Wages and Hours in Panamanian Labor Law
According to Panamanian law, all employees must have an employment contract with some mandatory content which cannot be replaced by a job offer. Salary and working hours, must be agreed in this employment contract. The salary could be paid by month, fortnight, week, day or hour, but the practice is to negotiate a monthly salary, which must be at least equal to the minimum wage established by law.
Employers should take into consideration employees receive 12 months of salary, plus an additional XIII month as a mandatory bonus. It is therefore important, that job offers clarify this, in the case of companies who usually offer annual salaries.
When the employee has a variable salary, by commissions, basic salary must be at least the minimum salary. Overtime, commissions, allowances, bonuses or similar must be in addition to basic salary.
Labor Code establishes the minimum wage should be set by activity, region and size of the company. Minimum wages must be reviewed every two years. The last revision was made recently by means of Executive Decree 424 of 31 December 2019, in force since January 15th, 2020.
Minimum wage is established on an hourly basis and the government considers the economic situation of each sector and region. For this reason, although most activities received an increase of about 3% for the next two years, some activities with a lower growth such as the agricultural sector, fishing, industry, free zones, hotels and restaurants, received smaller increases between 1 and 2% and, areas that have shown good economic performance, such as mining, received 6% increases.
Highest rates range from US$4.67 for airline workers to US$3.27 per hour for financial activities. The lowest rate is for small agricultural, livestock, and fishing businesses with a rate of US$1.55 per hour.
In case of companies that carry out several economic activities, if employees work for all the activities, the highest wage applies, whereas if the employees are separated by activity, minimum wage corresponding to their activity is applied to each one.
Minimum monthly wage also depends on the number of hours the employee works. The law sets a maximum of 8 hours per day, 48 hours per week, and 206 hours per month but, it is customary in offices to work 40 hours per week and 172 hours per month from Monday to Friday. Therefore, the amount of the minimum wage will be different for an employee who works 6 days a week and one who only works 5 days.