--- title: "Hiring in Panama 2026 | Employer of Record Guide" description: "Hire in Panama through Teamed's EOR. 13.25% CSS employer rate, 30 days vacation, a 13th-month salary, all paid in US dollars. The Panama guides." canonical: https://www.teamed.global/country-hiring-guides/panama --- Panama · Country overview Served by Teamed vetted partner-entity network in Panama # What do you need to know to hire in *Panama*? Panama runs payroll in US dollars. The balboa is pegged one to one with the dollar, so there is no currency to convert. Employer social security is 13.25%, every employee earns a 13th month of pay across 3 payments a year, and dismissal needs a legal cause once someone passes two years. Each guide below takes one layer. Last reviewed 14 June 2026 · Panama guide ## How does Teamed handle Panama hiring for you? Teamed becomes your legal [employer of record](/lp/employer-of-record) in Panama for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency. Payroll, contracts, and the full Panama employment law stack run on **one platform**. **Real HR and legal experts** manage every Panama hire, from the first offer letter to the final settlement. **An actual person**, not a chatbot or a pooled queue, handles your Panama team alongside EOR, contractor onboarding, and entity payroll on **one platform**. There is **no setup fee** and **no exit fee**. Employer cost **passes through at cost, itemised** on every invoice. A Panama contractor who moves to payroll keeps their record, and that same employee can **graduate** from EOR to your own Panama entity without re-onboarding. Run the [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator) to see the month the model flips. EOR is the right model for a first Panama hire, **until it isn't**. Three things you won't find on any other Panama EOR guide - **Panama raised its employer social security rate to 13.25% in 2025.** Law 462 of March 2025 lifted the employer CSS contribution from the long-standing 12.25 percent, with further rises set for 2027 and 2029. Most competitor guides still print the old 12.25 percent figure. The tax and payroll guide sets out the current rates. - **Severance is owed on every indefinite exit, not just dismissals.** The seniority premium (prima de antiguedad) of 1 week of salary per year of service is due whenever an indefinite contract ends, even on resignation (Codigo de Trabajo art. 224). That sits on top of the unjustified-dismissal indemnity. Most guides only mention the dismissal payout. - **Every employee earns a 13th month of pay, in 3 installments.** The decimo tercer mes is one extra month of salary a year, paid on 15 April, 15 August, and 15 December. It is mandatory under a 1971 decree, exempt from income tax, and carries its own social security contribution. Answer.cite this Hiring in Panama adds 13.25% employer social security plus 1.5% educational tax on top of gross salary. Neither has a ceiling. Every employee earns a 13th month of pay, paid in 3 installments a year. Paid vacation is 30 days a year. Payroll runs in US dollars, with no currency to convert. Teamed runs Panama payroll, contracts, and compliance through a vetted local partner-entity that holds the required registrations. This page is the map. Each guide below is the detail. At a glance · Panama USD · Spanish · Fortnightly payroll Currency USD (and balboa) US dollar is legal tender; balboa pegged 1:1 Social security (employer) 13.25% raised by Law 462 in 2025; no ceiling Educational tax (employer) 1.5% on top of CSS, no ceiling Annual leave 30 days per 11 months of continuous service Maternity leave 14 weeks CSS subsidy plus employer top-up 13th salary (decimo) Yes one extra month, in 3 payments Seniority premium 1 week per year, owed on every indefinite exit Top income tax 25% above $50,000 a year ![A wide warm illustration of Panama City at golden hour: the Cinta Costera waterfront curving past the modern skyline of glass towers, with ships waiting near the Pacific entrance to the Panama Canal under an amber sky.](/images/country-guides/panama-hiring.webp) Panama · per employee · per month · flat $ 599 One fixed fee to hire compliantly in Panama. Zero FX. No setup fees. The price your finance team can forecast against without an asterisk. Zero FX Fixed No setup fee No exit fee 100+ countries ## How much does it cost to hire an employee in Panama in 2026? Plan on roughly 115 percent of gross salary once employer contributions are added, plus a 13th month worth one extra month of pay a year. Employer social security is 13.25% and educational tax adds 1.5%, both on top of salary with no ceiling. Your cost has three parts. The first is employer social security at 13.25% plus educational tax at 1.5%, both on gross salary with no upper limit. A variable professional-risk premium, set by the type of work, adds a little more. The second is the 13th month, one extra month of pay a year, paid in 3 installments. The third is Teamed's fee, one flat number per employee per month, with zero FX mark-up in any currency. Because Panama pays in US dollars, there is no conversion to manage. Salaries, taxes, and benefits pass through at cost on every invoice. No setup fees. No exit fees. The full breakdown for your hire, with worked examples at current rates, goes in the cost guide. Read the full Panama cost breakdown ## Do you need a Panama entity to hire employees in Panama? No. An Employer of Record runs Panama payroll and contracts from day one. Your own Panama entity becomes cheaper than EOR somewhere around 5 to 8 employees, depending on salary. Hiring a local employee directly normally means registering your own company in Panama, with a notice of operation (aviso de operacion) and registrations for social security and tax. That takes time and brings ongoing local filings. An [Employer of Record](/lp/employer-of-record) skips that step at low headcount. Teamed employs the person through a vetted local partner-entity and runs Panama payroll, contracts, and compliance from day one. The point where your own entity beats EOR depends on your Panama salaries and local accounting costs. For most professional-services roles it lands around 5 to 8 employees. Most EOR providers will not tell you when you have reached it. We do, and we help you move. You progress from contractor to EOR to your own Panama entity on **one platform** under Teamed's Graduation Model, with tenure preserved. Read the full Panama EOR vs entity guide ## What changed in Panama employment law recently? Law 462 of March 2025 raised the employer social security rate to 13.25%, up from the long-standing 12.25 percent. The rate rises again to 14.25 percent in 2027 and 15.25 percent in 2029, so cost models built on the old figure are now wrong. The headline change is the social security reform. Law 462 of 18 March 2025 lifted the employer contribution to the Caja de Seguro Social from 12.25 percent to 13.25%, effective from April 2025 payroll. It is scheduled to rise to 14.25 percent on 1 March 2027 and 15.25 percent on 1 March 2029. The employee rate was left unchanged at 9.75%. Many guides and some tax summaries still quote the old 12.25 percent employer figure. The 2026 minimum wage was reset by Decreto Ejecutivo No. 13 of December 2025, in force from 16 January 2026. Panama sets the minimum wage by region, sector, and company size, so there is no single national number. Income tax bands were unchanged. The hiring guide covers each current obligation in detail. Read the full Panama hiring guide ## What benefits must you provide Panama employees in 2026? The floor is 30 days of paid vacation a year, 14 weeks of maternity leave, and 11 national public holidays. Every employee also earns a 13th month of pay, paid across 3 installments a year. Paid vacation is 30 days for each 11 continuous months of service (Codigo de Trabajo art. 54), and Panama counts vacation and public holidays separately. There are 11 national public holidays a year. Maternity leave is 14 weeks, six weeks before birth and eight after, paid mainly by the social security subsidy with the employer topping up to full salary. Paternity leave is 3 days of paid leave at the birth of a child. Employer-paid sick leave runs to 18 days a year at full pay, after which the social security fund pays a subsidy. The 13th month, one extra month of pay in 3 installments, is mandatory for everyone. The benefits guide covers each entitlement and the employer obligations in full. Read the full Panama hiring guide ## What are payroll taxes in Panama in 2026? Employer social security is 13.25% plus 1.5% educational tax. The employee pays 9.75% plus 1.25%. Income tax is zero up to $11,000 a year, then 15%, and 25% above $50,000. Panama has two employer-side payroll contributions: social security at 13.25% and educational tax at 1.5%, both on gross salary with no ceiling. A variable professional-risk premium, set by the type of work, applies to the employer only. Employees pay 9.75% social security and 1.25% educational tax, withheld from gross pay. Income tax is progressive over three bands. The first $11,000 a year is exempt at 0%. The next band, up to $50,000, is taxed at 15%. Income above $50,000 is taxed at the top rate of 25%. Teamed payroll handles every deduction and remittance. The tax and payroll guide sets out each band and filing deadline. Read the full Panama tax and payroll guide ## How do you terminate an employee in Panama? Panama is not an at-will market. Once an employee passes 2 years of service, you need a legal cause to dismiss. A seniority premium of 1 week of pay per year is owed on every indefinite exit, and an unjustified dismissal adds 3.4 weeks per year for the first ten years. An indefinite contract cannot be ended without a legal cause once the employee has 2 years of continuous service (Codigo de Trabajo art. 211). Below that, or where a listed exception applies, the employer gives 30 days of notice (or pays it out) and the indemnity below. Probation is capped at 3 months and only counts where the role needs special skill and the clause is in the written contract. The seniority premium (prima de antiguedad) of 1 week of salary per year of service is owed whenever an indefinite contract ends, whatever the reason, including resignation (art. 224). On top of that, an unjustified dismissal triggers an indemnity of 3.4 weeks of salary per year for the first ten years, then 1 week per year after that (art. 225). The termination guide runs the full process and the grounds. Read the full Panama termination and severance guide ## What should you know before hiring in Panama? Two things catch US buyers out. The first is the 13th month, an extra month of pay every employee earns. The second is that Panama is not at-will. Dismissal needs a legal cause after 2 years, and severance is owed on every exit. **Panama pays a 13th month.** The decimo tercer mes is one extra month of salary a year, paid in 3 installments on 15 April, 15 August, and 15 December. It is mandatory for every employee and easy to miss when you budget a Panama salary against a US one. Build it in from the first hire. **Panama is not an at-will market.** After 2 years of service you need a legal cause to dismiss, and the seniority premium of 1 week of pay per year is owed on every indefinite exit, resignations included. Pay floors and contributions are set by the law, not by the contract alone. The hiring guide and the termination guide cover safe process in detail. Read the full Panama termination and severance guide ## Frequently asked questions How much does it cost to hire an employee in Panama? Plan on roughly 115 percent of gross salary once employer social security at 13.25% and educational tax at 1.5% are added, plus a 13th month worth one extra month of pay a year. Teamed's Panama fee is one flat number per employee per month, with zero FX mark-up in any currency pairing. The cost breakdown guide has worked examples. Can a US company hire in Panama without an entity? Yes. An Employer of Record like Teamed runs Panama payroll, contracts, and compliance through a vetted local partner-entity. You direct the work. Teamed becomes the legal employer of record. Hiring a local employee directly normally means registering your own Panama company first, which an EOR lets you skip. What is the 13th-month salary (decimo) in Panama? The decimo tercer mes is a mandatory 13th month of pay, equal to one extra month of salary a year. It is paid in 3 installments, on 15 April, 15 August, and 15 December. It is exempt from income tax but carries its own social security contribution. Every employee earns it. What are the notice and severance rules in Panama? Panama is not an at-will market: after 2 years of service you need a legal cause to dismiss. A seniority premium of 1 week of salary per year is owed on every indefinite exit, even resignation. An unjustified dismissal adds an indemnity of 3.4 weeks of salary per year for the first ten years. Where notice applies, it is 30 days. What currency do you pay employees in Panama? Panama uses the balboa, pegged one to one with the US dollar, and US dollar notes are legal tender that circulate as everyday cash. So pay runs in US dollars with no conversion. Teamed charges its fee with zero FX mark-up in any currency pairing. Teamed Legal Operations Panama is a strong secondary market for global teams. The dollar peg takes currency risk off the table, and the Canal keeps a deep pool of people used to serving international firms. The work is in the labour law. Employer social security rose to 13.25 percent under Law 462 in 2025, every employee earns a 13th month of pay, and dismissal needs a legal cause once someone passes two years. None of that is hard once you know it. It is consistently costly when you do not. These guides use the current rates. A note from Tom Price-Daniel Panama pays in US dollars, so there is no currency to convert. The harder part is the labour law. Employer social security rose to 13.25% in 2025, every hire earns a 13th month of pay, and dismissal needs a legal cause after two years. Read the right Panama guide before the first hire, not after the first filing. Tom Price-Daniel · Co-founder, Teamed ## Keep reading - Panama hiring guide, offer to payslipguide - Panama employer cost breakdown 2026guide - EOR vs entity in Panamaguide - Panama termination and severanceguide - Panama tax and payrollguide - [Employer of Record overview](/lp/employer-of-record)core - The Graduation Modelcore - [Teamed pricing, Zero FX Fixed](/pricing)core - [Talk to an expert](https://www.teamed.global/contact)CTA A note on this page. This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with Panama's Ministerio de Trabajo y Desarrollo Laboral, the Caja de Seguro Social, and the Direccion General de Ingresos for Panama, or speak to a qualified professional, before relying on any specific framework.