Official formula of the 13th Month Bonus

Per installment: (monthly salary x months worked in the installment) / 12

Annual total: equals one full monthly salary, divided into 3 equal installments (if 12 months were worked).

Payment dates: April 15, August 15, December 15.

Salary base: includes salary, commissions, regular overtime, and periodic bonuses. For variable pay, the prior 4-month average is used.

Legal framework: Cabinet Decree 19 of 1973.

How each installment is calculated

The Decimo Tercer Mes equals one extra monthly salary per year, paid in 3 equal installments. Each installment covers 4 months of work, and every month worked contributes 1/12 of the salary to the corresponding installment.

The 3 installments and their periods

  • Installment 1 (April 15): covers December, January, February, March
  • Installment 2 (August 15): covers April, May, June, July
  • Installment 3 (December 15): covers August, September, October, November

Worked example

Employee with a fixed salary of B/.1,200, full installment period

Installment = B/.1,200 x 4 months / 12 = B/.400.00

Employee CSS deduction (7.25%) = B/.29.00
Employee receives net (before ISR) = B/.371.00

Employer CSS cost (10.75%) = B/.43.00
Total employer cost = B/.443.00 per installment

Annual Decimo total = B/.400 x 3 = B/.1,200
(equals 1 monthly salary per year, as the law requires)

When the employee worked less than 4 months in the installment

If the hire occurred partway through the period, the calculation is prorated. For example, an employee hired on February 1 falls under the April 15 installment (covering December to March, 4 months) but worked only February and March: 2 months. The installment reduces to salary x 2 / 12.

What's in and what's NOT in the base

In: base salary, commissions, regular overtime, periodic bonuses. For variable pay, the prior 4-month average is used.

Not in: non-contributing per-diems, representation allowances, severance, seniority premium, expense reimbursements.

Taxes on the 13th month

CSS (Social Security): the Decimo pays CSS. Employee 7.25%, employer 10.75% on the Decimo amount. These rates for the Decimo differ from standard monthly payroll rates.

ISR (income tax): the Decimo is subject to ISR. The calculation uses the marginal-bracket method to avoid artificial jumps: salary plus annual Decimo are annualized, total ISR is calculated, and the month's withholding is adjusted. For a dedicated ISR calculator, see Panama Payroll Income Tax Calculator.

Common mistakes that trigger MITRADEL penalties

  • Paying late. The deadlines are strict: April 15, August 15, December 15. Paying late triggers MITRADEL penalties and retroactive interest.
  • Excluding commissions or overtime from the base. The base includes all periodic remuneration. Excluding commissions is a frequent cause of labor claims.
  • Not averaging variable pay. For employees with variable bonuses or commissions, the prior 4-month average must be used, not the base salary.
  • Confusing Decimo with Prima de Antiguedad. They are independent obligations and both accrue in parallel. See the Seniority Premium Calculator.
  • Not paying Decimo at termination. A severance package includes proportional Decimo from the start of the current installment. See the Severance Calculator.

Related resources

Frequently asked questions

What is the formula for Panama's 13th month bonus?

(Monthly salary x months worked in the installment) / 12. The annual total equals one month's salary, paid in 3 equal installments on April 15, August 15, December 15. The base includes salary, commissions, regular overtime, and periodic bonuses; for variable pay, the prior 4-month average is used.

When is the 13th month bonus paid in Panama?

In three installments: April 15 (covers December to March), August 15 (covers April to July), and December 15 (covers August to November). Paying late triggers MITRADEL penalties and retroactive payments. Not optional under any contract structure.

Does the 13th month bonus pay CSS and income tax?

It pays CSS (employee 7.25%, employer 10.75% on the bonus). ISR applies using the marginal-bracket method: annualize salary plus Decimo, calculate total ISR, adjust the month's withholding. Prima de Antiguedad does not pay CSS.

What if the employee worked less than 4 months in the installment?

Prorated: salary x months worked / 12. Example: hired on February 1, the April 15 installment covers December to March (4 months) but the employee only worked 2 months; receives salary x 2 / 12.

Do overtime and commissions count toward the 13th month?

Yes. The base includes base salary, commissions, regular overtime, and periodic bonuses. For variable pay, the prior 4-month average is used. Excluded: non-contributing per-diems, representation allowances, severance, seniority premium.

Does this calculator replace a labor accountant or attorney?

No. It is a reference calculator under Cabinet Decree 19 of 1973. For specific cases (dismissals, leaves, complex variable schemes, custom ISR withholding) consult a Panamanian accountant or labor advisor. cifraHQ automates this calculation every pay cycle inside the ERP.