How much does an employee really cost beyond salary?

Add approximately: employer CSS 13.25% (since April 2025 under Law 462 of 2025; 14.25% in March 2027 and 15.25% in March 2029), educational insurance 1.5%, professional risk premium (varies), 13th month (~8.33%), vacation (30 days per 11 months) and seniority premium. Total burden is typically estimated at 35-45% over base salary, depending on activity. Verify current rates with the CSS and your accountant.

Can I hire only foreign staff?

Not in ordinary companies: the Labor Code caps foreign ordinary personnel at 10% of payroll (up to 15% for specialists or technicians). Special regimes such as SEM and EMMA have their own immigration and labor rules that relax these limits for executives. Every foreign worker needs a MITRADEL work permit.

How does termination work in Panama?

The Labor Code contains an exhaustive list of just causes for dismissal. Outside those causes, dismissal triggers indemnification, and in all cases the seniority premium applies (proportional payment per years of service). Procedures and amounts depend on contract type and tenure; consult a labor attorney before terminating.

Hiring Employees in Panama | Labor Code, CSS & 13th Month

Visa Types

In short

Hiring employees in Panama is governed by the Labor Code (Cabinet Decree 252 of 1971): mandatory written contracts, probation up to 3 months, 48-hour workweek, 13th-month bonus in three installments, 30 days paid vacation per 11 months worked. CSS social security: 9.75% employee / 13.25% employer since April 1, 2025 (Law 462 of 2025; rising to 14.25% in March 2027 and 15.25% in March 2029), plus educational insurance and professional risk premium. Foreign staff capped at 10% of ordinary personnel (15% for specialists), with exceptions for regimes like SEM.

Employment relationships in Panama are governed by the Labor Code (Cabinet Decree 252 of 1971). Contracts must be in writing, with probation of up to 3 months and a standard 48-hour workweek. Employees are entitled to the 13th-month bonus (paid in three installments: April 15, August 15 and December 15) and 30 days of paid vacation per 11 months worked. Social security (CSS) involves contributions of 9.75% by the employee and 13.25% by the employer — in force since April 1, 2025 under the pension reform (Law 462 of 2025), with scheduled increases to 14.25% in March 2027 and 15.25% in March 2029 —, plus educational insurance (1.25% employee / 1.5% employer) and a professional risk premium (varies by activity). Minimum wages are set every two years by region and activity via MITRADEL decree. Ordinary companies may employ at most 10% foreign ordinary personnel (up to 15% for specialists or technicians), with exceptions for special regimes such as SEM; work permits are issued by MITRADEL.

Legal Disclaimer

This information is general guidance only and does not constitute legal or labor advice. CSS rates, minimum wages and labor case law change; minimum wages are revised every two years by MITRADEL decree. Consult a licensed labor attorney in Panama and verify current rates at css.gob.pa and mitradel.gob.pa before hiring or terminating. Last updated: July 2026.

Ready to get started?

Our team is available to help you at every step of the process.

Applicable Incentives

SEM EMMA