Employer of Record

🇵🇦

Employer of Record Services in Panama

Panama is a regional hub with a dollarized economy, a stable labor regime, and a strategic logistics platform for operations across Latin America.

Request a Consultation

Country fact sheet

Country Fact Sheet: Panama

Panama is the region's logistics, banking and regional-headquarters hub: a dollarized economy, the Canal, the Colón Free Zone, and the SEM regime that has attracted hundreds of multinational headquarters. It is also a market with a protective Labor Code, a strict foreign-worker quota and a social-security system that was substantially reformed by Ley 462 of 2025. An EOR lets you hire Panamanian talent immediately while those rules are handled by an established local employer.

Currency: Balboa (PAB) pegged 1:1 to USD; USD circulates
Time zone: UTC−5, no DST
Working week: 48 hours (daytime)
Paid vacation: 30 calendar days per year

Country overview

Major industries & sectors

Logistics, ports, maritime services and the Panama Canal ecosystem.
Banking, insurance, asset management and the international financial centre.
Regional multinational headquarters under the SEM and EMMA regimes.
Trade and re-export through the Colón Free Zone.
Construction, infrastructure and, increasingly, technology and shared services.

Why now

Dollarization removes currency risk from payroll and pricing entirely.
The best air connectivity in Central America through Tocumen, plus UTC−5 alignment with US Eastern time.
A concentration of regionally experienced, frequently bilingual professionals.
The 2025 social-security reform changes contribution economics — a reason to have a partner tracking the transition rules.

Benefits of doing business

Dollarized economy

The balboa is pegged 1:1 to the US dollar and the dollar circulates as legal tender, so salaries, budgeting and invoicing carry no FX exposure.

Regional headquarters hub

The SEM and EMMA regimes have made Panama the default location for Latin American regional management teams.

Logistics infrastructure

The Canal, ports on both oceans, the Colón Free Zone and Tocumen's hub network support genuinely regional operations.

Financial system

A large international banking centre with sophisticated corporate banking and treasury services.

Time zone

UTC−5 year-round without daylight saving, matching US Eastern time for most of the year.

Bilingual talent

A significant English-capable professional pool, reinforced by decades of multinational presence.

Challenges of establishing a local entity

Incorporating requires the Registro Público, a RUC and Aviso de Operación with the Ministerio de Comercio e Industrias, plus municipal registration and corporate bank account opening under strict KYC.
Every employment contract must be registered with the Ministerio de Trabajo y Desarrollo Laboral (MITRADEL) within the statutory deadline.
The employer must register with the Caja de Seguro Social (CSS) and report through the SIPE system every month.
Foreign-worker quotas apply: as a general rule at least 90% of employees must be Panamanian, with a limited allowance for specialized or trusted foreign personnel, and work permits are required.
Ley 462 de 2025 reformed the social-security system, changing contribution rates and pension architecture on a transition schedule that payroll must follow.
Termination is restrictive: after two years of service most employees can only be dismissed for statutory just cause, and errors lead to reinstatement or aggravated indemnities.

Criterion	Own legal entity	With Grupo IERG (EOR)
Setup	Registro Público, RUC, Aviso de Operación, municipal registration, bank account and CSS employer registration.	None — Grupo IERG is already registered and reporting through SIPE.
Contract registration	Each contract must be filed with MITRADEL within the legal deadline.	Handled by the EOR as legal employer.
Foreign-worker quota	The 90/10 rule is measured against your own payroll, limiting expatriate hiring.	Managed within the EOR's compliant workforce structure.
CSS reform transition	Your payroll must be reconfigured as Ley 462 provisions phase in.	Applied automatically by Grupo IERG.
Termination risk	Post-two-year just-cause requirement exposes the entity to reinstatement claims.	Exits structured and documented by an experienced local employer.

Employment & labor law summary

01Contracts and registration+

Requirement	What the law requires
Governing law	Código de Trabajo de Panamá and its regulations, administered by MITRADEL.
Contract types	Indefinite term, definite term and specific-work contracts. Definite-term contracts are limited to one year in general (up to three for qualified technical roles) and convert to indefinite when renewed beyond the legal limit.
Written form	Contracts must be in writing, in Spanish, in triplicate, and registered with MITRADEL within the statutory deadline.
Probation	Up to three months, and only valid when expressly agreed in writing in the registered contract.
Job security	After two years of continuous service, an employee may generally only be dismissed for a just cause listed in the Labor Code.
Foreign nationals	Work permits are required and the general rule limits foreign personnel to 10% of the workforce (15% for specialized or trusted positions), subject to the special regimes.

02Working time+

Requirement	What the law requires
Daytime shift	Maximum 8 hours per day and 48 hours per week.
Night shift	Maximum 7 hours per day and 42 hours per week.
Mixed shift	Maximum 7.5 hours per day and 45 hours per week.
Overtime	Surcharges apply by shift type — commonly 25% daytime, 50% night and higher on rest days and holidays — with caps on daily and weekly overtime.
Weekly rest	One paid day of rest per week, normally Sunday; work on the rest day carries a substantial surcharge.
Public holidays	National holidays are paid, and work on them is paid at a statutory premium.

03Leave and entitlements+

Requirement	What the law requires
Vacation	30 calendar days of paid vacation per year, accruing at one day for every eleven days worked.
Décimo tercer mes	One month's salary per year, paid in three instalments on 15 April, 15 August and 15 December.
Sick leave	Paid sick leave with CSS benefits under the conditions set by the social-security regime and the Labor Code.
Maternity leave	14 weeks — 6 weeks before and 8 weeks after birth — funded through the CSS, with job protection.
Paternity leave	Statutory paid paternity leave following the birth.
Seniority premium	Prima de antigüedad accrues at one week's salary per year of service and is payable on termination of indefinite contracts.

04Social security and payroll costs+

Requirement	What the law requires
Minimum wage	Set by decree by region, economic activity and company size, and revised periodically. We confirm the applicable rate for each role at contracting.
CSS contributions	Employer and employee contributions to the Caja de Seguro Social. Ley 462 de 2025 reformed the system and adjusts employer contribution rates on a transition schedule; we apply the rate in force for each payroll period.
Professional risk	Riesgos profesionales premium payable by the employer, rated by activity.
Educational insurance	Seguro educativo contributions from both employer and employee.
Income tax withholding	Progressive withholding on employment income, remitted to the Dirección General de Ingresos.
Reporting	Monthly payroll and contribution reporting through the CSS SIPE platform.

Important: Because Ley 462 de 2025 phases in changes to contribution rates and the pension regime, Grupo IERG confirms the exact employer and employee percentages applicable to each payroll period in writing rather than relying on a static table.

05Termination and severance+

Requirement	What the law requires
Just cause	The Labor Code lists the disciplinary, non-attributable and economic causes; the employer must follow the documented procedure.
Notice	Statutory notice or payment in lieu, depending on contract type and cause.
Unjustified dismissal	After two years of service, an unjustified dismissal can result in reinstatement with back pay or an aggravated indemnity, at the employee's election in the cases provided by law.
Indemnity	Statutory indemnity calculated on length of service, in addition to the prima de antigüedad.
Final settlement	Accrued vacation, proportional décimo tercer mes, prima de antigüedad and any outstanding wages.
Protected employees	Pregnant workers, union officers and employees on certified leave enjoy special protection requiring prior judicial or administrative authorization.

Employer compliance checklist

1
Register the employer with the CSS and enable SIPE reporting before the first hire.
2
Execute the contract in writing in triplicate and register it with MITRADEL within the legal deadline.
3
Confirm the applicable minimum wage for the region, activity and company size.
4
Verify compliance with the 90/10 foreign-worker rule and obtain any required work permit.
5
Configure the shift type and the corresponding hour limits and overtime surcharges.
6
Enrol the employee with the CSS from the start date and apply the contribution rates in force under Ley 462.
7
Accrue vacation at one day per eleven days worked and the prima de antigüedad at one week per year.
8
Diarize the décimo tercer mes payments for 15 April, 15 August and 15 December.
9
Withhold and remit income tax and educational insurance each period.
10
Retain contracts, payroll records and CSS filings for MITRADEL and CSS inspection.

Why use an Employer of Record?

Hire in Panama without Registro Público incorporation, RUC, Aviso de Operación or CSS employer registration.

Contracts drafted and registered with MITRADEL within the statutory deadline.

CSS contributions, SIPE filings and income-tax withholding handled end to end.

Ley 462 transition rates applied automatically as they phase in.

Vacation, décimo tercer mes and prima de antigüedad accrued monthly and paid on the legal dates.

Terminations structured to respect the post-two-year just-cause regime and protected-employee rules.

Talk to an EOR expert

Primary sources: Código de Trabajo de Panamá · Ley 462 de 2025 (social-security reform) · Caja de Seguro Social (CSS) and the SIPE reporting platform · Ministerio de Trabajo y Desarrollo Laboral (MITRADEL) · Dirección General de Ingresos (DGI); minimum-wage decrees

Information reviewed February 2026. Figures indexed to minimum wage, tax units or annual decrees change periodically; we confirm the applicable values for each engagement. This page is general information, not legal or tax advice.

Services provided

End-to-end EOR services

We employ, pay and stay compliant on your behalf in every jurisdiction — no local entity or in-country HR operation required.

Employer of Record

We become the formal legal employer of your talent: we sign the local contract, answer to authorities and absorb the legal complexity. You keep full operational direction of the team.

Payroll & multi-currency payments

Salaries and deductions, tax withholding, on-time local-currency payments and consolidated reporting across multiple countries — one auditable operation.

International labor compliance

Minimum wage, statutory benefits, vacation and leave, social security and every piece of labor documentation each authority requires — kept current in each jurisdiction.

Localized employment contracts

Contracts drafted under each country's legal framework: language, currency, salary structure, benefits, probation period, termination causes and notice periods correct from day one.

Onboarding & offboarding

Onboarding — contract, registration and first payroll — resolved in business days. Terminations executed with correct settlements, notices and formal legal closure.

Global contractor payments

Where a full EOR solution isn't required, we support payments to independent contractors in additional international markets, with proper documentation and compliance.

Why work with Grupo IERG

Hiring in another country instantly activates a set of obligations — entity setup, registrations, contracts, payroll, benefits, terminations — that few companies are ready to absorb. Grupo IERG offers a third path between "don't hire" and "build a full structure": hire now, compliant from day one, backed by two decades of local operation in regulated Latin American markets.

FAQ

Frequently asked questions

What is an Employer of Record (EOR)?+

An Employer of Record is a company that acts as the legal employer of your staff in a given country. It signs the local contract, runs payroll, withholds taxes and contributions and answers to labor authorities, while your company keeps day-to-day direction of the work.

Do I need to open a legal entity to hire?+

No. With the EOR model you can onboard people without incorporating a local company, registering for local taxes or building an in-country administrative structure.

How long does onboarding take?+

Once the role terms are agreed and candidate documentation is received, onboarding is usually completed within business days: local contract, mandatory registrations and payroll enrollment.

Who carries the labor and compliance risk?+

Grupo IERG assumes the formal employer obligations (contract, payroll, contributions, documentation). Your company retains responsibility for business decisions and operational management of the team.

Is the EOR model right for every situation?+

It is not a substitute for your own entity when there are regulated activities, local licensing requirements or a large permanent operation. In those cases EOR is typically a bridge while entity setup is evaluated.

Representative experience

Grupo IERG's team has supported EOR, workforce administration, and contractor-payment programs involving companies and partners such as:

EOR clients