If you plan on moving your business offshore, or starting a new business in Panama, you’re going to need to hire local Panamanian employees. This is something that many foreign business owners need to consider, yet sometimes overlook, before moving/starting a business in Panama. You will find that with effective due diligence, finding the best staff or contractors for your business needs will be quick, and without much hassle. Here are some things you’ll need to know first.
Salary:
For most positions in Panama, the monthly salary for an employee will be much less than it would be in North America, or Europe. The new federal minimum wage is currently at $624 per month, however depending on the size of your business, there are exceptions. For basic service jobs (waiter/waitress, receptionist, cashier) expect to pay your employees between $400-$700 per month, however, this can vary depending on your type of business, and where you’re located. Panama City jobs tend to pay more than those in the rural interior, as the cost of living is higher.
For higher skilled management positions, you can expect to pay $1,500-$2,000 a month, and will most likely be able to hire someone who’s bilingual. English is very common for college graduates in Panama, and many management-level employees have been groomed for work with international businesses, and multilingual jobs.
Taxes:
Employers and employees pay social security taxes when the employee is paid. Currently, employers pay 12.25% and the employee pays 9.75%. Employers are required to withhold a percentage from each employee’s pay for income tax and for social security tax. Failure to withhold and make payments to the Social Security Office will result in surcharges, fines, and even criminal prosecution.
There is also a professional risk premium paid to the Social Security Office corresponding to a perceived risk the work entails, which is withheld from an employee’s salary. An additional 1.25% of an employee’s wages are withheld as an “educational tax” while the employer pays 1.5%. Tax codes can change regularly, so it’s important to check with your Panama attorney before making any decisions, just to be sure that you’re up to date.
Work Culture:
Over the years, Panama has gained the unfortunate stigma of having a less-than-stellar workforce, and many in the country have gone to great lengths to change that. The international business community is growing so fast in Panama, and the demand for customer service skills has, in many cases, outgrown the supply. That being said, there is a good, capable, quality workforce in Panama, and the culture is adapting to meet growing demand.
For many jobs the typical workweek goes from Monday to midday Saturday, although there are also great deal of businesses that operate Monday to Friday. The standard workweek for a full-time laborer is about 45 hours, however depending on your contract; it can be as much as 50, and as little as 40. There are over 20 observed holidays in Panama, however not all are strictly enforced federal days off. Christian religious holidays such as Christmas, Holy Week, and Easter are almost universally observed, and paid. There are 5 national holidays in November, which are also all universally observed and paid holidays for workers.
Foreign Workers:
Panamanian laws establish that only 10% of a company’s work force can be foreign (non-Panamanian). Therefore, to hire a foreign (non-Panamanian) employee you are required to obtain a work permit issued by the Ministry of Labor. The law establishes that 90% of employees must be Panamanian citizens or a foreign individual married to a Panamanian, or foreign individuals that have resided in the country for ten or more years. However, there are exceptions to the 10% rule.
For more info on how to hire in Panama, what to expect, and how to set up your business’ finances to be best prepared, check out our FAQs on Labor Law and business information page. Also, feel free to contact us directly with any questions or concerns you may have.
