Wednesday, October 4th, the Ministry of Economy & Finance (read: Tax Department) published in the Gazette 174-page list of companies which have been struck off the register. This striking off is done in accordance with Article 318-A, subsections 2, 3 & 4 of the Tax Code. Article 318-A of the Tax Code deals with the payment of annual renewal fees (franchise tax) for corporations, foundations & LLCs.
This is the third such list it has published this week. The first was published on Monday. A second on Tuesday, and a fourth list was published today, just before I published this article! I almost missed that list. It’s an amazing 40,000 companies that are not in good standing. It’s estimated that these companies owe some $36 Million in government fees alone.
Effects of striking off:
Subsection 2 of Article 318-A establishes that failure to pay this annual renewal fee for 3 years consecutively results in striking off. Subsection 3 establishes the following effects of being struck off:
- blocked from initiating legal action, doing business transactions or transfering assets;
- unable to make claims or exercise rights;
- blocked from filing corporate changes of any type.
Nonetheless, if your corporation is struck off, you may do the following:
- request reactivation (paying an additional $1,000.00 penalty fee for reactivation);
- defend any legal process begun against the company;
- continue with any legal processes which started before striking off.
Automatic dissolution after striking off:
It is important to note that you only have a 2-year period after it is struck off to reactivate it, otherwise striking off leads to automatic dissolution at the Public Registry. Consequently, the company will be considered to be wound up. This means that any company that is in arrears for 5 years or more, is automatically dissolved (previously this was a 10-year period).
The lists of companies can be found in the following gazettes:
- Resolution 201-5610
- Resolution 201-5611
- Resolution 201-5612
- Resolution 201-5613
- Resolution 201-5614
- Resolution 201-5615
- Resolution 201-5616
- Resolution 201-5617
- Resolution 201-5618
- Resolution 201-5619
- Resolution 201-5620
- Resolution 201-5621
- Resolution 201-5622
- Resolution 201-5623
- Resolution 201-5624
- Resolution 201-5625
- Resolution 201-5626 (MBCL – Muren)
- Resolution 201-5627
- Resolution 201-5628
- Resolution 201-5629
- Resolution 201-5630 (Puente Hombre – Rokewood Trading)
- Resolution 201-5631
- Resolution 201-5632
- Resolution 201-5633
- Resolution 201-5634
- Resolution 201-5635 (USA – ZYXXX)
What do you need to do?
If you a corporation that owns property or has assets of any kind, and you have not been paying the annual renewal fees, then you have 2 years to reactive the company if it is on these lists. You need to pay all outstanding government fees and the $1,000 reinstatement fee (and registered agents and directors fees, if applicable). Otherwise, in 2 years from now, the Public Registry will dissolve the company automatically.
This is the first time any such list has been published since the amendment was introduced in 2016. Therefore, it contains companies that have not paid for five or even seven years, and not just those who owe 3 years in fees. This is the moment to bring your Panamanian corporation back into good standing if you are actually using it or you need it.
Finally, if you have any questions regarding your Panama Corporation and striking off, please do not hesitate to contact our office. Our staff would be happy to assist you.
While you don’t need a personal bank account in Panama to live here, it may lower transaction prices and make paying bills easier.
Reasons to set up a personal bank account
Many expats have differing views on whether or not you need to open a personal bank account. If you have an account in USD, it may make little difference in the bank charges. In other currencies, the bank charges could be high and might be reason enough to set up your account here.
Another reason for setting up a personal bank account in Panama is to apply for the friendly nations visa. One requirement is that you have a personal account with no less than a mid-four figure balance. You should deposit at least USD$5,000 in the account, then. The friendly nations visa will provide you with permanent residency, It also provides a work permit (depending on which application you make). And it allows you to eventually naturalize as a Panamanian (if having a second passport is your goal).
Paying bills online: many of the banks will allow you to pay bills online, although this is not for all utilities companies. Some still requirement payment at their office or through an approved intermediary. You can also pay your personal taxes online through some banks (such as income tax or property taxes).
Requirements: personal bank account
The requirements vary slightly from bank to bank. Nonetheless, the general requirements are the same:
- Complete the bank account application forms, all of them
- Your passport (the bank will make its own copy)
- 2nd ID – such as driver’s license
- Professional reference letter – such as from a lawyer / accountant / company you have done work with
- Banking reference – they are looking for proof of a banking relationship of more than 2-3 years
- If you don’t have a “bank account” but have a credit union account, this will usually work
- They may accept an investment account letter instead of a “bank”
- Minimum opening deposit: $1,000.00 (some banks do require less)
- Minimum balance:
- checking: usually somewhere between $250.00 to $1,000.00
- savings: usually somewhere between $500.00 to $1,000.00
The forms ask for proof of source of funds: the bank is interested in knowing how you support yourself financially and where they should expect to receive income from.
If you are applying for your friendly nations visa through our office, we would be happy to accompany you to the bank for your initial interview.
Choosing a bank:
Consider the following when choosing where to apply for your personal bank account:
- Where you live and branches that you have close by
- Online banking – which ones have their website in English
- What online banking services do they offer?
- Do you / your friend / the company you work for already have a relationship with the bank?
- Expat opinions regarding customer service – you will be able to find complaints against every bank, but some are worse than others
- What is their online security platform? Will you need a widget in order to pay bills and make transfers?
- Number of ATM machines available in your area of town if you like to get cash out
For more information, do not hesitate to contact our office for assistance.
Property Taxes: Types
When you are thinking about retiring, the last thing you want to deal with are the details. But the devil is in the details, and one of the details you need to clearly understand is property taxes in Panama. There are a number of property taxes in Panama, but the principal ones that you need to be aware of are:
- Annual property tax
- land tax
- improvements tax – or tax exemptions
- Transfer Tax (2%)
- Capital Gains Tax
Annual Property Taxes – Land Tax & Improvements
Whether you own an apartment or a house, you need to know what taxes are going to be charged by the Panamanian DGI (Dirección General de Ingresos) each year. We recommend that before you buy, you ask the sellers for the tax statements so that you can see the history of what they have paid each year. You should also ask what is tax exempt and when the tax exemption runs out. As I said above, the annual property tax has two parts:
- land tax
- improvements tax or tax exemption
The land tax
There is a difference between owning a condo and owning a house. The property taxes are the following:
- Condominium: you will pay 1% of your proportional value of the land under the building. Say the land is worth $1,000,000 and there are 84 apartments in the building: you are responsible for $11,904.76 in land value. Your 1% per annum is: $119.05. Whatever the value of your assigned piece of the land, your tax rate will always be 1%.
- House – land taxes: This is a little more complicated! The first $30,000.00 in value is exempt from taxes. Then the following rates apply:
- 1.75% = $30,000 < and up to $50,000.00
- 1,95% = $50,000 < and up to $75,000.00
- 2.1% anything over $75,000.00
- So, if the land value of your property is $85,000.00 you will pay: $0.00 on the value between $0.00 to $30,000.00; 1.75% on $20,000.00; 1.95% on $25,000 and 2.1% on $10,000.00. Which is about $1,050.00 per annum in property taxes.
What you need to look out for is cases, which I have seen, where the previous owner, in order to get a reduction in 2005 or so on their capital gains tax, did a property appraisal and pushed the value of the land up over $250,000.00, and at these rates, the property taxes each year are about $4,500.00! This means that you will pay in April, August & December about $1,500.00 in property taxes.
Improvements Tax or Tax Exemptions
The other part of the equation in calculating your property taxes is the tax on the improvements. There are many properties that have a 20-year tax exemption on the improvements, and so for now you only have to pay the land taxes. But the questions to consider are:
- Are the improvements exempt?
- If so, when the tax exemption expire?
- What is the tax rate after the exemption expires?
So, if you purchased an apartment in a building that was built in 1996, the 20-year tax exemption would already have ended and you would need to pay property taxes on the land and the apartment itself. That is why you find so many people prefer the new buildings, even though the older buildings are much more spacious and possibly better construction (depending on the building and the year of construction).
Sale of a Property: taxes due
When you go to sell a property, there are 2 taxes which need to be paid:
- Land transfer tax
- Capital Gainst tax
Land Transfer Tax:
The land transfer tax is based on 2% of the higher of the two values:
- the tax basis value in the DGI system
- the sale price value
The Tax Department always wins – they will collect on the higher value!
Capital Gains Tax:
The 2nd tax payable at the time of the sale is the Capital Gains Tax: 10% of the value of the gain.
BUT… and as everyone says, when you see the word “but” just ignore everything you heard before the word: the tax department requires you to prepay an estimated 3% tax on the value of the sale to cover your capital gains tax.
- Your purchase price: $270,000.00
- Your sale price: $320,000.00
- Your gain: $50,000.00
- 10% of the gain: $5,000.00
- 3% value of the sale: $9,600.00
At the time of the sale, you will pay the tax department $9,600.00 in Capital Gains Tax. As you look at this, you might think “that’s unfair!”, but your only option is to ensure that your lawyer does the paperwork right and requests a refund of the overpayment of the capital gains tax! This process is some 3-4 years long – and some clients simply walk away. The Tax Department pockets the difference.
On the other hand, if you made a large gain, there is a box that you can tick, stating that this is your “final return” on the transaction, and that is the complete amount of capital gains tax that you owe. You should review these numbers carefully with your realtor or the lawyer that is handling the closing for you.
For more information regarding your property purchase or sale in Panama, please contact Joan Villanueva in our office.
Other Property Tax issues:
There are more issues to consider regarding property taxes, such as filing your Declaration of Improvements (if you just finished building a house on a lot), presenting a request for a tax exemption (if the builder did not request the exemption from the tax department), and other similar issues, but we will deal with them in another article.
Panama Maid: a guide & FAQ
So, I have a maid / nanny / housekeeper (yes all-in-one) and I’ve been living back in Panama for a little over 20 years now. I get lots of questions about do’s and don’ts: since most of our maids, nannies and housekeepers are not from Panama. They are from Nicaragua, Colombia, Jamaica, Dominican Republic and some even from Venezuela. Some of the things that I am going to mention will not apply to your Panama maid, although most of them will. I have tried to organize this as a guide from the start of the relationship to ending it. I hope that works for you! Throughout, I have used the term “maid” to cover nanny/ housekeeper / cleaning lady, since it’s the shortest word.
And one more thing – I’m telling you the legally compliant way. Do as I say, not as
I do (well, your Panamanian neighbor does)! They mean well, but they won’t get caught.
hiring process – live-in versus travelling – referrals & agencies – contracts – social security – immigration status – labor law – trial period – remuneration – working hours – holidays – décimo – healthcare – maternity – termination – firing
The process for finding a maid in Panama can be daunting, especially if you have young children and will be leaving them to be cared for. With older children, at least you know they can talk to you and tell you what is going on: but with young ones it is somewhat scary.
The first step is to work out “what do I need?”. Take into account what your kids’ needs are (if applicable), what you want the maid to take care of, and your working hours:
- Do you want her to cook? Oh, and when you ask if she can cook – make sure you ask what kind of cooking she does? You may not want just rice and beans!
- Will she clean?
- Does she need to do the heavy cleaning, like spring cleaning? Windows?
- Is child care involved?
- What time does your child need to be ready for school or the bus?
- Are you able to get home from work at the same time every day?
- What about your social life? Do you need a baby-sitter on weeknights?
- Working late?
- Does she iron? If she does, what are her conditions? Some maids iron as part of the job, some charge “per shirt” or a weekly additional amount for ironing.
- Does she understand the symbols on the clothes tags, for washing the clothes? (Yes – because if she doesn’t, you need to teach her!)
- Will she walk the dog?
- Do you have a cat or dog? I had a maid that was allergic to cats – she was awesome, but we had to part ways. Lesson learned: always ask about allergies!
What to look for:
My experiences have varied over the years: my cleaning lady has been with me almost 20 years. She is not awesome at cleaning, but she is reliable and trustworthy. That is priceless. When I got more staff for my home, she only stayed cleaning my office: but she has keys to the place.
I had a fabulous housekeeper for years that was more of a PA than a housekeeper, but then her husband fell ill. I lost my wife that day! I loved having a wife! She took care of the dry-cleaning (dropping it off and picking it up), she organised painters, plumbers, air-conditioning maintenance. she watched the cooking channel and then bought groceries according to what she was going to try cooking. Irreplaceable! Of course, I didn’t know I had a wife until I no longer had her as my housekeeper. I now know: I need a wife, not a housekeeper!
Live-in versus Travelling
A Panamanian maid will probably not want to live in, as her family is “close” and she wants to live with them. But remember the traffic and commute times when you consider live-in versus someone travelling. For them to arrive at 7.00 a.m. each morning, what time will they have to leave home? What time will they leave to get home every afternoon or evening?
It is easier to get a young foreign girl (by young I mean 22 – 29) to live in, but this also has possible setbacks. My experience with younger maids has been great at the beginning (1-2 years), but then they get a boyfriend and want to settle down. Then they no longer want to live-in. And I need a live-in at this moment of my life. When I was single, and even when I was married without a child, having a maid that arrived in the morning and then left mid-afternoon was fine (say 7 am to 3 pm).
With a child, all of that changes. I am a working mom. Sometimes I work till 7.00, or other times I get home early and I take my work home with me: I am there, but I’m not “there”. I am studying part time. I volunteer many hours at Church and some fundraisers for charities. So now I have a 40-something year old live-in maid. She doesn’t run as fast as a younger girl (and so if little miss almost-4 takes off running, I have to run!). On the other hand, she cooks well, she is happy to live in, and she is loving and sweet. Okay, I admit it! She coddles my little girl!
The Práctica: Professional Services or Employee?
Many consider that the práctica (the new-born nurse that you might get for your first month, 3 months or 6 months) is professional services, rather than an employee. As professional services, she is not entitled to receive: holiday pay, décimo, or liquidation at the end of the period that she was hired for. As an employee for a contract for a specified period of time, she is entitled to all those things. Personally, I view the práctica as an employee on a short-term contract. I know that many disagree with me on this, as it increases the cost (by about 40% if you did social security, etc.). If she has her own Social Security and she is paying in as an “independiente” that changes the picture – and I would agree that she is professional services. But the 2-pronged rule in employment law is:
- is she economically dependent? Yes – she is only working for you those months
- is she subject to your instructions and telling her how you want the job done? I believe so – I doubt she’s looking after your newborn without you “supervising” how you want it done. It may be true that she knows more than you and is providing you with an education while she is at it, but I view the fact that she has to work X hours and be at your home and do it “your way” as meaning that you are in charge, rather than her.
The cleaning lady:
There was a time I just had someone come in twice a week for cleaning! She wasn’t considered to be an “employee”, but rather providing professional services. You will pay a little more for this, but then most of the things that I mention in the article – you can ignore! If she’s working 2 days a week, she is not an employee. The fine line is whether she works 3 days a week: if you provide at least half of her income, she is considered to be economically dependent upon you! Is she working 4 days a week for someone else? If she loses that job, then you are her primary source of income and she has “economic dependence”.
Referrals & Agencies:
My first choice is always referrals: from a friend, a family member of another maid that I know, or from other mothers. All of my maids have come referred from a friend or their maid. But there are other sources: Facebook groups – I like Panama Mamas. Expats in Panama is another one, but it caters to more general questions. There are also placement agencies, such as Agencia domestica Panama and Maids & Nannies.
Once you have identified your needs and the right person, it’s time to discuss contracts for your Panama maid. Even if she’s not Panamanian, still write a contract! If you don’t have a written contract: you have a verbal contract. Panama Labor Law does not leave a vacuum – there was a contract, it was not in writing. And the worst part is: the employee’s word has more weight than the employers! What was agreed? How was it agreed? Put it in writing. And yes, it should be in Spanish. And yes, ideally, prepared or reviewed by someone (a lawyer or labor law expert) that actually knows labor contracts. I know – your neighbor has a model contract! You can probably also ask for one at the Ministerio de Trabajo.
Basic contract requirements:
The very basic requirements of the contract are:
- Parties: name, nationality, age, male/female, civil status, domicile and cédula or passport number
- Worker’s dependents: name of those that live and depend on the worker
- Type of service offered
- Place where the worker is to show up for work
- Length of the contract: definite (period of time) or indefinite
- Working hours and the type of “shifts” – if applicable
- Salary – how it will be paid, on what date and where it will be paid
- Place and date of signing the contract
- Signatures of the parties
Register your contract with the Ministry of Labor.
As well as the contract, consider registering her at Social Security. For that, you (the employer) must register. You can do this without a lawyer, but you might want a translator or a good taxi driver for this. I had a great guy for this until about 3 years ago, when he passed away unexpectedly. I’ve never actually found someone to replace him. He was awesome – knew where all the government offices were, had a basic idea of the forms, and could take you through it without it costing you an arm and a leg! But, you could always ask your lawyer or law firm to help you with this. Which branch to go to? The one that is easiest for you to get to in rush hour when you forgot the paperwork was due “today” – there’s going to be a day that happens!
The benefit of registering your Panama maid at CSS (Caja de Seguro Social) is that you get rid of a couple of risks:
- healthcare – you are no longer responsible for her healthcare – she can go to CSS;
- pregnant? You are not responsible for her maternity leave, check ups or if it’s a high-risk pregnancy;
- if she has an accident at work – CSS covers it completely (the medical and the time she’s off work after the first 18 days. You cover the first 18 days of sick leave in a year.)
And as an added benefit: she will (if it is still around when she reaches retirement age) get a pension. Even if your maid is an illegal immigrant, and they do not have their work permit, it is still possible to register them at Social Security and put them into that system.
On the down-side: you have to go in and register yourself and you have to register your maid. You have to calculate and pay the SS deductions each month – employer and employee contributions, which you withhold from the salary and you pay in (there is contribution from you and one from her), and each month you have to make the payment, complete the online forms in the system, and present. You also have to pick up her “paz y salvo” each month from CSS (so pick the most convenient office to where you live and/or work). It’s not the most user-friendly system I have encountered – and I admit I have my office book-keeper take care of it for me, because I didn’t want to invest my time working it out!
The system is called SIPE: http://www.css.gob.pa/sipe/. This is where you sign up as an employer: http://www.css.gob.pa/sipe/afiliacion.html – and, of course, it’s ALL in Spanish! And this is where you advise that you have a new employee starting: http://www.css.gob.pa/sipe/avisodeentrada.html. They have a whole section on “e-learning” – not me! I gave this to my book-keeper and told her to let me know what personal details she needed from me!
If you didn’t hire a Panama maid, what is the legal status of your maid? If she already has a visa, what kind of visa does she have? The two most common visas you will find are:
- doméstica (the actual visa for maids)
- Crisol de Razas
Unfortunately, the Crisol de Razas program appears to no longer be available, unless they got in before the 31st of May 2017 with this first application. If they are already in the system, they will be allowed to continue, but the Immigration Office is not accepting any new applications for those not already registered. Some people with Crizol de Razas were able to get a 10-year visa under the program, upon renewal. That is no longer available to new applicants, but you may still find someone that has that status. Most people have a 2-year visa, but they are able to renew.
Visa de Doméstica:
If they need to apply for the doméstica visa, then YOU the employer, will need to provide some documents to the immigration department. The maid will need to complete the form from the Panama Tramita site. The basic requirements of this visa are published in Gaceta 26104.
- This visa requires a $500.00 bond, plus a $250.00 fee to the Immigration Department.
- The return ticket to their home country must be presented.
- A utility bill for your home must be included.
- The employer must provide their paz y salvo, which is certificate of Good Standing from the DGI (Dirección General de Ingresos) – Tax Department – showing that you are in good standing.
- Proof that you have already registered with the CSS (Social Security).
- An employment letter from you to her, offering her the employment.
This visa is only valid for 2 years; then she must renew it. She needs a lawyer for this visa.
Once you have your Panama maid, then these basic “rules” apply as to what you can and cannot expect.
The Labor Code applies to all maids, irrespective of their legal status (illegally in the country or not). Even if they are an illegal immigrant, they can go to the Ministry of Labor to report you. So, comply with minimum wage, holiday pay, décimo pay, and the payment of public holidays, etc. That said, a special section of the Labor Code is dedicated specifically to “domésticas”. The important section is Article 231.
The Code considers that the first two weeks are a trial period. This differs from normal labour contracts, which consider that there is a 3-month trial period. If you terminate after this first 2-week trial period (and it’s not a justified termination), you will give 30-days notice (or pay out the 30-day notice).
I typically spend the first week at home with her, and then the second week I show up at any time unexpectedly during the day to check on her. And I still do that months and years later!
Minimum salary for a maid in Panama City is $250.00/month. Good luck finding anyone willing to work for that! The typical monthly salaries that I hear are above $375.00, and go as high as $700.00/month. You will probably get what you pay for (but choose well).
The Labor Code explicitly states that “unless otherwise agreed” it is presumed that the remuneration package includes (in addition to the payment of money): food and board. The food must be healthy, abundant and nutritious; the room must be comfortable and hygienic.
I know some people that offer their maids: $XXX in salary plus $20.00/week for food (the maid then buys what she wants). Others buy the food that the maid will eat, but it is not what the family eats. I have always had the custom that the maid eats what she cooks for us (because she will sit and eat with my daughter if I am not home), unless she really wants “something from home”, in which case she may cook something separate for herself. I usually ask what types of coffee, bread, beans and rice she likes, and buy those for her (because they usually are different from what I like).
Loans or Advances:
Panama’s Labor Law prohibits that you deduct any money loaned to an employee from their liquidation pay. So, if you are going to loan them money: how and when are you going to get repaid?
- One option: don’t loan them money.
- Second option: don’t loan them money, but give them an advance on their next month’s salary (and document that this is an advance). Or advance them their décimo.
- Or ask them to come and work extra for you on the weekends and spring-clean your house.
According to the Labor Code, the Panama maid receives a “rest period” from 9.00 p.m. to 6.00 a.m. I realise, if you have a newborn, everyone in the house may wake up with the baby and colic! But you should not require her to serve and cater a party till 2.00 a.m., and then be up at 6.00 to get breakfast on the table for the kids.
She also receives her “weekly break” and “annual holidays” which are to be paid. She is entitled to paid day-off on public holidays or national days of mourning (such as when an ex-President dies). Nevertheless, you can ask her to work this public holiday, as long as you pay a surcharge of 100% on a normal day’s pay.
Every week she is entitled to one day off – “rest day” or “weekly break”. The law describes this as “descanso semanal“. Usually, this would be Sunday, but you could agree with her any day of the week off. It is supposed to be the same day each week. Customarily, however, they get a day and a half off each week: leaving Saturday afternoon (1pm, 3pm, 4pm – whatever you have agreed upon), and returning Monday morning (7am). I had one maid that never seemed to make it at 7am Monday morning, and so I changed her day off, so that she left on Friday afternoon and came back Sunday morning. Problem solved! It no longer mattered if she was an hour late.
In Panama, you should consider the public holidays. Here is an example of the 2017 public holidays: http://www.cuandoenelmundo.com/calendario/panama/2017. Those dates marked in red are actual public holidays. those in blue are days that people usually don’t work (banking holidays or employees work the hours beforehand in order to take them off). A Panama maid is going to expect to have off the days in red, or be paid overtime (extra 100%) for that day.
Additionally, your maid is entitled to one month’s holiday per year. This is one month to go home to her family (probably in the interior or possibly overseas). You may choose to break this up into two 2-week holidays: giving her time off after the first 5.5 months, and then another 2-week holiday at the end of her work year. Note: It doesn’t have to be exactly at the end of the year. It could be at 11 months, 12 months or 13 months. But she has to get it!
We’re going away on holiday:
What if you go away on holiday? Then what? You have a couple of choices:
- take her with you
- leave her at home to look after the dog
- send her on holiday
If you choose option #2, you still have to pay her the complete salary she is due, as if she was doing everything (unless you can reach an agreement of some sort with her that she will do some side jobs while you are away for a friend of yours, and they will pay her). But the reality is, she’s still your employee while you are away on holiday.
Décimo (décimotercer mes):
This is a particularity of Panamanian and Central American law that I struggled for a long time to understand and get my head around. Basically: you pay employees a monthly wage, which covers 12 months. But if you look at the year as weeks, and periods of 4 weeks, there are 13 months in the year. And so the
crazy (sorry, I meant to say difficult to understand) system here in Panama is that throughout the year (April 15, August 15 & December 15) you pay that “missing” month in 3 quotas. Often, the April 15 payment is made earlier in the year (after Carnavales, before the start of the school year). You are not required to pay this early, but in my office we do, because of the many employees with children starting school.
It is your responsibility to sign up and sign your Panama maid up for Social Security coverage. This will cover her healthcare needs. If you don’t sign her up for CSS, then you are responsible for her healthcare, and if she has an accident at work, you are responsible for the hospital bills and well as paying her throughout the recovery time!
You are not required to provide her with private health insurance, dental coverage (also provided at CSS) or private healthcare.
Her mobile phone:
Oh, this one is difficult: ask any office manager! I connected my maid’s phone to my house wifi (setting up a Guest user), so that I can control my bandwidth usage. She listens to music all morning while cleaning. I have asked her NOT to use the headset when my daughter is home, as I want her paying attention to my daughter, not on the phone. And with this maid, I have not had any problems. But I have had problems in the past with maids and their mobile phones! Sometimes, there is nothing to do, but let them go – some things just will not be corrected!
One protection offered by Panama’s Labor Code is the “fuero de maternidad“: Articles 105-116 of the Labor Code. This means that for the entire 9 months of the pregnancy and for 1 year after giving birth, you can only terminate the relationship through a justified firing (with cause), and it has to be approved by the Ministry of Labor. Buy her contraceptives! You can’t force her to take them, but you can make them available to her.
There are a number of scenarios that can result in termination: resignation, firing (justified) or simply unjustified termination.
If she resigns, she is still entitled to:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
Firing (with cause)
If you fire her, with cause (i.e. you caught her red-handed stealing or one of the causes indicated in Article 213, then you are required to give her only the 4 payments indicated above:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
You do not need to pay any notice or indemnification.
Termination (without cause)
If you don’t have documented (and well documented – written amonestations), then the best way to terminate the relationship is just to pay your Panama maid her dues, and let her go!
You will have to pay:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
- 30 days notice
- the indemnity identified in Article 231, subsection 4 of the Labor Code.
Other causes of termination:
The Labor Code also provides another ground for termination, in article 231 that is NOT available for normal workers: sickness for more than 4 weeks which makes them unable to go to work. You are only required to pay the 1 month of incapacity (sick leave), and then the indemnity mentioned in subsection 7 of Article 231.
My favorite form of termination is “Mutuo Acuerdo” – a written agreement between the parties to terminate the employment relationship. This gets rid of any “he said – she said” arguments or whether or not it is justified or not. Even with this agreement, you still have to pay the first 4 items listed above:
- salary for days worked this fortnight
- holiday pay outstanding
- décimo outstanding
- prima de antigüedad
But, depending on why you are letting the person go, you can then decide what you are going to offer regarding the 30-day notice and indemnification for termination.
In the case of any doubt, ask for a lawyer.