Payroll in Colombia
Capital
Bogota
Official Language
Spanish
Currency
Colombian Peso
Payroll cycle
Monthly, Bi-Weekly
Quick facts about Colombia
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.
Running payroll in Colombia means managing onboarding, termination, severance, payments, benefits like private health insurance, pension plans, 13th-month pay, payroll deductions, compliance, and taxes for full-time employees and contractors. Companies can partner with a PEO or EOR to run payroll abroad, or open an entity and build their own internal payroll system.
Here’s a look at everything you need to know about establishing payroll in Colombia, including important information regarding minimum wage and payroll taxes.
How to run internal payroll in Colombia
Building internal payroll in Colombian means that you are setting up an entity in Colombia and hiring an HR team to manage the entire process. Colombian law requires you to register with the right agencies and decide what type of company you want to incorporate
Performing payroll in Colombia
To perform payroll in Colombia, many companies choose to set up an entity, simplified joint-stock companies (S.A.S) or partner with EOR services to remain compliant.
When setting up a business in Colombia, you will want to work closely with local lawyers and accountants to ensure that you’re following payroll processes. Hiring local lawyers and incorporating can be difficult to maneuver and costly. This process takes 2-3 weeks and can mostly be completed online. You will need to complete the following steps:
Register with the Chamber of Commerce (La Cámara de Comercio)
to get a business ID Number
Set up an in-country bank account
Register for Family Compensation Fund (Caja de Compensación Familiar del Valle del Cauca, Comfand), employee public health coverage and pension plans, The Labor Risks Administrator (the Unidad de Gestión Pensional y Parafiscales de la Protección Social) and the severance fund
Get your employees personal information, such as passport, proof of health insurance coverage, and bank statements
Have Employees complete tax registration requirements including:
Written employment contract
Register with social security
Register for public health service coverage
Register for severance fund
Establish workers insurance
Payroll outsourcing in Colombia
Colombia is known for its complex bureaucracy, especially at the local level. That’s why using an EOR service to help alleviate some of the stresses of paying employees in the country.
EORs help:
Manage payroll, employment contracts, and statutory benefits
Navigate payroll taxes and other HR processes
Support full-time workers across the entire employee lifecycle, from onboarding to offboarding
Sponsor work visas & permits
Save thousands of dollars and countless hours of valuable time
Employment and payroll taxes you should know about
If you’re going to run internal payroll in Colombia or partner with an EOR service provider, you should understand employer contributions to the social security system as well as employee contributions.
Taxable income is expressed in units of COP 35,607 or 1 UVT (unidad de valor tributario). Both employers and employees contribute to social security, which includes pension, healthcare, and the general labor risks system. In total, social security tax for employer and employee equals 28.5%. The employer pays 20.8% and the employee pays 8% of their monthly salary.
Colombian employer deductions
Employer contributions | Percentage |
Pension | 12% |
Employee medical plan | 8% |
Labor risks | 0.52%-6.96% |
Family Compensation Fund | 4% |
Family Welfare (ICBF) | 3% |
National Apprenticeship Service | 2% |
Combined total | 20.5% |
Colombian employee deductions
Employers must also deduct 8% of their employees salary for social security: 4% for pension and 4% for medical plan.
Combined, the employee and employer deductions equal the 28.5% social security taxes employees and employers are required to pay in Colombia
Employee income tax
Percentage | Tax Units (Gross Income) |
0% | 0-1,090 Tax Units |
19% | 1,090-1,700 Tax Unit |
28% | 1,700- 4,100 Tax Units |
33% | 4,100- 8,670 Tax Units |
35% | 8,670- 18,970 Tax Units |
37% | 18,970- 31,000 Tax Units |
39% | 31,000 Tax Units+ |
Minimum wage
The minimum wage in Colombia is $1,000,000 COP per month.
Pay cycle
The pay cycle in Colombia is normally monthly with payments made on the last working day of the month. In certain fields, the pay can be run bi-weekly with pay dates on the 15th and the last working day of the month.
Tax year
The fiscal year in Colombia is January 1st to December 31st.
Corporate tax rates
The corporate income tax rate in Colombia is 35%. Residents and individual companies are taxed on worldwide assets, while non-resident companies and individuals are only taxed on their Colombian source of income.
VAT
VAT is the value-added tax that is similar to sales tax in the United States. VAT rates are 19% and 5%. The Colombian government recently established 3 VAT-free days in Colombia. These days are March 11th, June 17th and December 3rd. On these days, consumers do not pay VAT taxes when purchasing goods at stores.
Working hours
Standard working hours in Colombia are 8 hours per day with a 40 hour work week. The standard week is Monday-Friday, however, it can be extended to Saturday for a work week of 48 hours.
Overtime
The maximum number of hours per day is 8 hours per day and 48 hours per week. All work beyond the standard working hours must be agreed and regulated by the employment contract.
Employees that work between 10am and 6pm are paid at 35% more than the regular daytime salary.
Daytime overtime is paid at 125% of the regular pay rate and 175% for night overtime hours
Sundays, extra daytimes, and holiday work is paid at 175% of the regular pay
Leave
Paid holiday must be a minimum of 15 days per year after 1 year of employment. There are 18 public holidays employees are entitled to have off in Colombia.
Sick leave
Employees are entitled to 2 days of sick leave paid by their employer at 2/3 their regular salary.
After the 3rd day, employees are paid out by the Colombian social security system with proper documentation from a medical doctor for up to 180 days.
Maternity leave
Employees are entitled to 18 weeks of maternity leave paid in full by their employer. The employer is reimbursed for this leave by the social security system.
Paternity leave
New fathers are entitled to 8 days of paid paternity leave following the birth of a child. The employer pays out the leave in full and is reimbursed by the social security system.
Colombian payroll deduction calculator
Income taxes in Colombia are deducted based on the employees monthly pay and can easily be calculated using a Colombian deduction calculator. You can use a payroll deduction calculator to quickly estimate an employee’s net salary after taxes.
Why companies partner with Via
Via makes hiring talent around the world and building your global team seamless by helping you onboard workers in as little as 2-3 business days. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, employee data privacy compliance, benefits, global payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts provide 24-hour local support and ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity abroad, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
