Great talent is everywhere. Central America’s main logistical hub, Panama is home to a young, dynamic, and highly-skilled talent pool. But sometimes, the problem is legally hiring the talent you need.
An Employer Of Record (EOR) is ideal for companies looking to hire and pay talent around the world without the legal hassle.
This article will walk you through the processes and advantages of hiring employees in Panama through an EOR.
Why Hire Talent in Panama?
Home to the Panama Canal, Panama is one of the main logistics hubs in the Americas. In 2021, 516.7 tonnes of cargo were transported through the canal. This has given local talent in Panama incredible exposure to the global logistics and trade industries. It also makes Panama a key strategic location for many global companies to set up offices.
Another advantage of hiring employees in Panama for companies based in the US and Canada is real-time collaboration. Panama’s time zones match up nicely with both the East and West coasts, allowing companies to seamlessly integrate Panamanian staff into their meetings and processes.
This is also true for culture and language. Many Panamanians have close ties to the US and Canada, understand the culture, and speak fluent English. Plus, for companies working with the Spanish-speaking market, hiring bilingual employees in Panama can be a huge advantage.
Notably, cost plays a significant role when hiring Panamanian employees. Salaries remain well below the US and Canadian averages. So, it’s a good opportunity to save on human resources expenditures while employing some of the top global talent.
How Can I Legally Hire an Employee in Panama?
Things can get tricky if you want to legally hire talent in Panama on your own. For compliance, you must set up a local legal entity. However, navigating Panamanian labor laws and regulations can be challenging.
This is where EORs come in handy. An EOR acts as a broker for hiring talent outside of the country you legally operate in. It will already have an entity set up and the legal framework in place to do the hiring for you. You, on the other hand, will manage the relationship with your employees.
Going through an EOR is possibly the easiest way to hire talent in Panama without all the legal hassle.
What Does an EOR Do?
Simply put, EORs take care of the legal procedures while you manage your employees. The legal frameworks for hiring in Panama can be quite different from those in the US and Canada. EORs handle worker visas and work permits, employment contracts, payroll, local compliance, termination, and other HR and financial services.
For example, did you know that employers in Panama must pay statutory thirteenth-month salaries? Or that pregnant employees are entitled to 14 weeks of maternity leave? EORs will take care of this and so much more.
Contracts and Documentation
An EOR will handle the tedious administration of preparing and collecting contracts and documentation. This includes employment offers, signed contracts, banking information, and more so you can focus on growing your business.
Employee Insurance and Benefits
When the world is your competition, it pays to incentivize new and existing hires with attractive benefits like medical, dental, vision and life insurance, and retirement savings plans. A comprehensive EOR will have those benefits built into its service offering.
Vacation and Public Holidays
In Panama, full-time employees are entitled to 30 days of paid vacation after 11 months of employment (22 working days). There are also several other types of leave to consider, such as 14 weeks of maternity as well as sick leave. An EOR can keep track of all this and the corresponding payments for you.
In addition, Panama has many statutory holidays that companies are obligated to provide to their employees.
- January 1: New Year’s Day
- January 9: Martyrs’ Day
- February (Varies): Shrove Tuesday
- March/April (Varies): Good Friday
- May 1: Labor Day
- November 3: Separation Day
- November 5: Colon Day
- November 10: Los Santos Uprising
- November 28: Independence Day
- December 8: Mother’s Day
- December 20: National Mourning Day
- December 25: Christmas
Taxes
Employers in Panama pay a range of taxes and social security contributions, which amount to just under 16% of an employee’s salary on average. They are required to contribute to social security, education, and professional risk funds.
This can be a tedious process but it is necessary to ensure you are paying employees in a compliant manner. Thankfully, an EOR can handle the logistics and ensure that payroll is processed correctly and per the regulations wherever you hire.
What Are Your Responsibilities?
While an EOR handles everything related to legal and HR processes, many aspects of the company’s workings fall under your purview. So, you take care of your staff as you would with your local hires.
That means search and recruitment, company onboarding, training, management, day-to-day communications, progress tracking, and so on should be managed by you.
The relationship with the employee won’t be all that different through EOR services, but you need to be clear with your staff on the legalities of their contracts. Of course, retention is also up to you. You will need to consider how you help your staff grow and succeed in their new roles at your organization.
What Are the Advantages of Hiring Employees Through an EOR in Panama?
Using an EOR to hire talent in Panama will save you time, reduce costs, and mitigate risks.
Navigating the employment laws and regulations in Panama can be time-consuming and complex. Since an EOR is already set up to hire employees in the country, it will be faster and easier to start hiring right away. The process won’t differ very much from hiring locally.
Set-up and HR costs associated with independently hiring abroad can be quite high, so going through an EOR can save you money. You will also be paying lower salaries than in the US and Canada, so you’re bound to see some positive impact on your bottom line.
Most importantly though, you’ll be mitigating the risks associated with non-compliance. Because EORs have extensive experience navigating complex employment and tax laws and regulations, you won’t have to worry about any issues arising.
How Do I Choose the Right EOR for Me?
There are a few key things to consider when you are selecting an EOR in Panama.
- Local Experience: Does the EOR have experience hiring in Panama? One of the biggest advantages of hiring an EOR is the assurance of compliance. Often, this requires a lot of experience, so check the EOR’s track record in the country.
- Service Scale: Do you need someone who offers a full suite of services? If you want happy employees that you can retain in the long run, then you may need to offer them benefits like insurance and other welfare. Some EORs have systems in place for this but others may not. Also, certain EORs will offer consulting services to optimize your global hiring practices.
- Data and Systems Security: Protecting intellectual property in a remote working environment is critical. Ensure your vendor of choice has a specific agreement outlining how they plan to keep your sensitive information safe and secure.
- Collaboration: Ensure your vendor’s approach to communication and client collaboration is aligned with your organization. Prefer having a quick and easy point of contact? Perhaps all you need is access to a Slack channel to quickly reach your vendor. Whatever your communication style, ensure your vendor can meet your needs.
Borderless: The Employer of Record Your Company Needs
Need an EOR? Look no further than Borderless. We can help you hire employees in Panama – giving you access to a highly-skilled talent pool without the headaches of traditional global expansion.
Book a demo today and see how we can help you quickly and easily hire, onboard, pay, and retain the Panama-based talent your organization needs.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
