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The Thirteenth Month is undoubtedly one of the most anticipated and valued labor rights for the workforce in Panama. More than just a “bonus,” it is a social entitlement designed to ease the financial burden on Panamanian families during key times of the year.
The Thirteenth Month is, without a doubt, one of the most anticipated and valued labor rights for the workforce in Panama. More than just a “bonus,” it is a social entitlement aimed at easing the financial burden on Panamanian families during key times of the year.
In Panama, this right was established by Cabinet Decree No. 221 of November 18, 1971 (before the current Labor Code) and later regulated by Decree No. 19 of September 7, 1973, to resolve interpretative uncertainties.
Known colloquially as the “décimo” in Spanish, this special bonus applies to all employees in both the private or public sectors, regardless of their contract type (fixed-term, indefinite, or project-based).
Until 2024, the public sector’s Thirteenth Month was capped at USD 170.00 per installment, regardless of the employee’s actual salary. However, in a ruling dated January 12, 2024, the Supreme Court of Justice (CSJ) declared this cap unconstitutional, citing it as discriminatory and a violation of the principle of equality compared to private-sector workers. Currently, calculations for public sector employees are based on the total income earned during the relevant period, eliminating the long-standing gap between the public and private sectors.
Unlike other countries where the Thirteenth Month (often called aguinaldo in some regions) is paid in a single installment, Panama divides this benefit into three instalments throughout the year:
- First installment: Paid on April 15
- Second installment: Paid on August 15
- Third installment: Paid on December 15
Each installment corresponds to one day’s salary for every eleven days worked (or fraction thereof). In practice, this is calculated by summing all wages earned during the corresponding four-month period and dividing the total by 12.
While the formula may seem straightforward, it should be clarified that not all types of remuneration are included in the calculation, and that certain situations may arise in which, even if the employee is not actively working or receiving wages from the employer, the benefit must still be calculated as if the employee were working.
The Thirteenth Month certainly represents a key driver of the national economy. For employees, it provides financial relief during periods of increased expenses; for employers, it constitutes a legal obligation that must be accrued monthly to ensure timely compliance.
Please feel free to contact us for specialized advice regarding the management, exclusions, or calculation of this important benefit.
