Hiring in Panama

The contract sets out role, salary in USD, working hours, leave, notice and any restrictive covenants. The EOR is the counterparty to the employee, which is what removes the need for your own entity.

Spanish is the standard contract language, and the copy filed with the Ministry of Labour (MITRADEL) must be in Spanish. Contracts are signed in three copies: one each for the employer, the employee and MITRADEL.

Fixed-term contracts are capped at one year, or three years for roles that need special skills. Keeping someone on after the term ends makes the contract indefinite, so most EORs default to indefinite terms.

Set probation from day one. It cannot be extended beyond 3 months, and it is only valid for roles that need particular skills.

EOR policies on probation vary because they, not you, carry the dismissal risk. Ask before you agree a start date.

Overtime is paid at a premium of 25% to 75% depending on the shift, and is capped at 3 hours a day and 9 hours a week. Night and mixed shifts have shorter weeks of 42 and 45 hours.

Senior managers and positions of trust sit outside the hours limits, so overtime for those roles becomes a contractual matter rather than a statutory one. Put the position in writing either way.

The statutory 30 days is already generous and is usually what professional roles receive, so budget for a full month away each year when you plan cover.

Paid sick leave runs to 18 days a year at the employer's cost, and unused days can be carried over two years. Maternity leave is 14 weeks, paid by the social security fund with the employer covering any shortfall, so confirm which side the EOR carries. Paternity leave is 3 days, paid by the employer.

Without just cause, the employer owes notice or pay in lieu for staff under two years, plus an indemnity that rises with tenure to roughly 3.4 weeks' pay per year of service. After two years, employees gain job stability, so dismissal needs just cause or a negotiated exit.

The seniority premium of one week's pay per year is owed whatever the reason for leaving, and employers pre-fund it through a severance fund (fondo de cesantía). The EOR runs the process as the legal employer and will want the paperwork in order, including final pay, unused leave and the thirteenth-month balance. A just cause dismissal must state the reason in writing, so keep it documented.

Private medical cover and group life are standard for professional roles even though they are not mandatory.

EORs often bundle benefits through a group scheme. Ask what is included in the fee and what is billed on top.

Employer social security and education tax add 14.75% on top of gross salary, plus a professional risk premium set by business activity. That is before the EOR fee, and the employer CSS rate goes up a further point in March 2027.

The thirteenth month is the trap. It adds one month's pay a year, paid in three instalments on 15 April, 15 August and 15 December, so build it into the budget from the start.

Ask whether the EOR sponsors directly or refers to a partner. A partner-model EOR often cannot sponsor at all, and the quotas of 10% of ordinary staff and 15% of specialist staff apply to the sponsor, not to you.

Several regulated professions are reserved for Panamanian nationals, so check the role first. Set start dates after approval, not before.

Get the data processing terms in the service agreement, not just the privacy notice. Cross-border transfers need consent or a recipient that meets equivalent standards.

Ask where payroll data is hosted and who in the partner chain can see it. The regulator, ANTAI, can fine and suspend processing.

Incorporation here is quick, but the running cost is the point: a resident agent, three directors, the annual franchise tax, a commercial licence, accounting and payroll software set an annual floor. Your own entity would also be bound by the foreign worker quotas.

Permanent establishment risk is about what people do, not where payroll sits. Revenue-generating activity can create exposure regardless of the employment route.