It would seem that drafting and knowing how to write is everything. A better draft or ability to write clearly could have avoided many problems. At the beginning of September, there was furor among Panamanian professionals. The Ministry of Commerce published a resolution authorizing Multinational companies to hire foreign professionals… or so they said. I read headlines such as: “Opening to foreign professionals will impact the middle class”. The negotiations regarding TiSA (Trade in Services Agreement, a proposed international trade treaty) caused this furor, particularly with Panama’s measures to qualify. Panama participates in the TiSA negotiations with 23 members of the WTO. These negotiations continue in December 2017, after being stalled by the US.
Multinational – requirements for headquarters in Panama
The licensing commission for Multinational Company Headquarters issued a resolution for Multinationals. This resolution indicated the new qualifying requirements. One of the requirements is to have 2,500 professionally qualified employees. However, this resolution indicated that said professionals needed to be qualified in their countries of origin, without needing to be verified by respective professional boards in Panama. Specifically, this resolution indicated that the foreigner would be considered qualified if they had a Bachelor’s Degree, a Master’s Degree or Doctorate, or were duly licensed to practice in their qualifying country. The reactions from professional guilds were hat this would affect not only the working class, but also the middle class.
This discussion seemed to miss the purpose of the requirements entirely. Multinationals are not required to have 2,500 professionally qualified employees in Panama in order to qualify. They must have 2,500 professionals in their offices, worldwide, in order to qualify. It is therefore obvious that such professionals would be duly qualified in their respective nations, and not Panamanian nationals. The second major requirements is a capitalization of 200 million US dollars. The new resolution sought to establish that for those multinationals that did not qualify with a consolidated capital of 200 million, they could qualify if they had the 2,500 professionals worldwide. After reviewing the wording of the resolution, Panaman’s Law Society (Colegio Nacional de Abogados) requested that it be redrafted.
Foreign professionals in Panama
Panama is a small market: we have a population of only 3.9 million (depending on which day of the week you count). This means that the professional workforce also has its limitations when there is unexpected growth in some industries. Studies have shown that Panama does need foreign professionals to meet these labor needs. Official sources indicate that Panama lacks some 159,000 specialized professionals for the needs of the country. But there is also resistance to allowing foreign professionals to come work in Panama, with the fear that “they will steal all the good jobs”.
Of course, for the executives and employees of Multinationals who have qualified under the special licensing rules: there are special rules and exceptions. It is possible for a multinational company to hire a professional, duly qualified to do the job internationally, have them working in Panama, and they simply are not allowed to sign off on documents in Panama (i.e. a lawyer could work in-house for a multinational, but would need a Panamanian lawyer to sign off on any legal documents for Panama).
Salaries in Panama
It is important to understand the idiosyncrasies of the Panamanian labor market. Salaries for highly qualified jobs pay less than in North America or Europe. Executives of the multinationals are among the highest paid employees in Panama: these jobs are highly coveted. English and Spanish are essential: for working internationally and locally in Panama. One of the biggest constraints to foreign employment is the 10% and 15% limits established for work permits and immigration: a Panamanian company can only have 10% maximum of its workforce (averaged out over salaries, not just the number of employees) as foreigners. For highly technical staff or experts in a field, this increases to 15%. Additionally, some professions are exclusively reserved for Panamanians: for example, medicine, dentistry, nutrition, pharmacy, accounting, psychology, architecture, journalism, and law.
The minimum wage in Panama is between $500.00 to $700.00 (lower for some areas of the economy, such as domestic help). Normal working hours are 8-hour days (9 hours including lunch hour) and overtime for more than this. Additionally, there are special rules regarding shifts starting or ending before 6.00 a.m. or 6 p.m., and there are not rules regarding flexi-time (which basically ensures that employers avoid it, because the Labor Code specifies that the employee is always right). So, if you had an employee that worked 12 hours Monday and then 4 hours Tuesday and they alleged that 4 hours of the time worked on Monday was overtime, the employer could be liable to pay this. There are companies working with flexi-time, but it is outside of the archaic constructs of the Labor Code.
Real costs versus “salary”:
Additionally, Panama offers 30 days (calendar, not working) holiday pay each year and additionally pays the 13th month. When you calculate the cost of an employee (contingent liabilities plus Social Security costs), you should expect this to cost about 1.41 times the actual declared salary. So an employee earning $600.00 a month, with contingent liabilities calculated, costs about $850.00 a month. An employee earning $700.00 a month costs the company about $1,000.00 a month, with contingent liabilities. These are rough estimates.
According to figures released in August 2017, the following are average salaries:
- $2,435.00 – Multinationals
- $1,085.00 – Mining companies
- $1,063.00 – Education (includes universities & private training)
- $1,029.00 – Doctors, medicine & health
- $985.00 – Finance (banking sector)
- $681.00 – Average monthly salary
Of course, as mentioned, these are the averages.
On the 12th of September, the same MICI office that had issued the “problematic” resolution mentioning 2,500 foreign professionals, issued a new resolution. This resolution left the previous one without effect, and presented different requirements for Multinationals wishing to be established in Panama.
These requirements are:
- capital of 200 million USD or more
- presence in 40 countries or more
There is no mention in the new resolution of the number of foreign professionals working for the multinational. The new resolution is Resolution No. 20-17 (Sept. 11, 2017).
For more information regarding the requirements to establish Multinational offices in Panama or for foreign professionals to work in Panama, please do not hesitate to contact our office.