Labour law

An introduction to the Panamanian Labour Law

Labour law

In Panama, the main piece of labour law is the Labour Code of 1971. It establishes labour relationships and the rights and duties of both employee and employer.

Thirteen Months Pay

In Panama, employees are paid 13 months for every 12 worked. The thirteen-month compensation can be paid once or in three instalments in April, August and December.


The statutory paid vacation is 30 days. However, you would only be entitled to 30 days of vacation after 11 continuous months of employment.

You should also know that the law permits the employer to fraction vacation time into two equal periods, as long as the collective bargaining agreement authorizes it.

As in many countries, if your contract is terminated and you have not used your vacation time, you will receive a payment for each vacation day that you are entitled to.

Public Holidays

  • January 1: New Year's Day
  • January 9: National Martyrs' Day
  • Carnival's Monday: The Monday before Ash Wednesday
  • Carnival's Tuesday: The Tuesday before Ash Wednesday
  • Holy Friday: Friday of Roman Catholic Holy Week - Death of Christ
  • May 1: Labour Day
  • November 3: Separation Day (from Colombia).
  • November 4: Flag Day
  • November 5: Colon Day
  • November 10: First Call for Independence from Spain (Primer Grito de Independencia de la Villa de los Santos)
  • November 28: Independence Day (from Spain).
  • December 8: Mothers' Day.
  • December 25: Christmas.

Where a public holiday falls on a Sunday, the following Monday will normally be observed. If you are requested by your employer to work on a national holiday, you will have to be paid double time.

In addition, you should also know that most foreign embassies observe their own national holidays.

Maternity Leave

In Panama, the maternity leave is 14 weeks paid by Social Security, not by the employer. You must apply for maternity allowance a month before you want your leave to start. You will also have to present a medical certificate issued by an obstetrician-gynaecologist, a photocopy of your identification and your social security card, your last payslip, and a letter from your employer certifying that you will not receive any salary during your maternity leave. To download the request forms go to: 

Labour complaints

If a conflict emerges between an employee and his employer, the Labour Code provides different steps of mediation and conciliation, before going to a trial. Depending on the object of the conflict and the gravity, the steps vary. If you need more information on this subject, please go to: 

Termination of a Labour relationship

The employer cannot prematurely terminate a labour relationship contract without justification under the law. These are considered to be justified by law: disciplinary, economic reasons or causes of unavoidable accidents and chance occurrences. The employer must notify the worker in advance and in writing with the date and reason for dismissal.

For a permanent contract, the worker who has been notified of the dismissal may solicit to the Commissions of Conciliation and Decision, or the tribunal, his reintegration into the work team, or the indemnities due. Furthermore, the termination compensation for a permanent contract is equivalent to one week’s salary for each year worked, no matter the dismissal’s reasons.

The employee can put an end to the employment relationship without supporting reasons through a written notification with 15 days notice. Some reasons are provided by the Labour Code for a worker to terminate the contract of employment while receiving the same benefits as for unfair dismissal.

For more information on the termination of employment, please refer to Title IV of the Labor Code.

Further reading

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