Payroll Services in Panama
Fully managed Panamanian payroll – CSS contributions at the 2025 reform rates, the 13th month paid in April, August and December, and the severance fund funded every quarter, with a named specialist a phone call away.
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What Panamanian payroll actually involves
Panamanian payroll pays a 13th month in three instalments, funds severance in advance and sends contributions, educational insurance and income tax to the Social Security Fund (CSS) in a single monthly payroll. The 2025 reform raised the employer contribution, with two more increases scheduled.
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Calculate Your Employee Costs in Panama
Enter a gross annual salary, meaning twelve monthly salaries, to see the employer cost of a Panamanian employee: 13.25% CSS, 1.5% educational insurance, a professional risk premium of about 1% for office work, the 13th month with its CSS contribution, and the 2.25% severance fund. The balboa trades at par with the US dollar.
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*Indicative figures only and not definitive legal advice. Local regulations change frequently. Consult an expertPanama
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Employer Costs in Panama Explained
A Panamanian employee costs about 27% on top of twelve monthly salaries in 2026, and the share does not fall as salaries rise because no contribution has a ceiling. The CSS contribution of 13.25% is the largest item, followed by the 13th month at 8.3% and its own CSS contribution. Educational insurance, the professional risk premium and the quarterly severance fund add about 4.75%. The scheduled CSS increases add a point in March 2027 and another in March 2029. Here’s the breakdown.
The Social Security Fund (CSS) charges 9.75% to the employee and, since 1 April 2025, 13.25% to the employer on all salary, with no ceiling. Law 462 of March 2025 raised the employer rate by one point and scheduled two more: 14.25% from 1 March 2027 and 15.25% from 1 March 2029. The employee rate did not change, and the reform kept retirement ages at 57 for women and 62 for men.
Educational insurance adds 1.5% from the employer and 1.25% from the employee, also without a ceiling. Employers pay a professional risk premium set by activity, from about 1% for office work to 5.67% for the most dangerous activities. The employer withholds the employee’s contributions, educational insurance and income tax and pays everything to the CSS with its own share by the last business day of the following month.
Every employee earns a 13th month equal to a twelfth of the salary received, paid in three instalments by 15 April, 15 August and 15 December, each covering four months. The instalments carry special CSS rates: 10.75% from the employer and 7.25% from the employee, with no educational insurance. They are declared on the CSS payrolls for April, August and December.
On termination, the proportional 13th month for the current period is paid with the final settlement, alongside unused vacation and the seniority premium.
For an employee on USD 2,000 a month in an office business, the employer pays USD 265 of CSS, USD 50 of educational insurance and risk premium, USD 184.58 a month for the 13th month and its CSS contribution, and USD 45 into the severance fund: USD 2,544.58 a month, 27.2% on top of the salary. With the CSS increases the same salary costs USD 2,564.58 a month from March 2027 and USD 2,584.58 from March 2029.
The severance fund, or fondo de cesantía, is a trust that employers of indefinite-term staff pay into every quarter: the seniority premium of one week’s pay per year plus 5% of the monthly share of the dismissal indemnity, about 2.25% of salary in total. It pays the seniority premium, and the indemnity when the dismissal is unjustified or the resignation justified.
Employment income is taxed at 0% up to USD 11,000 a year, 15% on income between USD 11,000 and 50,000 and 25% above that. The employer withholds the tax from each salary and pays it through the CSS payroll with the contributions, by the last business day of the following month.
The minimum wages for 2026 and 2027 were set by Executive Decree 13 of 31 December 2025, in force since 16 January 2026. They are hourly rates by activity, company size and region: USD 3.58 for financial and insurance activities, USD 3.16 for information and communication, USD 3.02 for professional services and wholesale trade in Region 1, and from USD 1.64 in small farms to USD 5.01 for international flight crews. Region 1 covers Panama City, Colón, San Miguelito, David, Santiago and other main districts.
The day shift is up to 8 hours a day and 48 a week, the night shift 7 and 42, and mixed shifts 7.5 and 45. Overtime carries a 25% premium in the day, 50% at night and 75% when it extends a night shift, with no more than 3 hours a day or 9 a week. Employees earn 30 days of paid vacation for every 11 months of work and 144 hours of paid sick leave a year, which accumulate for two years. Maternity leave is 14 weeks, 6 before and 8 after birth, and fathers receive 3 working days of paternity leave.
A probation period of up to three months is valid only if written into the contract. An employer must notify a dismissal in writing with its date and cause. On the end of any indefinite contract, the employee receives the seniority premium of one week’s pay per year; an unjustified dismissal adds an indemnity of 3.4 weeks’ pay per year for the first ten years and one week per year after that. Employees who resign give 15 days’ notice, or two months for technical staff. At least 90% of ordinary staff must be Panamanian, and foreign specialists, up to 15%, need Ministry of Labour authorisation.
Panamanian employer contributions and payroll costs, 2026
| Contribution | Employer | Employee | Applies to |
|---|---|---|---|
| CSS social security | 13.25% | 9.75% | All salary, no ceiling; 14.25% from March 2027 |
| Educational insurance | 1.5% | 1.25% | All salary, no ceiling |
| Professional risk premium | About 1% to 5.67% | — | Rate set by activity |
| CSS on the 13th month | 10.75% | 7.25% | Each 13th month instalment |
| 13th month | A twelfth of salary | — | Paid by 15 April, 15 August and 15 December |
| Severance fund (fondo de cesantía) | About 2.25% | — | Quarterly, into a trust |
| Income tax (ISR) | — | 15% / 25% | 15% above USD 11,000 a year, 25% above USD 50,000 |
Panamanian payroll deadlines and statutory entitlements, 2026
| Item | Rule | Timing |
|---|---|---|
| CSS payroll | Contributions, educational insurance and income tax withheld | By the last business day of the following month |
| 13th month | A twelfth of salary in three instalments | 15 April, 15 August, 15 December |
| Severance fund | Seniority premium plus 5% of the indemnity share | Every quarter |
| Vacation | 30 days of paid leave | For every 11 months of work |
| Seniority premium | One week’s pay per year of service | At the end of any indefinite contract |
| Unjustified dismissal | 3.4 weeks’ pay per year, one week after year ten | On top of the seniority premium |
| Sick leave | 144 hours a year on full pay | Accumulates for two years |
| Minimum wage | USD 1.64 to 5.01 an hour | In force since 16 January 2026 |
Employer cost of a USD 2,000 monthly salary in Panama, 2026 to 2029
| Period | CSS | Educational insurance and risk | 13th month with CSS | Severance fund | Total monthly cost | On top of salary |
|---|---|---|---|---|---|---|
| From April 2025 | USD 265 | USD 50 | USD 184.58 | USD 45 | USD 2,544.58 | 27.2% |
| From March 2027 | USD 285 | USD 50 | USD 184.58 | USD 45 | USD 2,564.58 | 28.2% |
| From March 2029 | USD 305 | USD 50 | USD 184.58 | USD 45 | USD 2,584.58 | 29.2% |
Educational insurance at 1.5% and a professional risk premium of 1%, an approximate office rate. The 13th month is a twelfth of salary plus 10.75% employer CSS on it; the severance fund is 2.25% of salary. The same shares apply at any salary because there is no ceiling. These are TopSource calculations from the verified 2026 rates.
Rates, amounts and deadlines shown are for 2026 and were verified on 29 September 2026 against the Official Gazette, CSS regulations, the Labour Code and published tax sources. The employer CSS rate rises in March 2027 and March 2029. This page is general information, not tax or legal advice.
How our Panamanian payroll service works
Why Outsource Your Panama Payroll to TopSource
TopSource for payroll, Employer of Record or any other of our services represents a simpler, more reliable and transparent option.
We don’t hide fees or sneak price increases. We run Panamanian payroll in-house and file under your own CSS registration rather than a bureau’s, so the same team that files your CSS payroll answers your calls. You get a named account manager, one consolidated monthly invoice covering salaries, contributions, taxes and fees, and one live Portico view of Panama beside every other country we run for you. Portico syncs with your time-tracking, leave and HR systems via API – set up by our onboarding team, not left to yours. GDPR, SOC 2 and ISO 27001 certified.
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Panamanian payroll FAQs
Employers pay 13.25% CSS social security, 1.5% educational insurance and a professional risk premium of about 1% to 5.67% depending on the activity, all without a ceiling. Employees pay 9.75% CSS and 1.25% educational insurance. The employer CSS rate rises to 14.25% in March 2027 and 15.25% in March 2029.
The 13th month is a twelfth of the salary earned, paid in three instalments by 15 April, 15 August and 15 December, each covering four months. The instalments carry CSS of 10.75% for the employer and 7.25% for the employee, with no educational insurance.
Law 462 of March 2025 raised the employer CSS contribution from 12.25% to 13.25% from 1 April 2025, and schedules further increases to 14.25% from 1 March 2027 and 15.25% from 1 March 2029. The employee contribution stays at 9.75%, and retirement ages remain 57 for women and 62 for men.
Executive Decree 13 of 2025 sets hourly minimum wages for 2026 and 2027 by activity, company size and region, in force since 16 January 2026. They range from USD 1.64 to USD 5.01 an hour, with USD 3.58 for financial and insurance activities and USD 3.02 for professional services.
It is a severance fund that employers of indefinite-term staff pay into every quarter, held in trust by an authorised private administrator. The deposit covers the seniority premium and 5% of the monthly share of the dismissal indemnity, about 2.25% of salary in total.
Every indefinite contract ends with a seniority premium of one week’s pay per year of service, whatever the reason. An unjustified dismissal adds an indemnity of 3.4 weeks’ pay per year for the first ten years and one week per year after that, for employment that started after the 1995 Labour Code reform.
Employment income is taxed at 0% up to USD 11,000 a year, 15% on income between USD 11,000 and 50,000, and 25% above USD 50,000. The employer withholds the tax each pay period and pays it through the CSS payroll with the social security contributions.
CSS contributions, educational insurance and the income tax withheld from salaries are paid to the CSS together by the last business day of the following month. The 13th month is due by 15 April, 15 August and 15 December, and severance fund deposits are made every quarter.
Employees earn 30 days of paid vacation for every 11 months of continuous work, paid at their monthly salary or the average of the last 11 months if higher. They also build up 144 hours of paid sick leave a year, which can be accumulated for two years.
Registering as an employer with the CSS requires a Panamanian company or a registered branch. Without one, the usual route is an Employer of Record. TopSource can run payroll for your Panamanian entity or employ your team through our Employer of Record service.
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