Overtime in Panama: the 25%, 50% and 75% surcharges
In Panama, overtime is paid with a surcharge over the hourly wage, and the percentage depends on the type of shift (Art. 33 of the Labor Code). Here are the surcharges and the limits.
The overtime surcharges
| Situation | Surcharge |
|---|---|
| Daytime shift (6 a.m. – 6 p.m.) | 25% |
| Night shift, or extension of a mixed shift that began in the day | 50% |
| Extension of a night or night-started mixed shift | 75% |
The surcharge is applied to the ordinary hourly value. For example, a daytime overtime hour is paid at 125% of the normal hour.
The overtime limits
The maximum is 3 overtime hours per day and 9 per week. If those limits are exceeded, the excess hours are paid with a 75% surcharge. Legal shifts are: daytime 8 hours (48 per week), night 7 hours (42) and mixed 7.5 hours.
Miscalculating the surcharge or exceeding the limits leads to claims and fines. A payroll system should apply the right rate by hour type.
Does overtime pay CSS and income tax?
Yes. Overtime is taxable salary: CSS (9.75% employee), education tax and income tax are deducted, just like ordinary salary.
Source: Art. 30, 31 and 33 of the Panama Labor Code. Reference only; confirm with your accountant or advisor.