#Panama 🇵🇦 #BDS_LaborAlert: Labor Implications of the Reform to the Organic Law of the Social Security Administration
After nearly four months of intense discussions, Bill 163, initially filed by the Executive Branch...
The National Congress has recently approved the Part-Time Employment Law, a comprehensive regulation designed to govern hourly hiring and establish specific conditions for its application within the of labor law framework.
This new legislation sets specific limits on working hours, defines employer obligations, and guarantees fundamental rights for workers under this modality.
According to the approved text, part-time work is defined as “a form of employment with a working schedule shorter than the ordinary workday, specifically ranging between 18 and 32 hours per week.” This schedule must be agreed upon in advance by the parties and formalized through a mandatory written contract, which must detail the duties, hourly wage, schedule, and attendance control mechanisms.
One of the core principles of the regulation is proportionality, under which wages and benefits must be paid in proportion to the hours worked, without the hourly rate being lower than the applicable minimum wage. Also, the law provides that workers under this modality must enjoy the same fundamental rights as full-time employees, including vacation time and other statutory benefits, calculated on a proportional basis.
The law also introduces mechanisms to prevent abuse in hiring, prohibiting practices such as the unilateral conversion of full-time contracts into part-time contracts, the artificial fragmentation of working hours to reduce costs, or the use of this modality in positions that, by their nature, require a full ordinary workday.
Obligations Regarding Social Security and Formalization
The regulation mandates affiliation to the social security system. Thus, part-time workers must contribute to the Honduran Social Security Institute (IHSS in Spanish), the Private Contributions Regime (RAP), and the National Institute for Vocational Training (INFOP), with contributions calculated in proportion to wages earned.
Additionally, the law recognizes that part-time employment does not imply exclusivity. Workers are free to hold multiple jobs, provided that schedules are compatible. Only in exceptional situations—such as positions of trust or those involving sensitive information—may justified restrictions be imposed.
With respect to overtime, the law establishes that additional hours must be compensated in accordance with the provisions of the Labor Code. Furthermore, if a worker consistently exceeds 32 hours per week over a period of three months, the contract must be converted into a full-time employment contract.
Scope of the New Regulation
According to the legislative opinion, the primary goal of this legislation is to formalize informal employment relations, expand the social security contributor base, and generate new employment opportunities, particularly for youth, students, and those with caregiving responsibilities.
From a preventive standpoint, companies are advised to review their current hiring structures and ensure that all hourly work arrangements comply with these new legal standards, thereby avoiding labor contingencies or potential reclassification of the employment relationship.
Please contact us should you have any additional questions or require assistance regarding this or other labor matters.
