Minimum Wage Changes in the Republic of Panama – 2018

Eduardo Achurra MonteroPartner, Pardini & Asociados

By means of executive decree No. 75 of December 26th of 2017, President Varela approved the new minimum wage that will enter into effect as of January 1, 2018

Legal basis and historical reference

According to article 66 of the Constitution of the Republic of Panama, the country`s labor 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 competitively, resulting on massive layoff

Since the commission did not achieve bringing a negotiated decision, then Executive Branch resolved the controversy by issuing the above mentioned executive decree.

 

Highlights of the new minimum wage

1. Economical Regions

  • Region 1: Panamá, Colón, San Miguelito, David, Santiago, Chitré, Aguadulce, Penonomé, Bocas del Toro, La Chorrera  y Arraiján, Capira, Chame, Anton, Nata, Las Tablas, Bugaba, Boquete, Taboga, San Carlos, Chepo, Guarare, Los Santos, Pedasi, Dolega, San Felix, Baru, Boqueron, Portobelo, Donoso, Santa Isabel, Santa Maria, Parita, Pese, Atalaya, Changuinola, Chiriqui Grande.
  • Region 2:  Rest of the country
  • For some activities the government has set the term of “National”, which means that regardless of the region, the minimum wage will be a single amount.

 

2. The minimum wage is calculated by hour

 

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

  1. Economic activity (type of industry)
  2. Professional activity (profession)
  3. 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:

  • Domestic employees in Region 1 – US$ 275.00
  • Domestic employees in Region 2 – US$ 250.00

 

Schedule of New minimum wage

Economic activity

Region 1

Region 2

Agriculture, cattle farming, hunting and aquiculture (National)

  • Small Business
  • Large Business (11 employees or more)

 

 

Banana industry (National)

 

 

 

1.53

1.87

 

 

1.97

 

 

1.53

1.87

 

 

1.97

Fishing (National)

  • Artisan fishing
  • Industrial

 

 

2.15

2.36

 

 

2.15

2.36

Agro industry

  • Small Business (agriculture only) (National)
  • Large Business (agriculture only) (National)
  • Small Business (processing only)
  • Large Business (processing only)

 

1.53

1.87

2.20

2.72

1.53

1.87

2.20

2.24

 

Quarry exploitation (National)

  • Sand extraction (National)
  • Mining (National)

 

2.85

2.85

2.97

2.85

2.85

2.97

Manufacture industries

  • Small business
  • Large business
  • Distillation, rectification and blending of alcoholic beverages
  • Production of cement and concrete
  • Machinery repair and refrigeration equipment
  • Sugar cane processing (National)

 

 

2.20

2.85

2.85

 

3.14

2.85

2.85

 

 

1.85

2.35

2.40

 

2.99

2.31

2.85

 

Electricity, gas and water, Steam and air conditioning (National)

  • Ice production

3.14

2.72

3.14

2.24

Water supply, sewage, waste management and sanitation activities (National)

 

  • Sewage
  • Collection, treatment and disposal of waste
  • Processing and recovery of waste materials

 

3.14

 

2.85

2.85

2.72

3.14

 

2.35

2.35

2.24

Construction

  • Agriculture and forest land drainage (National)

3.14

1.92

 

2.95

1.92

 

Wholesale and commission business

  • Sugar cane products and sub-products sale (National)
  • Fuel tanks

 

2.72

2.72

2.72

 

2.23

2.72

2.23

Retail

  • Small Business
  • Large Business (11 employees or more)
  • Gas stations

2.20

2.72

2.35

2.72

1.84

2.23

1.93

2.23

Free Trade Zones

  • Colon Free Zone

3.47

3.17

2.32

—-

Hotel

  • Small Business
  • Large Business (11 employees or more)
  • Hotel and resorts with franchise
  • Hotel with more than 200 rooms
  • Motels and hostels

 

2.26

2.72

2.85

2.85

2.85

 

1.87

2.23

2.34

2.34

2.34

Restaurants

  • Small Business
  • Large Business (11 employees or more)
  • Discotheque, bars and cantina  (National)

 

2.20

2.85

3.14

 

1.85

2.34

3.14

Transportation

  • Cargo transport in free trade zones or special economic zones
  • Aquatic and aerial transport and complementary activities related to this type of business
  • Port workers (National)
  • International airports (National)
  • Bus drivers (National)
  • School bus drivers
  • Crew member for international flights (National)

Warehousing, storage and mail

 

2.85

3.14

2.85

 

3.27

3.47

3.14

2.72

4.45

 

2.72

 

2.34

2.32

2.32

 

3.27

3.47

3.14

2.24

4.45

 

2.23

 

Information and Communication (National)

  • Edition Activities
  • Production of radio and TV programs, movie production, video, sound, movie theater and News agencies
  • Telecommunication, radio and TV broadcasting (National)
  • Cameraman (National)

2.85

2.85

 

2.85

3.14

3.14

2.85

2.35

 

2.34

3.14

3.14

Financial Activities and Insurance (National)

  • Pawn shop (National)

3.17

2.77

3.17

2.77

Real estate activities

  • Commercial centers (with more than 50 commercial spots) (National)

 

3.14

3.14

 

2.80

3.14

 

Management and back up service Activities (National)

  • Rental Activities (National)
  • Car rental
  • Internet cafe activity
  • Employment agency activity (National)
  • Tour agencies, tour operators, reservation service
  • Building  and landscape service (National)
  • Garden and landscape maintenance service (National)
  • Office management, business support (National)Photocopy service
  • Security and investigator agency service (National)

 

 

2.85

3.14

2.59

2.85

2.85

 

2.72

1.92

 

2.72

2.72

 

 

2.85

3.14

2.41

2.85

2.24

 

2.72

1.92

 

2.72

2.72

Professional, Scientist and technical activities (National)

  • Veterinarian activities
  • Law firms, accounting and audit firms (15 employees or more) (National)
  • Law firms, accounting and audit firms (14 employees or less) (National)
  • Lawyers (National)
  • Radio, newspaper and television journalists (National)
  • Air transportation mechanic (National)
  • Ground transportation mechanic (National)
  • Maritime transportation mechanic (National)

 

2.72

2.72

 

2.85

2.64

3.34

3.12

4.45

3.12

3.47

2.72

2.23

 

2.85

2.64

3.34

3.12

4.45

3.12

3.47

Teaching (management staff)

2.85

 

2.32

 

Social and human health services

  • Clinics and hospitals
  • Health technicians (National)

 

2.85

3.14

3.14

2.32

2.34

3.14

Art, Entertainment and creativity (National)

  • Gambling, bets and casinos (National)
  • Gymnasiums (National)

 

2.85

3.34

3.14

2.85

3.34

3.14

Other Services activities

  • Non profitable organizations
  • Computer repair and maintenance (National)
  • Domestic and personal belongings repairs and maintenance
  • Small Business
  • Large Business (11 employees or more)
  • Residential condominium regime (Buildings with more than 10 levels) and homeowners associations (National)
  • Spa`s, Beauty clinics

 

 

2.85

2.72

 

2.72

2.20

2.72

3.14

 

3.14

 

 

2.32

2.23

 

2.72

1.84

2.29

3.14

 

2.34

 

National or Foreign organisms activities (National)

 

2.85

 

2.85

 

 

How to calculate an 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$_______ minimum wage

(I.e. Region 1- Construction 3.14   x   48 hour    x    4.33 =  US$ 652.61 minimum wage)

 

By Eduardo Achurra.

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