Terminations

When an employee's contract ends, Panama law requires a liquidación — a settlement payment covering all outstanding obligations. The amount varies significantly by the cause of termination. CifraHQ's 4-step termination wizard guides you through the process: it selects the employee and cause, runs the statutory calculation, shows a full breakdown for review, and finalizes the termination record.

Where to find it

Go to Payroll > Terminations.

Termination causes

Panama's Código de Trabajo recognizes several causes of termination, each with a distinct set of legally required payments.

In all causes, the employee is entitled to pending salary, proportional vacation, and proportional décimo regardless of who initiated the termination.

Liquidación components

The termination wizard calculates the following components:

Always paid (all causes)

Paid on unjustified dismissal and justified resignation

Deductions (all causes)

Salary base for seniority calculations

The seniority bonus and preaviso use the higher of:

6-Month Average Salary = Sum of cotizable earnings in the 6 closed periods
                         immediately preceding termination ÷ 6

Last 30 Days Salary = Cotizable earnings in the most recent closed period

Whichever is higher becomes the Base Salary for seniority and preaviso calculations. This protects the employee against recent salary reductions.

4-step termination wizard

Step 1 — Employee & Cause

Click Next to proceed to the simulator.

Step 2 — Liquidation Simulator

The simulator runs the full Panama termination calculation and displays a detailed breakdown:

Salary Base

Liquidation Components

Deductions

Net Liquidation = Total Components − Total Deductions

Step 3 — Review & Confirm

Displays the final amounts in read-only form for your verification:

• Net Liquidation amount
• Seniority Bonus
• Severance Pay

If the amounts are correct, click Finalize Termination. If you spot an error, click Back to return to Step 1 and adjust the cause or pending days.

Step 4 — Done

The termination has been recorded. Click View Document to open the generated termination case record.

The wizard:

• Creates a Termination Case record with all component amounts.
• Sets the employee's status to Terminated.
• Stamps the Termination Date on the employee record.
• Locks the employee from appearing in future Payroll runs.

Termination case detail

After finalizing, the termination case is accessible from Payroll > Terminations. It contains:

• Employee reference
• Termination date and cause
• Full component breakdown (all calculated amounts)
• Deductions applied
• Net liquidation amount
• Creation timestamp and user

The termination case is a permanent, read-only record. If you need to correct an error, you must void the case (contact your administrator) and re-run the wizard.

Tips

• Run Calculate on pending Payroll periods first. The termination simulator reads the most recent closed periods for the 6-month average and last-30-days figures. If the current period is not yet closed, those earnings are not included — potentially underestimating the salary base.
• Pending Salary Days should match your absence tracking. Enter the exact number of days the employee worked after the last closed Payroll period. If the current period has already been paid through a run, enter 0.
• Verify years of service. The system computes years from Hire Date to Termination Date including partial years. Double-check the hire date on the employee record before finalizing.
• Mutual Agreement amounts are negotiated. If you select "Mutual Agreement", the wizard still calculates the statutory components. You may override amounts in Step 3 before finalizing — the override amounts are what gets saved.

Related: Employees · Vacations · Payroll Periods and Runs · Audit Trail · Account Priming