Seniority premium in Panama: how it's calculated

The seniority premium (prima de antigüedad) is severance the worker receives when an indefinite-term contract ends, regardless of the cause. It's set by Article 224 of the Labor Code and equals one week's salary for each year worked.

Who is entitled to the seniority premium?

Any worker with an indefinite-term contract. It's paid whenever the relationship ends —resignation, justified or unjustified dismissal, mutual agreement or retirement—. Unlike the indemnity, it doesn't depend on whether the dismissal was justified.

How is it calculated?

One week's salary per year of service. The weekly salary is derived from the monthly salary, and incomplete years are paid proportionally:

Weekly salary = monthly salary × 12 ÷ 52
Premium = weekly salary × years of service

Example: with a $1,000 monthly salary, the weekly salary is 1,000 × 12 ÷ 52 = $230.77. At 5 years, the premium is 230.77 × 5 = $1,153.85. With 5 years and 6 months (5.5 years), it would be 230.77 × 5.5 = $1,269.23.

Examples by tenure ($1,000 salary)

The weekly salary is based on the average wage; if you have commissions or overtime, use the real average for the period.

Seniority premium or indemnity?

They aren't the same and often get paid together in the final settlement:

• Seniority premium (Art. 224): one week's salary per year, always when an indefinite contract ends.
• Unjustified-dismissal indemnity (Art. 225): only when the dismissal is unjustified, on a different scale.

Both, together with the proportional vacation and décimo, make up the final settlement.

Calculate your seniority premium

Use the free seniority premium calculator to estimate your premium from your salary and years of service.

Source: Panama Labor Code, Art. 224. Reference only; confirm the calculation with your accountant or lawyer.