Panama Severance Calculator 2026
Last updated: January 2026
The labor settlement (liquidación) in Panama for 2026 is calculated according to the Labor Code in US dollars. Components include: seniority premium (prima de antigüedad) of 1 week per year for all workers regardless of termination reason, severance for unjust dismissal (3.4 weeks per year), advance notice (preaviso), proportional vacation (30 calendar days/year), and proportional décimo tercer mes. Panama has unique features: the prima de antigüedad is paid even in voluntary resignation, making it a true earned benefit. Vacation is 30 calendar days per year — the highest in Central America. The daily salary is monthly salary ÷ 30. Unjust dismissal also includes an additional indemnity surcharge.
FAQ
What does a labor settlement include in Panama?
A settlement includes: prima de antigüedad (1 week/year, always paid), severance (3.4 weeks/year, dismissal only), preaviso (advance notice), proportional vacation (30 days/year), and proportional décimo tercer mes. The prima is paid regardless of how employment ends.
What is the prima de antigüedad in Panama?
The prima de antigüedad equals 1 week of salary per year of service. It is unique because it is paid to ALL workers regardless of whether they resigned or were dismissed. It functions as an earned seniority benefit, not a punishment for dismissal.
How is severance calculated in Panama?
For unjust dismissal, severance equals 3.4 weeks of salary per year of service, in addition to the prima de antigüedad. Partial years are proportional. Combined with the prima (1 week/year), total severance for dismissal is 4.4 weeks per year.
How many vacation days are paid in the settlement?
Panama grants 30 calendar days of vacation per year — the highest in Central America. Unused vacation is paid proportionally in the settlement. After 11 months of service, the worker is entitled to their full 30-day vacation period.
Is the settlement taxable in Panama?
Severance pay, prima de antigüedad, and proportional décimo tercer mes are exempt from ISR in Panama. The preaviso (advance notice payment) is subject to normal ISR withholding. CSS deductions apply to preaviso but not to severance components.