Outsourcing Software Development to Panama: A Nearshore Hotspot

Outsourcing Software Development to Panama: A Nearshore Hotspot

Published on
April 7, 2022
Updated on
August 24, 2022
Author
Reх Huхford
Reading Time
Panama is a prime nearshore destination for software outsourcing. Learn why and how to hire Panamanian developers.

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When looking to hire Latin American talent, most companies turn to Argentina or Brazil because of their recent tech advancements and a large candidate pool. Recruiting tech talent from rapidly growing countries sounds like the best option. However, many overlook the tremendous potential of small countries such as Panama.

Although not as big as some other outsourcing destinations, Panama makes a significant trade zone and a hot destination for foreign investments. With its stable political environment, pro-business regime, and overall growing economy, Panama attracts a lot of companies yearly.

The aggressive growth in the IT infrastructure also makes this country a good destination for building a capable and cost-efficient remote workforce. Outsourcing software development to Panama has a range of benefits for growing companies, and we cover them in detail today. Read on to learn more about the cost, advantages, disadvantages, and ways of hiring Panamanian developers.

Advantages of Outsourcing Software Development to Panama

Technological advancement is not the only reason you may want to nearshore software development in Panama. Here are six more benefits you get to enjoy when you hire Panamanian developers:

Same Time Zone as US EST

When outsourcing software development, most US companies struggle to align the working hours at home with those of their remote teams. Although not all workers need to operate in the same timeframe, communication is much easier when that's the case. Similar time zones of remote teams allow smoother and overall more efficient operations.

Since Panama observes US Eastern Standard Time throughout the year, it will be easier for businesses to catch up with their Panamanian developers during working hours. There's no need to invest in communication services, high-quality recording tools, etc. As Panama and the US are in the same time zone, they can easily communicate using local telephone lines. It will help save time, money, and effort.

On average, ineffective meetings can cause businesses to lose $283 billion a year. Clear and timely communication makes, thus, a vital part of any business.

USD Is an Official Currency

The Panamanian currency Balboa equals the USD currency in terms of value. Even more importantly, the US dollar is also an official currency in Panama. Therefore, US companies can easily make payments to their Panamanian developers in USD without changing currencies and facing additional fees. Several money-transferring apps also allow free money transfer from the US to Panama, saving businesses significant sums on transfer fees.

English Proficiency

Even though the official language of Panama is Spanish, Panamanians are also fluent in English. Since Panama is an American country, over 14% of the population speaks and understands English. Hiring foreign employees fluent in the same language as your home team removes the possible communication barrier, making project discussions, meetings, and negotiations a lot easier.

Believe it or not, miscommunication can not only cause employee frustration but unnecessary expenses on missed project deadlines, rescheduled assignments, repeated meetings, and more. Because most Panamanian software developers are fluent in English, US, Canadian, and South American businesses can hire them without worrying about the language barrier.

Proximity to the US

The geographical location of your nearshoring partner matters a lot. For example, Panama is just over 3,500 km away from the US, which means an average flight time lasts 3.85 hours. The duration is even shorter when you take off from cities such as Miami (about 3 hours).

The proximity of Panama to the US gives you more opportunities to meet up with your remote workers in person or even make them a permanent part of your team. You can do so without spending a lot of money in the process and traveling for hours to reach the destination completely swamped. As Panama City's Tocumen International Airport has direct flights to different states in the US and Canada, you may even come to the country from your city without making a stop.

Similar Culture

A similar work culture of distant employers and employees improves communication and work experience for both parties. Since Panama has long been a trade and investment hub, its residents are well-aware of the international culture and work ethics.

Similar culture boosts a positive work environment, productivity, and even the overall happiness of the workers. US employers find Panamanian workers compatible because of their keen understanding of the American work culture.

More Affordable

As software development reaches all industries and countries, it also brings better compensation for workers. The salaries of software developers are higher in the US compared to central American countries. The average salary of a software developer in the US is $110,140 per year. US developers also charge other expenses based on the complexity of the projects.

On the other hand, the average salary for the same position in Panama is $41,762 per year. This massive difference in the pay scale makes Panama a more cost-efficient region to outsource work for software businesses.

Cost of Hiring Panamanian Software Developers

As discussed above, the average salary of Panamanian software developers differs significantly compared to their US counterparts. Since the former make a more cost-effective option, most US businesses decide to hire Panamanian developers.

But how do you calculate the potential salary of your developer in Panama? A couple of factors may come into play here, including:

  1. Project scope
  2. Hourly rate cost of the developer
  3. Type of contract

Depending on these aspects, you may need to pay more or less to your remote workers. Below are listed average yearly and hourly salaries of Panamanian software developers for reference.  

Average Yearly Salary Rates for Panamanian Software Engineers

The average yearly salary of a Panamanian Software Engineer is $43,405 per year, while a Software Developer earns $41,762 per year. Here are some other yearly rates based on the experience and roles:

  • Entry-level Software Engineer: $30,493
  • Entry-level Software Developer: $29,296
  • Mid-Level Software Engineer: $43,401
  • Mid-Level Software Developer: $41,758
  • Senior Software Engineer: $54,117
  • Senior Software Developer: $52,069

Panamanian software engineers and developers expect a bonus of $1,867 to $1,936 per year, far less than their US colleagues. Also, it's good to keep in mind the salary of Panamanian developers is expected to grow by 25% in the next five years, making it $52,039 yearly.

Average Hourly Rates to Outsource to Panamanian Tech Talent

You can also hire freelance Panamanian software developers at an average rate of $11 per hour. However, this can reach up to $20 per hour based on the developer's experience and the project complexity.

Below are the hourly rates of common types of software developers in Panama:

  • Average iOS App Developer Hourly Rates: $13
  • Average Mobile App Developer Hourly Rates: $12
  • Average Video Game Developer Hourly Rates: $19.56

The hourly rates depend on the type of software you want and the type of degree the developer holds. Despite the fluctuating changes, companies can make notable savings by hiring talent from Panama, and all of that without trading work quality for lower business costs.

Disadvantages of Nearshoring Software Development to Panama

Despite all the benefits, outsourcing software development to Panama is not without disadvantages. Before selecting a software developer from Panama for your organization, consider these cons and make sure you have a proper strategy in place to overcome them:

Hard for Foreign Companies to Reach Local Developers

When outsourcing software development to Panama or any other country, you may find it challenging to reach the local talent. Without connections from the inside, how will you know where to search for the best developers? The top professionals are usually not available at freelancing platforms, or they simply may not see your post on the local job board.

Half the organizations that outsource work fail to achieve the expected financial results because they get the entire process wrong. Failing to reach out to the right talent in the right place makes one of the reasons.

Smaller Population

Panama is a country with a small population of 4.4 million people, and finding the right talent may prove difficult. Out of the entire population, only 47.8% of people have received higher education, according to a 2016 survey. Although we expect the percentage to be higher these days, finding top developers in a smaller country can always be a little more challenging than in a large one.

Navigating Complicated Local Laws and Regulations

Another major issue in hiring software developers from Panama is navigating the complicated local laws and regulations. For example, Panama has strict termination laws that protect employees from abrupt dismissals from the job. If you want to stay compliant and avoid the labor court, you need to have a written agreement with your Panamanian contractor and deliver an appropriate notice period for work termination.

The termination regulations make only one example. If you intend to hire Panamanian developers, you also have to follow other labor laws and rules. Paying contractors according to local laws is also imperative.

To avoid getting into legal trouble, consider getting expert help. Like any other country, Panama has its laws and requirements and following them as a foreign company can be difficult. A local and experienced partner can aid you in staying compliant while outsourcing software development to Panama.

Revelo: We Source, Hire, and Onboard Panamanian Engineers Compliantly for You

If you don't know where to even begin looking for a partner in handling these cons, we can help. Revelo is a talent platform that connects companies of all sizes with the top tech talent in Latin America, all while helping them stay compliant with local regulations. We handle all the hard work for you, from pre-vetting candidates to taking care of salaries, benefits, and legal requirements. All you need to do is focus on achieving the set business goals.

Where to Find and Hire Panamanian Developers

Panama has more than 200 cities, so it may be hard to decide where to start looking for software developers. Fortunately, some places are known as more technically focused than others. We selected some popular tech hubs and one talent platform for you.

Tech Hubs

There are a few locations rich in tech hubs in Panama:

Panama City

Panama City is the Capital of Panama, located at the entrance of the Panama Canal. It's the major trade hub and one of the most developed cities in the country, attracting many startup opportunities because of the City of Knowledge initiative introduced by the government. This initiative supports academic organizations and the growth of tech companies.

Bocas del Toro

Bocas del Toro is a tropical city in Panama. It's also commonly known as Bocas town, and it's the capital of Bocas del Toro province in Panama. Even in remote coastal cities like Bocas, the internet is super fast, and the tech talent is highly educated.

Pedasi

Pedasi is a coastal town located on the south-eastern tip of the Panama coast. It's of the safest places to visit and live in Panama, which attracts thousands of tourists yearly. You can find independent software developers working in this pristine town at a reasonable salary rate.

Related: Best Talent Acquisition Conferences in 2022

Talent Platforms That Specialize in Latin America

As mentioned, it's essential to get connected with local experts to eliminate the risk of getting in legal trouble. A talent platform can help you with that and many other things along the way, including talent acquisition and handling.

Revelo

We've already introduced Revelo as a prominent talent platform that helps you hire remote developers in Latin America. Panama is one of the many countries on our list. We help you connect with its local talent, match you with the best candidates for your needs, and support you in onboarding new hires.

All you need to do is tell us your recruiting objectives. We'll find you the best fits within days, and all of them will be pre-vetted. Moreover, once you hire the preferred candidates, we'll aid you in managing salary, benefits, and legal requirements. Explore our solution for companies for more detail about Revelo services.

Key Takeaways

In summary, outsourcing software development to Panama has many benefits for US companies, starting with cost-efficiency, the same time zones, and equal currencies. Nevertheless, there are still some risks and challenges you need to keep in mind to avoid legal issues. That's why partnering with a company familiar with local talent and laws can help you take your recruitment to the next level.

If you want to find out how we can help you hire remote software engineers in Panama, get in touch. We'll contact you as soon as possible with more information.

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María L.
Fullstack
DEVELOPER
EXPERT IN
EXPERIENCE
5 years
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Full-time

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Jose A.

Reх Huхford

Jose E.

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Full-Stack developer with 6 years of experience working with MERN stack. Worked for multiple transnational companies focused on web and cloud, technology services, and R&D. Major professional experience in Frontend with Javascript, Node.js, React.js, and Vue.js

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