Summary of costs of hiring an employee in Panama
Sunday, November 07 2004 @ 11:15 PM UTC
Contributed by: susangg
COSTS OF HIRING AN EMPLOYEE IN PANAMA
WHAT YOU DEDUCT FROM EMPLOYEE'S PAY CHECK:
Social security: 7.25%
Education security: 1.25%
EMPLOYER'S SHARE OF PAYMENTS:
Social security: 10.75%
Education security: 1.5%
"Riesgo" (workers' compensation): 2%
NOTE: There is another tax called ITBMS that is applicable only to higher paid employees. My employees don't qualify so I haven't researched it. Ask your attorney.
HOW YOU MUST PAY SEGURO THESE AMOUNTS:
When you first hire an employee, you fill out a document called a "planilla." The planilla lists your employees, their Cedula numbers, and you must fill in each employee's salary. The
next month, Seguro will deliver a planilla to you listing the amounts you filled in and adding the total amount you must pay Seguro for that month. You must pay Seguro either in cash (bad idea to ever pay any government office with cash) or with a certified check. You also write in what next month salaries will be for each employee, which Seguro will use for the next month's planilla. If you make a mistake you still have to pay the amount shown on the planilla and you will write down the mistake and the planilla will be adjusted the next month. If you pay any amount other than the exact amount on the planilla, the check will be sent back uncashed and you will have to pay a penalty.
Every four months, you must pay your employee a bonus payment called the "Decimo." The Decimo is equivalent to 9% of your employee's gross pay for the preceding four months.
Every employee is entitled to 30 days paid vacation, afterone year of employment. They must take their vacation in at least 15 day increments and cannot take them a day at a time.
There are approximately 15 paid holidays each year. I do not know what they all are, but six of those days are in November (I
know that November 3, 4, 5 and 10 are on the list) and most of the rest are in December. (The government publishes a listing of paid
holidays on one of its web sites, but jnfortunately I do not know what the URL is, ask your attorney to identify the holidays for you, or you can check with your local bank.) If your employees are required to work on those days you have to pay them double time.
PAID SICK LEAVE:
Each employee gets 6 days of paid sick leave. To accumulate those days, they must provide you with a doctors "notice of incapacidad" and you note each six day on the planilla.
You have to pay overtime if your employees work more than 8 hours a day. In some cases, you have to pay time and a half if an
employee works on Sunday. (This gets complicated, ask your attorney.)
CAVEAT: Don't let your employees talk you into paying them "off the books" and not complying with the mandatory social security law. You will end up having to pay anyway, plus penalties and probably attorneys' fees. Gringos are prime targets for labor law
enforcement and it matters not a bit if your employee ASKED you to violate and even signed an agreement to that effect. Don't listen
to people who tell you "I never pay Seguro" because they (and you) WILL get caught. You are required to put your employee on Seguro 30 days after they begin employment. You may NOT (contrary to some rumors circulating) avoid Seguro by putting your employees on temporary contracts. A temporary contract does not affect your
obligation to enroll the employee and pay Seguro.