Panama's labor market is rebounding from the pandemic lows. This article examines the recovery in key sectors such as construction, logistics and services and addresses the impact of recent economic developments and wage structures on the workforce. Additionally, it outlines essential employment laws and practices in Panama, offering vital insights for foreign professionals considering new opportunities in the country.
Key points about Panama's labor market
Unemployment
The current unemployment rate in Panama is 7.7%—a major improvement since the pandemic, which brought about a spike to over 18%. The present figure is somewhat high compared to some parts of Latin America. Still, the rebound from the earlier crisis levels means that Panama's job market is stabilizing after the economic shocks of recent years.
Leading sectors
The construction, logistics and services sectors play an important role in Panama's employment. These sectors have been recovering since the pandemic. However, the uncertainty in the labor market has increased again recently due to the ongoing economic turmoil related to the closure of the major copper mine. The latter used to contribute a considerable portion of GDP and many jobs.
Minimum wage
The minimum wage in Panama ranges from USD 2 to USD 3 per hour. In the health, maritime and air transportation sectors, the minimum wage slightly exceeds USD 3 per hour, depending on the type of employment and the region.
The work culture in Panama
It's worth noting that the work ethic of some low-paid workers is commensurately poor. Employers aiming to build a committed and reliable workforce must balance prudence with maintaining a “good-place-to-work” reputation.
The cost of living in Panama has been on the rise. Still, it is relatively affordable compared to many parts of the world. Here, unskilled workers often take jobs to cover immediate needs, such as rent or purchasing a new phone, then leave once they've achieved their goal. Therefore, having work contracts outlining duties and expectations is a wise move.
In Panama, the worker's word often holds more weight than the employer's in disputes. The Panamanian Ministry of Labor and Workforce Development tends to defend employees rather than employers.
Work contracts in Panama
There are different types of employment contracts in Panama:
- Limited duration contracts (usually no more than a year);
- Indefinite or unlimited-duration contracts;
- Specific project contracts.
It is essential for anyone setting up a business in Panama to consult a local attorney specializing in labor law, as the employment laws here may differ from similar regulations elsewhere.
Working conditions in Panama
The standard workday in Panama is 8 hours, with a maximum of 48 hours per week. Overtime compensation is obligatory by law.
Wages are paid twice a month: at the end of the second and the fourth week. The employer deducts income tax, social security and the education fund contributions and remits the amount to the relevant authorities.
Some public holidays in Panama may coincide with those in other countries, while others are unique. Employees working on a holiday are entitled to 150% of the regular pay.
A bonus called ‘the 13th month' is paid in equal installments on April 15, August 15, and December 15.
Workers can request 30 days of vacation after 11 months of uninterrupted work. They may split their vacation into a maximum of two periods.
Sick pay and accident compensation are the domain of the Social Security System. The system is funded through contributions from both employers and employees.
A company's workforce must comprise at least 90% Panamanians, foreign nationals married to Panamanians, or foreigners who have been legal residents for at least 10 years and have a work permit. However, there are some exceptions to this rule. Companies with fewer than 10 employees can hire one foreigner. Also, if a company needs specialized or technical staff unavailable in Panama, the foreign personnel quota increases from 10% to 15%.
Panama offers several work visa types for different scenarios.
As for terminating employment, grounds for dismissal, severance pay and employee benefits, it is crucial to consult legal professionals and authorities on these complex matters.
The retirement age in Panama is 65 years for men and 60 years for women.
Keep in mind that the information contained in this article is a guide. Seeking advice from legal experts is essential.
Takeaway
Panama's labor market is stable, with the current unemployment rate at 7.7%. The key contributing sectors include construction, logistics and services. Panamanian employment laws differ from regulations in other countries. Businesses should consult legal experts to avoid common pitfalls.
Useful link:
Mitradel (Panama's Ministry of Labor and Workforce Development)
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