Panama is an attractive market for foreign investors when it comes to a strategic geographical location, Panama Canal, their business environment, use of the dollar, attractive tax system and other factors. Panama ranks first in receiving foreign direct investment (FDI) in Central America, reaching US$ 5.5 billion in 2018. Working with an employer of record in Panama can be beneficial for your business.
However, it’s not always easy for foreign executives to start a business in Panama. Being an employer engaged in a new market, it can be challenging to deal and comply with all employment law regulations, including paying employee benefits.
Gain insight into the beneficial employer of records services in Panama when expanding your company.
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What is an Employer of Record?
Employer of record, also known as an EOR, is an external partner of a company. EOR companies are the third party that is hired to take responsibility for the formal employment tasks of your company. They carry out legal and requirements of immigration and employment and payroll services. However, they do not serve to day to day work activities like the evaluation of employees.
In specific, they carry out legal activities like:
- Organizing all visas and work permits for the employees, trying to avoid delays or refusals.
- Offering a recorded entity for running a local, compliant payroll inside the country.
- Knowing all labor laws in the selected country, concerning to local employee contracts and worker protections to be fully compliant with the law.
- Informing the customer of required notice periods, rules of termination and severance pay.
- Being the host country’s interface between the worker and government authorities.
What is the difference between Employer of Record and a PEO?
Both Profession Employment Organisation and Employer of Record are an extension of your company. Although they look similar, they can provide different services. An EOR places a part of your business and employees on its payroll. A PEO takes responsibility for all of your employees and runs all HR-related functions. They become a co-employer alongside your company. Moreover, you hold business contracts when working with a PEO. An EOR handles almost every task related to hiring, termination and everything in between with employees. An EOR engages you with a service agreement.
Furthermore, insurance is probably the greatest difference when working with a PEO or an EOR. PEOs may need you to provide your personal insurance. Whereas, EORs ensure the representatives they are covered for any damages, also, as workplace-related illnesses.
Which is better? In order to answer that question, it is important to think about your company’s needs. It depends on which stage you are with your company. For example, if you are planning to open a new company office or establish another office, the PEO option might be the right partner for you.
A PEO is also the better choice if you want to stay in control of the company but looking for expanding your HR abilities. A PEO can assist your company with the local compliant employment laws and enhance your HR capabilities. Therefore, a PEO would be a long-term solution instead of an EOR.
A better short-term solution would be an EOR, if you are looking for hiring employees quickly, an EOR might be a better option for your business. An employer of record also decreases your responsibilities when you enter a new market. They are responsible for being compliant with the law, insurances and employment belongings.
Benefits of an Employer of Record in Panama
A partnership with a good employer of record in Panama can be extremely beneficial for small to midsized firms. They will basically perform all back-office services as starting a company can be quite overwhelming.
Make business expansion easier
Each country and departments in LATAM have their own business, payroll and work license requirements for companies conducting business. The challenge of meeting those guidelines can be significantly difficult to business expansion in foreign countries. It will save you many hours as you won’t have to deal with payroll issues since an employer of record will do this work for you
Decrease risk
Approaching an EOR will assure you of mitigating the risk of your company. Expanding to new markets comes with many questions. An external EOR partner can advise your company in different the different stages of expansion. Being fully compliant with employment law in Panama will prevent you from making mistakes and lower your risks of receiving penalties because your company fulfills all the legal requirements of the employee management services. The employer of record will stay up to date on the state and local laws that could potentially change any moment. Consequently, you don’t have to worry about learning and complying with laws in multiple places
How Employment of Record mitigates risk?
In most Latin America, labor laws are very protective regarding the employee benefits, that is why is highly important to understand the local market and laws to comply with local authorities properly.
In Panama if the payroll of the employees are not being filed properly can lead to big monetary sanctions that could endangered the company, by hiring a local expert to manage and advise you on the payroll of your company, working visas, etc. through a PEO or Employment of record, will reduce this risk of making mistakes before the local authorities and allow you to focus on expanding your business without worrying about local regulations laws.
How to hire an employee in Panama?
Understanding labor laws in foreign countries can be complicated, by doing hiring an employer of record or PEO will help you understand the market properly without taking unnecessary risks.
If your business is new in Panama, it would need to complete the following process to start hiring employees and initiate with your business:
- Incorporate a new company
- Opening a Bank account
- Registry at the Ministry of Commerce
- Registry at the proper Municipality where the business is located
- Prepare formal work contracts for your first’s employees
- The registry the company as a formal employer
This process could be simple, but as a matter of fact, there are various steps you´d need to complete in the right way before hiring a local employee. By working with a local expert to manage your employees using tools like PEO or Employment of records makes the process faster.
By hiring a company that offers professional employments will reduce this process to sign a contract with your service provider and the provider would take care of all the processes related to managing the payroll of your company and securing that the compliance with local authorities is correct.
If you´re not familiar with the local market, it is convenient for your company to hire an employer of record or PEO to be able to expand your business faster.
Contact Biz Latin Hub to get employer of records services in Panama and support to expand your business
Expanding your business to Panama is a big step as compliance with local regulations can be very challenging. If you are considering to get some professional help without outsourcing your entire Human resources department, hiring an Employer of Record in Panama seems to be the perfect solution for your company.
Our bilingual team consisting of local lawyers and expert accountants has vast experience in Human Resources, legal services, payroll, visa procedures and more. Biz Latin Hub accompanies and supports your business in any issue by providing you with tailormade solutions.
Contact us today for more information about an employer of record in Panama.
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