Five Things You Need to Know about Hiring Domestic Employees Panama Labor Laws

 This is an article written by Ibsen Ávila from Legal Corp:Personalized and Innovative Legal Consultant. Panama employment laws require that all permanent household employees be on a payroll. Permanent workers are entitled to benefits above and beyond their salaries. In Panama a permanent worker is economically dependant on the employer, receives specific orders from the employers, their position has specific rules, and the employees has a regular, defined work schedule.  

2. Independent workers register for social security on their own, pay their own taxes, and pay their own social security benefits.

3. If you have a house employee who works for you, lets say, two times a week, more or less, who’s schedule can be moved around to fit your or his/her necessities, in order to attend other business or clients, then these workers are not considered permanent.

For these cases, you should draft a document in which it’s clearly stated that this person is an independent, that he/she has other clients and that in no way they are bound to you by a permanent contract. Therefore you are under no obligation to cover social security, labor obligations, vacations, 13th month payments, any kind of medical costs, nor are you responsible for any taxes the worker owes to the government regarding income tax.

4. A contract is important in this regard because without a contract signed by both parties the worker can report you to social security as a rogue employer. It is possible that the Social Security agency will find that you own employee social security payments. You can fight this in court but it is a lot easier and cheaper to have a written contract to start with.

5. Common mistakes that people make when hiring an informal or independent worker:

  • Give them vacations and vacation.  Independent workers are not entitled to vacation or vacation pay for that matter.
  • Give them days off.  Independent workers have no days off. They are business persons, owners of their time.
  • Cover medical expenses in cases they get sick or give them sick leave. Independent workers have to pay their own social security and are not entitled to sick leaves.
  • Hand out bonuses, payment for extra hours, 13th month payment, etc., that would generally fit the permanent worker criteria. Independents get none of this.
  • Use the word SALARY.  Independents don’t get salaries; they get payment for services rendered.  Never ever use the word salary when talking about payments to independent workers.