• Minimum Wage Changes in the Republic of Panama
  • March 16, 2010
  • Law Firm: Pardini & Asociados - Panamá Office
  • By means of executive decree No. 263 of December 21st of 2009, President Martinelli´s approved the new minimum wage that will enter into effect as of January 1, 2010

    Legal basis and historical reference

    According to article 66 of the constitution of the Republic of Panama, the law will establish the mechanism to adjust periodically the minimum wage. In fulfillment of this article the previous government created a “Minimum wage National Commission”, composed by the workers union and the private sector (employers). This commission historically has never concurred with a satisfactory decision for a new minimum wage.

    The arguments of each party are always extremely similar. On one hand, workers unions claim that cost of living is too expensive these days, and the other party, the private sector claims that increasing the minimum wage will affect productivity and competitivity, resulting on massive layoff.

    Since the commission never agreed and with a dead line approaching, the government took the lead and approved the abovementioned executive decree.

    Experience shows that although both parties have substantial arguments, the minimum wage is a topic that provokes a fleeting stress among the population rather than an unstoppable economical catastrophe. Furthermore, analysis demonstrates that economic activities have been only slightly affected after each change to Panama´s minimum wage.

    Highlights of the new minimum wage

    1.       From now on, there is only two minimum wage geographical regions (Just a few months ago the minimum wage was divided in 3  geographical regions)

     

    &smbull;         Region 1: Panamá, Colón, San Miguelito, David, Santiago, Chitré, Aguadulce, Penonomé, Bocas del Toro, La Chorrera  and Arraiján

     

     

     

    &smbull;         Region 2:  Rest of the country

     

     

     

    2.       The minimum wage is calculated by hour

     

    3.       The new minimum wage rate will also consider the following:

    a.       Economic activity (type of industry)

    b.      Professional activity (profession)

    c.       Size of the company (small or large)

     

     

    4.       In accordance to the labor law what is considered as a small business?

     

    Business

    with 10 or less permanent employees

    Agriculture (food and/or animals); service and retail business 

    Manufacture companies with 15 or less employees

    Agriculture-industrial companies with 20 or less employees

     

     

    5.       New salary rate for domestic employees is:

    &smbull;         Domestic employees in Region 1 - US$ 160.00

     

     

    &smbull;         Domestic employees in Region 2 - US$ 145.00

     

     

     

    Schedule of New minimum wage

    Economic activity

    Region 1

    Region 2

    Agriculture, cattle farming, hunting and aquiculture

    &smbull;         Small Business

     

     

    &smbull;         Large Business

     

     

     

     Farmyard birds breeding and sub products with more than 50 employees

     

    1.06

    1.24

     

    1.24

     

    1.06

    1.24

     

    1.24

    Fishing

    &smbull;         Handmade fishing

     

     

    &smbull;         Industrial

     

    1.50

    1.56

     

    1.50

    1.56

    Mining and Quarry exploitation

    &smbull;         Metallic mining extraction

    1.81

    1.81

    1.81

    1.81

    Manufacture industries

    &smbull;         Small business

     

     

    &smbull;         Large business

     

     

    ü  Distillation, rectification and blending of alcoholic beverages

     

     

    ü  Manufacture of paints, varnish and coating products

     

     

    ü  Production of cement and concrete

     

     

    ü   Machinery repair and refrigeration equipment

     

    1.53

    1.81

    1.81

     

     

    1.81

    2.00

    1.81

     

    1.28

    1.50

    1.52

     

     

    1.52

    1.81

    1.52

    Electricity, gas and water

    &smbull;         Production, transmission and distribution of electrical energy

    2.00

     

    2.00

    2.00

     

    2.00

    Construction

    2.00

    1.90

     

    Wholesale and commission business

    &smbull;         Import Agencies

     

     

    &smbull;         Free trade Zones and Special economical zones

    1.81

    1.81

    2.00

    1.49

    1.49

    1.49

    Retail

    &smbull;         Small Business

     

     

    &smbull;         Large Business

     

     

    ü  Supermarkets (chains)

     

     

    ü  Gas stations (chains)

     

    1.51

    1.81

    1.81

    1.81

     

    1.26

    1.49

    1.49

    1.49

    Hotel

    &smbull;         Small Business

     

     

    &smbull;         Large Business

     

     

    ü  Hotel and resorts with franchise

     

    1.55

    1.81

    1.81

     

    1.29

    1.49

    1.49

     

    Restaurants

    &smbull;         Small Business

     

     

    &smbull;         Large Business

     

    1.53

    1.81

     

    1.28

    1.49

    Economic activity

    Region 1

    Region 2

    Transportation

    &smbull;         Cargo transport in free trade zones or special economic zones

     

     

    &smbull;         Aquatic and aerial transport and complementary activities related to this type of business

     

     

    &smbull;         Port workers with more than 50 employees

     

     

    &smbull;         International airports (with more than 50 commercial business spots)

    1.81

    1.81

     

    1.81

     

    2.00

    2.00

    1.49

    1.49

     

    1.49

     

    2.00

    2.00

    Warehousing, storage and mail

    1.81

    1.49

    Telecommunications and telecommunication network maintenance

    2.00

    2.00

    Financial intermediation

    &smbull;         Banks and financial societies

     

     

    &smbull;         Loan and saving cooperative

     

     

    &smbull;         Insurance plan activities and private pensions

     

     

     

    2.00

    2.00

    2.00

    2.00

    2.00

    2.00

    2.00

    2.00

     

    Real estate activities

    &smbull;         Commercial centers (with more than 50 commercial spots)

    2.00

    2.00

    1.82

    2.00

    Rental activities

    &smbull;         Auto motor vehicle rental

     

     

    &smbull;         Internet cafes

     

     

     

    1.81

    1.81

    1.72

    1.81

    1.81

    1.68

    General Business activities

    &smbull;         Security and investigation activities (security agencies)

    1.81

    1.81

    1.81

    1.81

    Common, social and personal services

    &smbull;         Residential condominium regime (Buildings with more than 10 levels)

     

     

    &smbull;         Gambling, bet and casino activities

     

     

    &smbull;         Discotheques

     

     

    &smbull;         Spas, esthetic clinics

     

     

    &smbull;         Gymnasium

     

     

    &smbull;         Health clinic and hospitals

     

     

    &smbull;         Journalists

    1.81

    2.00

     

    2.00

    2.00

    2.00

    2.00

    2.00

    2.00

    1.49

    2.00

     

    2.00

    2.00

    1.49

    1.49

    1.49

    2.00

     

    How to calculate and employee salary?

     

     

     

    1 month fixed formula:  4.33

     Labor hours

    5 days a week = 40 hours

    5 ½ days = 44 hours

    6 days = 48 hours

    Salary per hour

     Salary per hour x labor hours x 1 month fixed formula = US$&under;&under;&under;&under;&under;&under;&under; minimum wage

    (i.e. Region 1- import agency  1.81   x   48 hour    x    4.33 =  US$ 376.19 minimum wage).