Official formula of the Seniority Premium

Monthly accrual: monthly salary x 1.92% (equals one week of salary per year worked, / 52 weeks / 12 months).

Total at termination: 1 week of salary x years worked + (additional months / 12) x 1 week.

When it pays out: at termination for any reason - resignation, dismissal (with or without cause), retirement, death. ALWAYS paid.

Salary base: salary, commissions, regular overtime, periodic bonuses, accrued 13th-month bonus.

Legal framework: Panama Labor Code and Law 44 of 1995.

How the seniority premium is calculated

The Prima de Antiguedad is a vested right of the employee from day one. It is NOT severance - it is independent compensation that accrues monthly and is paid at termination regardless of cause.

The 1.92% monthly formula

1 week of salary per year = 1 / 52 weeks / 12 months ~ 1.92% of monthly salary. Each month, the employer must provision 1.92% of the employee's salary into a separate trust fund (Fondo de Cesantia, regulated by Law 44 of 1995).

Worked example

Employee with B/.1,200 salary, 3 years 6 months worked

Full years: 3
Additional months: 6

Weekly salary = B/.1,200 / 4.33 = B/.277.13

Premium for full years = 3 x B/.277.13 = B/.831.39
Premium for partial months = (6/12) x B/.277.13 = B/.138.57

Total premium = B/.969.96

Monthly accrual while working = B/.1,200 x 1.92% = B/.23.04/mo
Accrued over 42 months = 42 x B/.23.04 = B/.967.68
(small difference is week-rounding)

Difference between Seniority Premium and Severance

Prima de Antiguedad (Seniority Premium): vested right, accrues from day one, ALWAYS paid at termination (resignation, dismissal, retirement, death). 1 week per year.

Indemnizacion (Unjustified Dismissal Severance): additional compensation, ONLY if the dismissal was without justified cause. Years 1-10: 3.4 weeks/year; years 11+: 1 week/year.

To calculate the full severance package (Prima + Indemnizacion if applicable + proportional Decimo + proportional vacations), use the Panama Severance Calculator.

The Cesantia Fund (Law 44 of 1995)

The Seniority Premium must accrue into a trust fund separate from the employer's assets, managed by an authorized financial institution. This protects the employee: if the employer fails, the premium is already separated and protected.

The employer deposits 1.92% monthly. The fund earns interest for the employee. At termination, the employee receives the fund balance.

Common mistakes that trigger labor claims

  • Not provisioning monthly. The obligation is monthly, not annual or at termination. Accumulating debt and paying at the end triggers interest and penalties.
  • Excluding Decimo from the base. The accrued 13th-month bonus is part of the premium calculation base.
  • Confusing Premium with Severance. Premium is ALWAYS paid; severance ONLY for unjustified dismissal. They are cumulative.
  • Not using a trust fund. Accruing the premium in the employer's operating accounts violates Law 44.
  • Not paying premium on retirement. Applies to retirement too, not just dismissal or resignation.

Related resources

Frequently asked questions

What is the formula for the Seniority Premium in Panama?

1 week of salary per year worked, accrued monthly at 1.92% of salary (1 / 52 weeks / 12 months). Paid at termination for any reason. Legal framework: Panama Labor Code and Law 44 of 1995.

When is the Seniority Premium paid out?

At termination for any reason: resignation, dismissal (with or without cause), retirement, death. Premium is ALWAYS paid, unlike severance (indemnizacion) which only applies to unjustified dismissal.

Does the Seniority Premium pay CSS or income tax?

It does not pay CSS. It is exempt from ISR up to the current legal limit. This is a net right for the employee, without the deductions applied to the Decimo or regular salary.

What if the employer did not provision the Premium monthly?

Still obligated to pay the total at termination, plus interest, plus possible penalties. Failure to accrue into the trust fund violates Law 44 of 1995.

How is the Premium calculated for variable-pay employees?

The salary is averaged over recent months (typically the last 6 to 12) including commissions, regular overtime, and periodic bonuses. For complex cases consult a labor advisor.

Does this calculator replace a labor advisor?

No. It is a reference calculator under the Panama Labor Code and Law 44 of 1995. For special cases (retirement, death, termination with cause, complex variable salaries) consult a Panamanian labor advisor. cifraHQ accrues the premium automatically every month inside the ERP.