Employment law in Panama
Employment law in Panama is primarily governed by the Labour Code of Panama (Código de Trabajo), which regulates employment relationships, worker rights, and employer obligations. Panama's labor law framework includes regulations on wages, working hours, contracts, social security, occupational health and safety, and dispute resolution. The law is designed to protect both workers and employers, promoting fairness and compliance with international labor standards.
Here is an overview of key aspects of employment law in Panama:
1. Employment Contracts
Types of Employment Contracts:
Indefinite-term contracts: The most common form of employment contract, which does not specify an end date and continues until terminated by either party.
Fixed-term contracts: These contracts are for a specific period and automatically terminate at the end of the contract term unless renewed.
Part-time contracts: Employees working less than the full-time hours can be considered part-time and entitled to proportional benefits and compensation.
Written Contracts: While written contracts are not mandatory for all types of employment, it is recommended to have a written contract to avoid disputes. For permanent employees, a written agreement detailing terms and conditions may be required.
2. Wages and Salaries
Minimum Wage: Panama has a national minimum wage set by the government, which varies depending on the sector and region. The minimum wage is reviewed periodically and applies to workers in both the private and public sectors.
Payment of Wages: Wages are generally paid bi-weekly or monthly, and the employer is required to provide detailed pay slips that include a breakdown of earnings, deductions, and taxes.
Wage Deductions: Employers are authorized to deduct taxes and contributions to social security from employee wages, and these deductions must be clearly stated.
3. Working Hours
Normal Working Hours: The typical workweek in Panama consists of 48 hours, usually divided into six days of 8 hours each. The maximum workday is 8 hours and should not exceed 48 hours per week. Exceptions are made for specific industries (e.g., hospitality) with different arrangements.
Overtime: Employees working beyond the normal 8-hour workday or 48-hour workweek are entitled to overtime pay. Overtime is typically compensated at a rate of 1.5 times the regular hourly wage during weekdays and 2 times the regular rate on holidays and weekends.
4. Leave Entitlements
Annual Leave: Employees in Panama are entitled to 30 days of paid vacation leave per year after completing one year of continuous service with the same employer. This leave is based on the employee’s standard daily wage.
Sick Leave: Employees are entitled to sick leave, which is paid for the first 3 days by the employer. After 3 days, the government social security system (CSS) will cover up to 75% of the worker’s wage, and the employer is responsible for the remaining amount.
Maternity Leave: Female employees are entitled to 14 weeks of maternity leave, which is divided into 4 weeks before delivery and 10 weeks after delivery. The leave is paid by the Social Security Fund (CSS), and the employee is entitled to receive 100% of her salary.
Paternity Leave: Male employees are entitled to 3 days of paternity leave when their partner gives birth.
Public Holidays: Panama has several public holidays, and employees are entitled to receive their normal wages for these holidays. If employees are required to work on a public holiday, they are entitled to overtime pay (usually double their regular wage).
5. Social Security and Benefits
Social Security Contributions: Both employers and employees contribute to Panama's Social Security System (CSS). The employee contributes a percentage of their wage, and the employer contributes a higher percentage. The social security system provides benefits such as healthcare, pensions, disability benefits, and survivor benefits.
The current contribution rate is typically 9.75% for employees, and 12.25% for employers.
Health Insurance: Social security contributions also cover health insurance, and employees are entitled to medical care through the CSS.
Pension Contributions: Employees contribute to the social security system for their retirement pension. Once they reach the required age and meet other criteria, they can access these pension benefits.
6. Health and Safety
Occupational Health and Safety: Employers are required to ensure a safe working environment under Panama's Labor Code and Occupational Health and Safety Law. Employers must implement safety measures, provide training to workers, and ensure that the workplace adheres to safety regulations.
Workers' Compensation: The CSS provides coverage for workers injured on the job, offering medical treatment, compensation for lost wages, and benefits for permanent disabilities. Employers are required to report accidents to the CSS and maintain a safe working environment to reduce workplace injuries.
7. Termination of Employment
Termination of Contracts: Employment in Panama can be terminated voluntarily (resignation) or involuntarily (dismissal). If an employee resigns, they are typically required to provide 15 days' notice unless otherwise agreed upon in the contract. If the employer terminates the contract, the employee may be entitled to severance pay.
Severance Pay: Employees with more than one year of service who are dismissed without just cause are entitled to severance pay, which is calculated as:
One month’s salary for each year of service (or a proportional amount for partial years).
Just Cause for Dismissal: Employers may dismiss employees for just cause, such as misconduct, theft, or violation of company policies. However, employees terminated for unjust reasons have the right to severance pay and compensation.
8. Discrimination and Equal Treatment
Non-Discrimination: The Labor Code of Panama prohibits discrimination based on race, gender, age, religion, nationality, and other characteristics. Employees have the right to equal treatment and opportunities in the workplace.
Equal Pay: There is a legal requirement to ensure equal pay for equal work, regardless of gender, meaning male and female employees doing the same work should receive the same wages and benefits.
9. Labor Unions and Collective Bargaining
Trade Unions: Workers in Panama have the right to form and join trade unions to represent their interests. Unions play a significant role in negotiating collective bargaining agreements for wages, benefits, and working conditions.
Collective Bargaining: Trade unions and employers can engage in collective bargaining to negotiate labor contracts. Collective agreements are legally binding and typically cover issues such as wages, benefits, and workplace conditions.
Strike and Industrial Actions: Workers in Panama have the right to strike, though there are legal procedures that must be followed, including a notice period and an attempt to resolve the dispute through mediation or negotiation.
10. Labor Dispute Resolution
Labor Courts: Disputes between employers and employees are handled by the Labor Courts in Panama. These courts specialize in employment law issues, including wrongful termination, disputes over wages, and other labor-related matters.
Mediation and Arbitration: Before resorting to legal action, workers and employers may attempt to resolve disputes through mediation. If an agreement is not reached, the dispute can be referred to a labor court.
11. Foreign Workers
Work Permits: Foreign nationals wishing to work in Panama must obtain a work permit. Panama has specific visa categories for skilled and non-skilled workers, and employers must sponsor the employee’s visa application.
Employment Rights: Foreign employees are entitled to the same rights and protections under Panama’s labor laws as local workers. This includes minimum wage, working hours, and other benefits.
Conclusion
Panama's employment laws aim to protect the rights of workers while providing a framework for employers to operate effectively. The Labour Code of Panama and other relevant regulations provide clear guidelines on issues such as employment contracts, wages, working hours, health and safety, social security, and termination. Workers enjoy significant protections, including rights to paid leave, social security, and protection from discrimination, while employers have clear obligations related to compensation and workplace safety.
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