Who pays what
| Contribution | Employee | Employer | Legal basis |
|---|---|---|---|
| Social security, from April 2025 | 9.75% | 13.25% | Law 462 of 2025, Consolidated Text of Law 51 of 2005 |
| Social security, from March 2027 | 9.75% | 14.25% | Law 462 of 2025 |
| Social security, from March 2029 | 9.75% | 15.25% | Law 462 of 2025 |
| Education insurance | 1.25% | 1.50% | Law 13 of 1987 |
| Occupational risks | 0 | Rate by activity, between 1.05% and 5.67% according to brokers; official table by activity code | Law 51 of 2005 |
| Self-employed | 9.36% of contributable income for disability, old age and death, mandatory; 8.5% for sickness and maternity on declared income, minimum 800 balboas a month | Not applicable | Law 462 of 2025 |
On a 1,000 balboa salary, the worker receives 890 net before income tax and the employer pays out between 1,158 and 1,204 depending on the activity’s risk. With the 2029 increase the employer cost will reach 1,178 before occupational risks.
What it covers and when it pays out
| Programme | What it covers | Condition |
|---|---|---|
| Sickness and maternity | Medical and hospital care and medicines in the Fund’s network; disability allowance and maternity leave | Active affiliation and contributions up to date; 1.896 billion budget in 2026 |
| Disability, old age and death | Old-age, disability and survivors’ pensions | 57 for women and 62 for men; 240 contributions for a pension with solidarity guarantee; 180 for proportional retirement; under 180, a lump sum |
| Occupational risks | Workplace accidents and occupational diseases | Paid only by the employer; 367 million budget in 2026 |
What changed with Law 462
The reform signed on 18 March 2025 kept the retirement age and the 240 contributions, raised the employer rate in three steps and created the Single Capitalisation System with Solidarity Guarantee: a mandatory individual account plus a solidarity fund, with a minimum pension of 144 balboas, a minimum replacement rate of 60% and a State contribution of 966 million dollars a year, adjustable by up to 4% annually, plus 20.5 million for rate fluctuations and 25 million for the sickness and maternity programme. Members of the mixed system had until 18 August 2026 to decide whether to switch to the new system; those who did not decide stayed by default.
Dino Mon, the Fund’s director general, explained in August 2026 that of 1.6 million active contributors, 736,000 are in the defined-benefit solidarity system, 868,000 in the mixed system and 29,000 in the new one; 180,000 chose to stay and 3,000 to switch, and 552,000 did not decide. The Fund identified 4,040 people who would gain by switching and did not; Mon warned that “they may be leaving some kind of benefit on the table if they do not take the decision to review” and that “the automated system will not grant extensions”. The remaining 803,000 members of the mixed system move by law to the new system in 2032.
Why it was reformed
The defined-benefit subsystem had in 2024, according to the International Labour Organization’s report, 469,881 active contributors for 346,645 beneficiaries, 1.3 workers per retiree, with a deficit of 1.181 billion in 2024 and 1.386 billion in 2025 and a reserve running out that same year. The 2023 financial statements showed a programme deficit of 673.6 million and receivables from central government of 1.0738 billion. The Fund’s 2026 budget is 8.211 billion dollars, with 4.427 billion in contributions and 1.167 billion in State contributions. Between 2024 and 2025 the Fund lost 12,853 active insured, partly because of the 11,143 formal agricultural jobs that disappeared in Bocas del Toro and the Ngäbe-Buglé comarca.
Foreigners
Article 77 of Law 51 requires affiliation of “every national or foreign worker who provides services within the Republic of Panama”. The employer must register the worker within six working days of starting and, for foreigners, present the registered contract or the work permit stamped by the Labour Ministry. A foreigner with a work permit contributes exactly like a Panamanian and accumulates contributions towards a pension. Panama is not among the countries with a bilateral social security agreement with Spain, and there is no record that the Ibero-American Multilateral Convention applies, so Panamanian contributions are not added to those of other countries unless officially confirmed.
What nobody has answered yet
- How many pensioners does the Fund have today? Open data publishes monthly series, but there is no recent consolidated figure in the statements.
- What is the official occupational risk table by activity? The percentages in circulation come from brokers and consultants, not from a Fund publication accessible online.
- How many of the 552,000 undecided would have gained by switching? The Fund identified 4,040 clear cases; it has not published the analysis of the rest.
Frequently asked questions
How much is deducted for social security in Panama?
From the employee, 9.75% social security plus 1.25% education insurance, 11% in total. The employer contributes 13.25% social security since April 2025, 1.5% education insurance and the occupational risk premium by activity.
When does the employer rate rise?
To 14.25% on 1 March 2027 and to 15.25% on 1 March 2029, under Law 462 of 2025.
What is the retirement age in Panama?
57 for women and 62 for men, with 240 contributions. The 2025 reform changed neither.
Must a foreigner contribute to the Social Security Fund?
Yes. Every national or foreign worker providing services in Panama must be affiliated, and the employer must register them within six working days of starting with the stamped work permit.
Related articles
Sources
- National Assembly, signing of Law 462 of 2025.
- Social Security Fund, Consolidated Text of Law 51 of 2005.
- Social Security Fund, increase in employer contributions.
- Justia, Law 13 of 1987 on education insurance.
- ECO TV, obligations of self-employed workers.
- TVN, Dino Mon’s statements on switching systems.
- La Prensa, insured who would lose benefits.
- La Prensa, Fund budget for 2026.
- TVN, ILO report on the disability, old age and death programme.
- La Estrella, programme deficit and central government debt.
- La Prensa, fall in active insured.
- Icaza, González-Ruiz & Alemán, frequently asked questions on the reform.
- Social Security Fund, General Affiliation and Registration Regulations.
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