Straddling the border between Central and South America, Colombia is one of the most biodiverse countries in the world. From the country’s high altitude sprawling capital Bogotá to the Caribbean island San Andres, Colombia offers some of the best natural resources in the world. The country is known for its robust education system, which makes it an appealing place to build out a local employment hub.
Companies looking to hire in Colombia can either establish an entity in the country and partner with an Professional Employment Organization (PEO), or partner with an Employer of Record service (EOR) when there is yet to be an established entity within the country.
Colombia has an up and coming technology sector, and global expansion in the country is relatively easy. Further, Colombia has some of the best universities in South America. This makes it appealing for businesses looking to establish an entity and hire talented employees for a wide range of industries.
Establishing an entity in Colombia requires you to register your business as a subsidiary as well as pay employees through a Colombian bank. Most importantly, you will need to navigate Colombia’s complex bureaucracy system. Using an EOR service like Via takes the pressure off of you to understand and maintain legal compliance when hiring.
Colombia focuses heavily on employees rights and there are many anti-discrimination laws put into place to protect potential employees from being unfairly discriminated.
When using a PEO service in Colombia, you will still need to have an entity or subsidiary established within the country. The problem with establishing a business in Colombia is that the process can take a few months and requires a significant amount of approval from the correct government agencies. PEO services do not take full legal responsibility for compliance. If any issue arises, the parent company is still held accountable for any mistakes made by the PEO service.
Another option is to partner with a third-party employer-of-record (EOR) service. EOR services own their entities, making the entire process of establishing a human resources team, hiring, recruiting, and running payroll seamless. Most importantly, EOR services take on all legal responsibility for the parent company, so that the stress of doing business in another country is alleviated.
Capital city: Bogotá
Largest city by population: Bogotá
Currency: Colombian Peso (COP)
Population: 50.8 million
Colombia GDP: 271 billion USD
Payroll frequency: Once a month on last working day or bi-weekly on 15th and last working day
Federal Minimum wage: 1,000,000.00 COP
There are a minimum of 18 paid holidays in Colombia that employees are entitled to take off with pay:
New Years Day
Saint Peter and Saint Paul
Epiphany (Three Kings Day)
Battle of Boyaca
Saint Joseph’s Day
Assumption of Mary
The Day of the Race
All Saint’s Day
Independence of Cartagena
On top of these mandatory public holidays in Colombia, employers are required to provide 15 days of paid vacation days to employees per year.
If an employee is sick, they are entitled to ⅔ their salary for the first two days that they miss, paid directly by the employer. After the 3rd day and up to 180 days, they are still entitled to ⅔ of their salary, but this payment comes from their social security.
When an employee is injured on the job, they are entitled to 100% of their salary.
New mothers are entitled to 14 weeks of maternity leave. This leave can start up to 2 weeks before labor, and can go for 12 weeks after giving birth.
New fathers are entitled to 2 weeks of paid leave for both birth and adoption. Depending on the circumstances, paid paternity leave can be extended from 1 week to up to 5 weeks.
In the event of the death of a parent, in-law, grandparent, sibling, child or spouse, employees are entitled to 5 days of bereavement leave.
Upon marriage, employees are entitled to 5 days of paid leave for their wedding.
In Colombia, employers are required to pay into the social security system for their employees. Employers must pay 20.8% monthly for social security while the employee contributes 8% of their salary to their social security per month.
Employer payroll tax breaks down as:
12% for pension
8% for employee medical plan
0.52-6.96% for labor risks
4% for Family Compensation Fund
3% for Family Welfare (ICBF)
2% for National Apprenticeship Service (SENA)
Combined, these percentages equal the 20.5% that employers must pay for social security contributions.
Employment contracts in Colombia are of the utmost importance to ensure an agreement is made between both the employer and the employee. Employment contracts should be clear and concise and state the agreed upon salary between the employer and employee in Colombian pesos. Further, employment contracts should include the probationary period agreed between both parties as well as if the employment will be definite or indefinite. Employers will need to know how to draft strong employment contracts to protect both themselves and employees.
Most companies allow for a 2 month probationary period for new employees to allow the employee and employer to try out the working relationship to make sure it’s a good fit.
In Colombia, the working week is a bit longer than the United States. A full working week is 48 hours and is spread out between 5-6 days depending on if Saturdays are required. Most people working in Colombia have 9.6 hour work days from Monday-Friday, but some jobs do require a six day on Saturday. If Saturdays are required, hours are spread out to 8 per day.
Starting in August of 2021, the government reduced the full-time hours to 42. However, these new laws won’t start to go into effect until 2023.
For work conducted between 9pm and 6am, employees are paid at 135% their normal daytime rates.
Overtime can only be accumulated at 2 hours maximum per day or 12 hours maximum per week. This equals to 125% during daytime hours and 175% during nighttime hours. Like Canada, employees who are in management positions are exempt from the mandates on time limits.
An employment contract can be terminated by any party with or without a just cause. In Colombia, it is better to have both parties mutually consent to sever the whole contract, than for the employer to terminate the contract without consent of the employee.
Termination of employment does not make employers legally obligated to pay employees. However, legal ramifications are a looming threat if the employee is not terminated properly.
To avoid unjustly terminating an employee, remember to carefully consider termination, have evidence and proper documentation and overall try to have mutual consent between both parties to avoid a costly lawsuit. If the employee wins in a lawsuit, not only is the employer obligated to pay severance, but they are obligated to cover legal costs.
In Colombia, severance pay is mandatory and equivalent to 1 month of salary for every year of the employee’s employment. If the employee only worked for a fraction of the year, then the severance is equivalent to the fraction of the year that they worked. Employers must deposit severance funds into employees accounts no later than February 14th. Severance interest occurs once a year at 1% interest and liquidation of interest must be paid to employees no later than January 31st of the following year of their employment.
Payroll taxes in Colombia are deducted from each employee’s month’s salary. Establishing a payroll in Colombia can be quite complex because of the bureaucracies that are set up at the local level. Employees pay into social security, severance pay, and their health insurance, while employers also pay into social security and employee’s 13th month pay. This Christmas bonus is paid out in December.
Companies want to hire within Colombia because of the wide range of talented potential employees who live there. However, the process of onboarding these employees can be challenging and expensive without using a third-party service like Via.
To become an employer-of record in Colombia, you need to establish a physical entity in the country. Further, there is a large amount of paperwork as well as laws that are difficult to comply with. Most importantly, as the employer-of-record in Colombia, you will need to enact an HR system that is strict about following necessary labor laws. If you don’t comply correctly, you risk legal actions and added fines.
For companies who plan to hire a large number of foreign employees, opening an entity with a strong HR and legal team makes sense.
However, most of the time, using a third-party EOR service like Via that has in-country support in Colombia is a strategic move.
For companies that want to build a large team in Colombia and own their own entities, using a PEO service makes sense.
PEO services operate as a co-employment with a parent company. This means that they manage HR processes, but don’t own the entity. The problem with using a co-employment service is that it keeps employment contracts with your company. If any issues arise with compliance, the parent company is still legally responsible for solving the issue.
Using a co-employment PEO service still requires you to meet the necessary procedures for opening an entity, which can take a few months to go through.
The PEO option makes sense for larger corporations that want to maintain an entity in Colombia. However, using a PEO service can be cost prohibitive, especially for startups and SMBs.
When you partner with an EOR service like Via, you do not have to open a bank account, register and comply with government institutions or have a local Colombian business. Most importantly, we know how to create a strong employment agreement that protects your business and makes your employees feel valued. An EOR service like Via handles all of the local HR processes and local laws, while you focus on building a strong team.
When looking to build a small but strategic team in Colombia, using an EOR service like Via expedites the process. Via allows you to hire and onboard employees compliant with Colombian laws in a few days, instead of you having to wait months for the process to go through.
Companies of all sizes want to hire employees in Colombia, but don’t know how to navigate the country’s local labor laws. Via makes hiring Colombian talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity in Colombia, Via assumes full responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Colombia with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.