Many professionals in Panama employ domestic staff but are unaware of their legal obligations regarding payroll, social security, and benefits. This article explains how payroll outsourcing works, its benefits, and how CES can simplify this management.

What does Panamanian law say about domestic staff? What every employer should know

Hiring domestic staff in Panama is common practice, but few professionals truly understand the legal obligations that come with it. Here’s a clear and simple breakdown:

Who is considered a domestic worker?

The Labor Code defines a domestic worker as someone who continuously provides cleaning, assistance, or other household-related services.

Excluded are:

• Close relatives (up to the fourth degree of consanguinity or second of affinity).
• People who work less than 3 days a week in the same household.
• Minors under 14 years old.

The contract: verbal or written?

The law allows for verbal contracts, but this “convenience” can be a mistake. 

• With a written contract, there is a 2-week probation period.
• With a verbal contract, no probation applies, and the employer assumes responsibility from day one.

Recommendation: always opt for a written contract for greater protection.

Basic rights of domestic staff

• Full rest from 9:00 p.m. to 6:00 a.m.
• One weekly day of rest.
• Paid annual vacation.
• Payment of the 13th month in three installments each year.
• Seniority premium (one week’s salary for each year worked).
• Severance pay in case of dismissal without cause, based on seniority (from 1 week to 7 months of salary).

Mandatory registration with the CSS

Every employer must register their worker with the Social Security Fund (CSS). Starting April 2025, the employer’s contribution will increase from 12.25% to 13.25%, in addition to occupational risk payments.

Practical example:

If your domestic worker earns $500 per month, the real cost to the employer increases by 15% to 17% due to social security contributions

Penalties for non-compliance

• Failing to comply with the law carries huge risks:
• $100 fine for not registering the worker.
• Surcharges and interest for late payments of contributions.
• Fines up to $5,000 in serious cases.
• Full liability for work-related accidents or illnesses.

How does payroll outsourcing help?

In this context, outsourcing payroll management is a practical strategy. The provider handles registration, calculations, reports, and payments.

This ensures that:

• The employer complies with the law.
• The worker receives their rights.
• Legal issues and penalties are avoided.

In conclusion, formalization is not optional. 

Outsourcing payroll not only simplifies the employer’s life but also protects their assets and ensures a fair, safe labor relationship.

Discover how CES can manage your domestic payroll and help you avoid legal complications.