The Pros And Cons Of Hiring Through An Employer Of Record (EOR) In Panama

• Published date: 03 August 2023
• Law Firm: Biz Latin Hub Group
• Author: David Wright

Employers of Record (EORs) offer a solution to companies looking to expand their operations in Panama, without the need to establish a local entity. In this article, we'll take a closer look at the advantages and risks of using an Employer Of Record in Panama and help you determine whether this approach is the right fit for your business needs.

What is an Employer of Record?

An EOR is a third-party entity that assumes legal responsibility for employing and paying workers on behalf of a company. This can be particularly useful for companies looking to hire employees in a foreign jurisdiction where they may not be familiar with local labor laws, regulations, and requirements.

This graphic highlights the importance of utilizing an Employer of Record in Panama (EOR). The majority of the working population within Panama is employed by an individual or business, making it important to stay on top of payroll duties.

Legal Framework Governing Employers of Records (EORs) in Panama

Panama has a well-developed legal framework governing EORs. Under Panamanian law, an EOR is known as a "contratista de personal," which translates to "personnel contractor." Personnel contractors are regulated by the Panamanian Labor Code and must be registered with the Ministry of Labor and Social Security.

One of the key advantages of using an EOR in Panama is that it allows companies to quickly and easily establish a presence in the country without the need to set up a separate legal entity. However, it is important to note that while EORs can help streamline the process of expanding into Panama, they are not a substitute for compliance with all applicable laws and regulations.

Employers must ensure that they are working with a reputable EOR that is in compliance with all relevant laws and regulations in Panama. This can help mitigate the risks associated with using an EOR, such as the risk of reputational damage or legal liability.

Advantages of Hiring through an EOR in Panama

1. No Requirement to Incorporate a Local Entity: Hiring through an EOR eliminates the need to establish a local entity in Panama. This can save companies time and money, as the process of incorporating a local entity can be lengthy and complex.
2. Flexibility: An EOR can provide companies with the flexibility to adjust their workforce in Panama as business needs evolve. This can be particularly useful for companies that have seasonal or project-based employment needs.
3. Ability to Hire in Multiple Jurisdictions...