terminate a probationary employee without notice or severance.

Just-cause dismissal (despido por causa) – termination for theft, gross misconduct, repeated absenteeism, or breach of critical contract terms – does not require advance notice or severance. However, the employer must document the cause and notify the employee in writing with specific details. Disputed dismissals may result in claims for unfair termination (despido injustificado), and after two years of service the burden shifts to the employer to prove just cause. Collective dismissals (redundancy) require approval from MITRADEL and trigger heightened notice and severance obligations.

Severance Pay

Severance in Panama is mandatory for terminations without just cause and is calculated under Articles 224 and 225 of the Código de Trabajo. The severance formula is one week of ordinary salary per year of service (or fraction thereof exceeding three months), capped at a maximum of 104 weeks’ salary (approximately 2 years of salary). The severance base is the ordinary monthly salary at the time of dismissal; extraordinary earnings and bonuses are excluded unless they are part of the regular wage structure. The EOR calculates and pays severance when employment ends, and severance is not subject to income tax but is subject to CSS contributions on the portion up to the taxable ceiling.

Calculation Method

The severance formula under Article 224 of the Código de Trabajo is straightforward: one week of ordinary salary for each year of service (or fraction thereof exceeding three months). A week equals 4.33 days of gross ordinary daily salary (one-sixth of the monthly salary). The ordinary salary is calculated using the salary in force at the time of dismissal, excluding overtime, commissions, bonuses, and other extraordinary pay unless those items are permanent features of the compensation structure (paid every month without exception). Worked examples: an employee dismissed after 3 years earns 3 weeks of severance (approximately 1.5 months’ salary); after 5 years, 5 weeks (2.5 months); after 10 years, 10 weeks (approximately 2 months); after 15 years, still 10 weeks (capped), not 15 weeks.

Caps and Exceptions

Severance is capped at a maximum of 104 weeks’ salary, equivalent to two years of ordinary salary. This cap applies regardless of length of service; an employee with 20 years of service receives the same maximum 104 weeks as an employee with 10 years. Severance is not owed if the employee is dismissed for just cause (theft, gross misconduct, repeated absenteeism without excuse, breach of core confidentiality or safety rules). During the three-month probation period, no severance is owed upon termination by either party. Employees who resign voluntarily or retire also do not receive severance unless the employer has initiated a restructuring or collective dismissal, in which case severance may be owed even if the employee resigned in anticipation.

Grounds for Termination

Termination in Panama falls into two categories: termination for just cause (causa justa) and termination without just cause. Just cause includes theft or dishonesty, gross misconduct, repeated absenteeism without excuse, violation of safety rules, breach of confidentiality or non-competition obligations, and incompetence or repeated failure to perform core job duties despite written warning. The employer must provide written notice stating the specific cause and, if the employee disputes the dismissal, must prove the cause before MITRADEL or a labour court.

Termination without just cause requires advance notice (30–60 calendar days depending on tenure) or payment of notice in lieu, plus severance. Dismissals based on discrimination, retaliation for union activity, pregnancy, or disability are automatically unfair and trigger liability for back pay, damages, and reinstatement at the employee’s option. Collective dismissals (redundancy affecting five or more employees in a given period) require advance notification to MITRADEL and may trigger heightened obligations.

EOR vs. Other Hiring Models in Panama

EOR vs. Setting Up a Local Entity

An EOR is the right choice for companies testing the Panama market, building a small team (1–15 people), or scaling quickly without permanent overhead. A local entity becomes advantageous when you exceed 15 employees, need to bid for government contracts, or plan to operate in Panama for 5+ years. The key trade-off is speed and flexibility (EOR) versus control and cost per employee at scale (entity).

Many growing companies start with an EOR, hire 10–15 people in the first 18–24 months, then incorporate a local entity and migrate active employees as headcount grows. This two-stage approach avoids early incorporation overhead while preserving the option to own your Panamanian operation long-term.

EOR vs. Hiring Independent Contractors

Misclassification risk is real in Panama. If an independent contractor works under your day-to-day direction, reports to you daily, uses your tools and infrastructure, or performs ongoing core functions, MITRADEL may reclassify the relationship as employment and hold the employer liable for back taxes, CSS contributions, severance, and damages. An EOR eliminates this risk by making the employee relationship explicit and fully compliant from day one.

EOR vs. PEO (Professional Employer Organization)

Panama does not have a formal PEO regulatory framework like some other countries. A PEO model would require you to incorporate a local entity first, then have the PEO manage payroll, benefits, and HR administration on your behalf. If you already have a Panamanian entity and are seeking to outsource HR and payroll functions, a PEO relationship may work. However, for companies entering Panama with no local entity, an EOR is the faster, simpler, and lower-risk choice.

Public Holidays in Panama

Panama observes 13 mandatory paid public holidays in 2026. Work performed on a public holiday is paid at 200% (double pay) under Article 227 of the Código de Trabajo. If a public holiday falls on a Sunday, the following Monday is observed as the holiday and is also paid at double rate. Employees are entitled to time off on all listed holidays; employers who require work on a holiday must offer compensatory rest and the 200% premium or allow the employee to forgo the holiday through mutual agreement with bonus compensation.

How to Get Started with an EOR in Panama

Hiring your first employee in Panama through an EOR typically follows a five-step process that takes 1 to 2 weeks from contract signature to first paycheck:

• First, sign the EOR service agreement. You sign the EOR engagement letter and provide the employee’s details (full name, cedula de identidad or passport, proposed salary, job title, start date, and any work permit requirements). This step takes 1–2 days and establishes the EOR as your legal representative in Panama.
• Second, the EOR drafts the employment contract. The EOR prepares a compliant Spanish-language Código de Trabajo contract that specifies job title, salary, hours, probation (if applicable), leave entitlements, and termination conditions. You review it in English translation and both parties sign within 2–3 days.
• Third, the EOR completes CSS and tax registration. The EOR registers the employee with the Caja de Seguro Social, obtains occupational risk insurance, and registers the employee with the DGI for income tax withholding. This runs in parallel and takes 3–5 business days.
• Fourth, payroll setup and benefits enrolment take place. The EOR configures monthly payroll, sets up the employee’s bank account or payment method, enrolls in CSS health and pension benefits, and ensures the décimo tercer mes calculation is configured. This takes 1–2 days.
• Fifth, the employee starts work. On the agreed start date, the employee joins your team. The first paycheck is issued on the next monthly payroll date (end of month or per your pay cycle).

If the hire is a foreign national, add 6 to 12 weeks for work permit processing. If you are hiring multiple employees, each can be onboarded in parallel, so the timeline scales linearly rather than doubling.

Ready to build your Panama team? Contact Remote People today to discuss your hiring needs and get started with a compliant EOR partner.

Where companies hiring in Panama expand next

Teams hiring in Panama frequently expand across Central America and nearby markets, leveraging nearshoring to the US and shared Spanish-language talent. Many companies add an EOR partner in Guatemala first, drawing on aligned SICA employment frameworks. Honduras follows as SICA-wide workforce mobility, while a team in El Salvador offers shared Central American labor norms. Operations in Costa Rica is often the fourth step, valued for SICA-region proximity and shared Central American labor practices.