How to end an employment relationship in Panama. Resignation, dismissal and agreement.

Ways to end an employment relationship in Panama

If you are about to leave (or they are about to end) a job in Panama, there are 3 paths that change EVERYTHING: resignation, dismissal or mutual agreement.
The typical mistake is to choose "the fastest" and then find out you signed something that cost you money or left you without proof.

This guide is for deciding well: what happens in each case, what you should ask for in writing and how your severance (settlement/benefits) changes.

Useful note: This is practical information, not legal advice.
If the case is delicate (high amount, dispute, threats, pressure to sign), talk to a labour lawyer or consult MITRADEL, Ministry of Labour and Labour Development.

Resignation • Dismissal • Mutual agreement (quick decision)

Situation	Typical path	Main risk	What you must protect
You want to leave on your own	Resignation	Signing "release" without reviewing	Correct calculation + proof of payments
They are removing you without negotiation	Dismissal	Incomplete payment / poor documentation	Letter, dates, breakdown
They want an "arrangement" with a signature	Mutual agreement	Disguised resignation	Amount + payment + clauses

Golden rule: do not sign under pressure a document you do not understand. If they rush you, ask for a copy and review.

What changes in severance depending on the path

Severance usually includes:

Pending wages
Accumulated vacation
Thirteenth month (proportional, if applicable)
Benefits/indemnity (depending on the case)
Other agreed items (bonuses, commissions, etc.)

Practical difference

Resignation: you normally collect what is pending + proportionals, but there is not always indemnity as in a dismissal (depends on the case/contract/negotiation).
Dismissal: may include indemnity or additional payments depending on the type of dismissal and circumstances.
Mutual agreement: it is pure negotiation. It can be better than resignation or dismissal… or a trap if the document is wrong.

Calculator / guide to calculate severance in Panama — Liquidation calculation Panama

Resignation in Panama (how to do it right)

1) "Clean" resignation (the one that doesn't complicate your life)

Goal: leave with correct payment and proof.

Steps:

Submit resignation letter (date, details, last day).
Ask for written confirmation (email or "received").
Request severance breakdown (itemized, not just total).
Verify items: salary, vacation, thirteenth month, commissions (if they apply).
Sign receipts only with a clear amount (ideal: with payment already made or proof).

2) Resignation with negotiation (when you want to improve your exit)

If the company wants you out or there is tension, it sometimes helps to propose mutual agreement instead of simple resignation.

Signs that it's worth negotiating:

They ask you to resign "now" or "please sign this"
They offer you an extra amount "if you sign today"
There are role/salary/hour changes and they are pushing you out

In those cases, don't give away your exit: go to the mutual agreement section.

Dismissal in Panama (what to ask for and what to check)

Your priority is that everything be documented:

Exact date of termination
Type/reason of termination (whatever the company states)
Itemized severance
Method of payment and date

What to do if you are dismissed (checklist)

Ask for termination letter or written communication.
Note: last day worked, notification date, whether they ask you to return equipment/credentials.
Request severance breakdown in writing.
If they give you a "release" document, ask for a copy before signing.
Keep evidence: emails, WhatsApp, receipts, proof.

Red flags (when to stop and review)

They say "sign and then we'll pay you"
They offer you "an amount" with no breakdown
They don't want to give you a copy of the document
They say "if you don't sign today, you lose everything" (classic tactic)

Mutual agreement (when it helps and how not to lose out)

Mutual agreement can be excellent if it is well written. If it is generic, it can be a disguised resignation.

When mutual agreement helps

You want to close quickly without conflict
You want an additional amount to what you would get for resignation
The company wants to avoid dispute and is willing to pay

What it must include (minimum structure)

Full identification (employee/employer)
Effective date of termination
Total amount and breakdown (ideal)
Method of payment (transfer, cheque) and deadline
What happens with: pending vacation, proportional thirteenth month, pending commissions/bonuses
Confidentiality/no discredit clause (if any): keep it reasonable
"Release" clause: it applies only after payment

Key tip: If there is a "release", insist it say something like:
"This release shall be effective only once the total payment has been credited…"
(In simple terms: don't close the door before you get paid).

FAQ

Are resignation and mutual agreement the same?

No. Resignation is the worker's initiative. Mutual agreement is a pact where conditions are negotiated. In practice, mutual agreement is usually better if there is a clear additional amount.

What document should I always ask for?

A severance breakdown and a document with termination date. Without that, everything becomes "your word against mine".

What is most important in Panama for payment delivery?

That the document and the payment be tied together: amount, method and date. If there is a release, it should be after payment.

Other labour guides and tools in Panama

Sources & Foot Notes

[1] MITRADEL — Benefits calculation (official tool)
[2] MITRADEL — Labour Code of Panama (PDF)
[3] Gaceta Oficial — Cabinet Decree No. 252 (Labour Code approval) (PDF)
[4] MITRADEL — Note on the benefits calculation tool
[5] PKF Central America — Causes of labour termination in Panama
[6] Kraemer & Kraemer — Termination of employment contracts in Panama
[7] Justia (Panama) — Labour Code (PDF)