Liquidation Calculation in Panama

When an employment relationship ends in Panama, the worker is entitled to a liquidation that includes various accumulated benefits. Calculating liquidation correctly can be complicated, as it depends on the type of contract termination, time worked, and other factors. In this complete guide we explain how to calculate employment liquidation in Panama step by step, according to different causes of dismissal or resignation, to ensure you receive everything you're entitled to according to the law.

Use our liquidation calculator by entering your data and get the calculation instantly. You just need to provide the start and end dates of the employment relationship, your last salary and the cause of termination, and the calculator will determine your benefits (vacation, thirteenth month, seniority bonus, severance, etc.).

Forms of Employment Termination in Panama

Panamanian labor legislation contemplates different termination modalities of the employment relationship, and each entails different rights for the worker. Below we summarize the main causes and what payments correspond in each case:

Justified Dismissal

Occurs when the employer terminates the contract for a legally valid cause (for example, serious misconduct by the worker defined in article 213 of the Labor Code). In this case, the worker is not entitled to severance or notice payment, but does have the right to receive accrued unused vacation, proportional thirteenth month owed, and accumulated seniority bonus.

Unjustified Dismissal

This is when the employer dismisses the worker without just cause. Here the worker is entitled to all benefits: accrued and proportional vacation, accrued and proportional thirteenth month, seniority bonus, plus severance for unjustified dismissal and notice payment (if proper notice wasn't given). Severance is additional compensation whose amount depends on the worker's seniority (years of service) as established in the Labor Code.

Voluntary Resignation

When the employee decides to terminate the employment relationship voluntarily (common resignation). If the worker didn't give advance notice (usually 15 days notice or according to contract), they must pay the employer the equivalent of one week's salary for lack of notice. Regarding their rights, the resigning employee is entitled to unused vacation, proportional thirteenth month until the exit date, and accumulated seniority bonus (provided they have completed more than 2 years of work, as the bonus is paid upon termination of relationships of more than 2 years).

Justified Resignation

If the employee resigns for a justified cause attributable to the employer (for example, mistreatment, breach of contract, etc., contemplated in article 223 of the Labor Code), then the resignation is equivalent to unjustified dismissal. In this scenario, the worker would be entitled to the same benefits as in unjustified dismissal: vacation, thirteenth month, seniority bonus, plus dismissal severance and possibly notice payment.

Mutual Agreement

Both parties, employer and employee, decide by mutual agreement to terminate the employment relationship. This modality must be documented in writing. Regarding payments, typically it's agreed that the worker receives their acquired rights (pending vacation, thirteenth month proportion, seniority bonus) and even a sum as severance if agreed, although the law doesn't require it unless stipulated.

Work or Project Completion

Applies to contracts defined by the duration of a specific work or task. Upon completion of the work, the contract automatically concludes. The worker is entitled to proportional vacation, proportional thirteenth month, and if the contract lasted more than 2 years, also seniority bonus. Important: In work contracts not terminated early, there's generally no dismissal severance, unless the contract or law (article 227 of the Code) provides for severance.

Expiration of Fixed Term

In fixed-term contracts, when the established termination date arrives, the contract ends. If the contract ends this way, the employer must pay the worker accumulated benefits (unused vacation, proportional thirteenth month, bonus if applicable), but there's no severance as it's not a dismissal but the natural conclusion of the agreement.

Death of the Worker

If unfortunately a worker dies while their employment relationship is still active, pending rights (unpaid salaries, vacation, thirteenth month, etc.) are not lost. A labor succession procedure is established before the Sectional Labor Courts (according to article 155 of the Labor Code) so that the beneficiaries or legal heirs of the deceased worker can collect the benefits they were entitled to.

Online Tools for Liquidation Calculation

The Ministry of Labor and Workforce Development (MITRADEL) offers on its web portal a useful tool for calculating benefits and liquidations. This online liquidation calculator allows both employers and workers to determine the liquidation amount quickly and accurately, from any device with Internet, without need for manual formulas.

Steps to Use MITRADEL's Liquidation Calculator

If you want to use Mitradel's official tool, follow these steps:

Access MITRADEL's web portal (www.mitradel.gob.pa) and navigate to the "Services and Procedures" section.
Click on the icon or link called "Benefits Calculation" (the web application dedicated to liquidations).
Select your role: Worker or Employer, and complete the requested personal data.
Provide details of the terminated employment contract: start date and termination date of the employment relationship, cause of termination (dismissal, resignation, mutual agreement, etc.), salary earned at termination, unused vacation days, and any other relevant data the calculator requests.
Click Calculate to get the detailed result of your liquidation. The application will show you each component (vacation, thirteenth month, seniority bonus, severance, etc.) with its respective amount in dollars.

This initiative is part of Panama's Digital Government strategy: with the online calculator, bureaucracy in labor procedures is reduced, paper usage is minimized, and response times for users are accelerated. In fact, since its launch (September 24, 2023), more than 20,000 people have used the application to calculate their benefits, demonstrating the great utility and confidence in this tool.

Importance of Calculating Liquidation Correctly

Having access to a liquidation calculator and knowing how calculations work is fundamental to protect your rights as a worker. An incorrectly calculated liquidation could mean you stop receiving money legally owed to you. By understanding the components of your liquidation (vacation days, thirteenth month, bonus, severance, etc.), you can verify the amounts your employer gives you at contract termination and claim any unfair difference.

For employers, this tool is also valuable because it allows them to comply with the law to the letter, avoiding labor conflicts and sanctions. Correctly calculating benefits ensures termination of the employment relationship on good terms and with transparency.

How to Calculate Liquidation Components

Unused Vacation

Calculated based on accumulated vacation days that haven't been used. Payment is: (Monthly salary ÷ 30) × pending vacation days.

Proportional Thirteenth Month

The proportion of the thirteenth month is calculated from the last payment until the termination date. The formula is: (Monthly salary × months worked in the period) ÷ 12.

Seniority Bonus

The seniority bonus equals one week of salary for each year worked. Calculated as: (Monthly salary ÷ 4.33) × years of service. Only applies if the worker has completed more than 2 years of service.

Severance for Unjustified Dismissal

Severance depends on years of service:

First 10 years: 3.4 weeks of salary per year
After 10 years: decreasing scales according to the Labor Code

Notice

If required notice wasn't given, the equivalent of the notice period is paid:

Contracts up to 6 months: 1 week
Contracts up to 1 year: 2 weeks
Contracts over 1 year: 1 month

Remember that this guide is informative. If you have a complex situation or specific legal doubts, it's always advisable to seek advice from a labor lawyer in Panama, who can guide you according to the details of your case.