How to Hire Employees in Panama (2026): CSS, Contracts and Benefits

Panama is a regional services hub with a dollarized economy. Its Labor Code is protective, and the 2025 social security reform is raising employer costs in stages. Here is what employers need to know in 2026.

Employment contracts

Employment follows the Labor Code (Cabinet Decree 252 of 1971). The employer must register with the Social Security Fund (CSS) when it hires its first worker and pay contributions from the start of the employment.

Minimum wage in 2026

Since 16 January 2026, minimum wages are set per hour by economic activity, company size and region (Executive Decree 13 of 31 December 2025). Domestic work, for example, is B/.350 a month in Region 1 and B/.320 in Region 2. Check MITRADEL’s official lookup for your activity.

Social security (CSS)

• Employer: 13.25% of salaries until February 2027, then 14.25% to February 2029 and 15.25% from March 2029 (Law 462 of 2025).
• Employee: 9.75%.
• The employer also pays a work-risk premium set by the CSS for its activity.

13th month

Employees receive a 13th-month payment (décimo tercer mes), with the proportional part paid when employment ends.

Vacation

30 days of paid vacation for every 11 months of continuous work, and one day for every 11 days worked if employment ends earlier (Labor Code, art. 54).

Severance

For employment relationships that began after Law 44 of 1995 took effect, unjustified dismissal costs 3.4 weeks’ salary per year for the first ten years, and one week per year after that (Labor Code, art. 225).

Hiring foreigners

At least 90% of ordinary staff must be Panamanian (or foreigners married to a Panamanian or resident for ten years), and specialized or technical foreign staff may not exceed 15% (art. 17). Foreign employees need a work permit from MITRADEL.

Employer of record or your own company?

If you want to hire before you have a local entity, an employer of record can employ staff on your behalf. For a long-term team, local invoicing or contracts in your own name, it is usually better to set up your own company in Panama and run payroll there.

Get help from Easyco

Easyco coordinates the company setup in Panama up to the tax ID, and supports companies afterwards with tax, accounting, payroll and company compliance, including a registered office address. Contact us to discuss your hiring plans.