Panama has introduced a new Internship Program under Law No. 513 of March 20, 2026, aimed at promoting youth employment and facilitating access to the formal labor market.

For employers, this framework creates a valuable opportunity to engage young talent. However, its implementation requires careful consideration from a legal and compliance perspective.

Key considerations for employers

The program establishes specific conditions that define the nature of internships:

• Internships do not constitute an employment relationship
• The monthly payment of USD 450 is not considered salary, and therefore does not trigger social security contributions or taxes
• The payment is tax deductible
• Maximum duration: one (1) year
• Working time: up to 40 hours per week
• A formal participation agreement and a genuine training purpose are required

Legal limits

The law sets limits on the number of interns based on company size:

• Up to 50 employees: 2 interns
• 51–100 employees: 4 interns
• 101–200 employees: 6 interns
• Over 200 employees: up to 3% of workforce

Any excess requires prior approval from the Ministry of Labor (MITRADEL).

Key warning

The law clearly establishes that:

Interns cannot be used to replace regular employees.

This is expected to be a primary area of enforcement.

Compliance red flags

From a compliance perspective, companies should monitor:

• Interns performing core or permanent business functions
• Lack of a documented training plan
• Additional or variable payments resembling salary
• Absence of occupational risk insurance
• Exceeding legal intern limits
• Use of interns to replace eliminated roles

These situations may lead to reclassification as employment relationships, with significant legal implications.

In practice

When properly implemented, the program allows companies to:

• Access young talent
• Strengthen internal talent pipelines
• Improve cost efficiency

If misused, it may result in:

• Labor claims
• Fines ranging from USD 250 to USD 500
• Reputational risks

Our recommendation

Companies should implement internship programs with:

• Strong documentation
• Clear training objectives
• Compliance controls
• Ongoing legal oversight