What Global Companies Need to Understand About Payroll in Colombia

Hiring globally has numerous benefits. Having a diverse team across the globe can be as important as offering your product or service globally. As an employer, you want the diversity global hiring can bring, as it brings top talent with new perspectives to the team.

However, global hiring comes with navigating local labor and employment laws. Every employer needs to meet these requirements to be able to handle payroll in the country they are hiring from. The same is true about hiring in Colombia.

Colombia is one of the countries currently making a significant mark in the technology sector. The booming economy in the last few years has created a dynamic job market. It has attracted a lot of attention with its promising employment opportunities.

So, if you plan to hire promising talent and professionals from Colombia, here is what you need to know.

Employment laws in Colombia

Colombian labor laws are employee-friendly. They focus on ensuring fair treatment and protection for workers. So, when hiring in Colombia, understanding these regulations is key to staying compliant. You want to maintain a good employer-employee relationship and avoid potential legal challenges.

Here are the key aspects of Colombian employment laws:

Employment contracts and types

In Colombia, employment contracts can be verbal or written. However, written contracts are strongly recommended to avoid misunderstandings. Contracts fall into three main categories: indefinite term, fixed term, and work or labor contracts.

Fixed-term contracts must be in writing, and you can renew them, but they must be at most three years. The work or labor contract, generally used for specific projects, ends when the project is completed.

Minimum wage and benefits

The government sets Colombia’s minimum wage annually, which applies to all employees. Employers must also provide additional mandatory benefits. Mandatory benefits include a prima (annual bonus), paid vacations, and severance payments.

Beyond these, there are payments for health and pension contributions. There is also mandatory enrollment in the Family Compensation Fund. It supports employee welfare programs.

Probation period

The probation period for indefinite-term contracts can last up to two months. During this period, either party may terminate the contract without severance pay. For fixed-term contracts, the rules are slightly different. For those, the probation period cannot exceed one-fifth of the agreed-upon contract duration.

Termination and severance

Colombian labor law is strict about termination, particularly for indefinite-term contracts. Employers can terminate these contracts with just cause, such as misconduct or underperformance. They also can terminate without cause, in which case severance payments apply.

Severance amounts depend on the length of employment. Employees who have worked less than one year usually receive around 30 days' salary. Termination without cause for longer periods requires different calculations. These vary based on salary and tenure.

Working hours and rest days

The standard workweek in Colombia is 48 hours, generally spread across six days. Employers can also offer flexible schedules, but you should know labor laws beforehand.

Employers must pay overtime for hours worked beyond this limit. Higher rates apply for night work, Sunday work, and holidays. Employees are entitled to a mandatory weekly rest day, usually Sunday.

Paid leave and social security

Colombian employees have access to various types of paid leave. Paid leave includes sick leave, maternity leave (18 weeks), and paternity leave (two weeks). Employers must also contribute to the national social security system. It covers health, pension, and occupational risk insurance for employees.

These contributions are mandatory. You must regularly report them and pay to the authorities.

Anti-discrimination and workplace harassment protections

Colombian law prohibits discrimination. It covers discrimination based on race, gender, religion, political opinion, and other characteristics. Employers must also take measures to prevent workplace harassment.

Employees who experience such issues can file complaints or lawsuits. Non-compliance with anti-discrimination laws can lead to large fines and legal action.

Payroll in Colombia

Payroll in Colombia has some unique features influenced by local regulations and labor laws. As an employer, you must navigate these carefully. Here are some key points:

Social security and benefits contributions

Employers in Colombia are responsible for making significant contributions to social security. Other benefits to consider include health insurance, pensions, and occupational risk insurance. Employers also contribute to funds for family welfare, such as the Family Compensation Fund. This fund covers benefits like family allowances and childcare support.

Mandatory bonuses and paid leave

Employees in Colombia are entitled to a statutory bonus known as prima. It is paid twice a year, usually in June and December. Workers also receive a 15-day vacation annually, and employers must pay for these days.

Colombian labor laws also require employers to provide severance pay (cesantías). There is also interest on severance pay (intereses sobre cesantías), which you must pay annually.

Taxes and withholding

Colombian payroll taxes include contributions to social security and income tax withholding. As an employer, you are responsible for deducting it from employees' salaries. The rates can vary depending on the employee’s income bracket, and deductions are typically progressive.

Payroll frequency and reporting

In Colombia, payroll is usually processed bi-monthly or monthly. You also must adhere to strict reporting and compliance requirements. These include filing reports with the tax authority, Unit of Pension and Parafiscal Management. Other relevant entities may also require you to file reports.

You must manage payroll in Colombian pesos. You should also keep and maintain specific records for several years as per local regulations.

Working hours and overtime

The standard workweek in Colombia is 48 hours, spread over six days. Overtime pay is required for hours beyond the standard workweek, and you should pay your overtime workers at a premium rate.

Night work and work on Sundays and holidays also require higher rates. The rates range around 175% of the regular hourly wage for Sundays and holidays and 135% for night shifts.

Hiring in Colombia

Navigating payroll and employment laws in Colombia can be tricky and complex for an employer. Colombian laws have very detailed requirements around contracts, contributions, and employee rights. If you don't have an established presence in Colombia, managing these obligations might feel daunting.

To simplify the process, consider working with an Employer of Record (EOR). An EOR can help you comply with local regulations and manage payroll on your behalf. This partnership will allow you to hire top talent in Colombia legally and compliantly.

FAQs

Can a foreigner get a job in Colombia?

Yes, foreigners can work in Colombia, but they need a valid work visa. Employers must also comply with all local employment regulations when hiring foreign nationals.

How do I apply for jobs in Colombia?

Job seekers can apply through online job portals, recruitment agencies, or networking events. Knowledge of Spanish is often required, as many employers seek candidates proficient in the local language.

What is a good salary in Colombia?

A good salary varies by industry and region. In general, salaries that provide a comfortable living standard are above the national minimum wage. Higher salaries are common in sectors like technology, finance, and management.