An Employer of Record (EOR) in Colombia is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
An employer of record in Colombia assist you with the following
- Draft local employment contracts
- Register employees with the social security agencies
- Withholding taxes
- Provide Benefits
- Comply with the local labor laws in Colombia
- End to End Payroll
- Work Permit
- Hiring and Payments
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Colombia to help you with your global staffing needs.
On this page: Employment Contracts in Colombia | Employment Laws in Colombia | Social Security in Colombia | Personal Income Tax in Colombia | Employees vs Independent Contractors in Colombia | Employee Benefits in Colombia
Employment Contracts in Colombia
In Colombia, employment contracts are governed by Article 22 of the Substantive Labor Code (CST). These contracts represent an agreement where a natural person commits to providing personal services to another individual or legal entity under continued dependence or subordination, in exchange for remuneration, commonly known as a salary. The individual providing services is referred to as the worker, while the recipient of the services and the one providing remuneration is the employer. The CST sets minimum conditions for labor relations, and one prevalent type of contract is the fixed-term employment contract, which has a predetermined duration agreed upon by both parties. Contracts without a specified term are considered indefinite, and termination conditions may be outlined within the contract.
There are different types of labor contracts in Colombia:
- Indefinite Term Contracts: Contracts without a predefined term, applicable from the commencement date. Terms for termination may be specified within the contract.
- Fixed Term Contracts: Legally binding agreements for a specified period, determined through mutual agreement. Duration can range from months to up to three years.
- Service Contracts: Not employment agreements but commitments to provide specific services. Individuals under service contracts are not considered employees and receive fees instead of a salary. Such contracts are suitable for consultants and independent contractors, as they entail no further obligations beyond outlined services.
Understanding these contract types is crucial for employers and workers to navigate the legal framework governing employment relationships in Colombia.
Regular vs Integral Salary Options in Colombia
In Colombia, employers can choose between two salary structures: Regular Salary and Integral Salary. The Regular Salary involves a base salary paid separately from mandatory benefits and contributions, including social security, vacation pay, and the 13th-month bonus. On the other hand, the Integral Salary consolidates all mandatory contributions into one fixed monthly payment. It is often chosen by higher-paid employees for administrative convenience. The Regular Salary offers transparency but requires separate administration, while the Integral Salary simplifies payroll but provides a less transparent breakdown. The choice depends on factors like the employee's salary level, administrative preferences, transparency, and expectations of overtime or bonuses.
| Feature | Regular Salary | Integral Salary |
|---|---|---|
| Structure | Base salary + separate payments for benefits & contributions | Base salary includes all mandatory benefits & contributions |
| Benefits & Contributions | Paid separately (health, pension, risk, vacation, 13th salary, some bonuses) | Integrated into salary (health, pension, risk, some exclusions) |
| Applicability | Typically for salaries below 15,080,000 COP/month (can be chosen by lower-paid employees) | Typically for salaries above 15,080,000 COP/month (can be agreed upon) |
| Advantages | Transparent composition, easier overtime & bonus calculations | Simplified administration, predictable income |
| Disadvantages | Complex administration, separate payments | Less transparent breakdown, lower potential overtime & bonus pay |
| Suitability | Prefers transparency & accuracy, expects frequent overtime/bonuses | Values administrative ease & predictable income |
Employment Laws in Colombia
For foreign employers venturing into Colombia, understanding the basics of local employment laws is essential. This brief guide outlines key aspects, including minimum wages, payroll cycles, probation periods, working hours, overtime pay, and the mandatory 13th-month salary. Use this overview as a starting point to ensure compliance and smooth operations as you consider hiring and managing remote teams in Colombia.
- Minimum Wages: The minimum wage in Colombia stands at 1,300,606 Colombian pesos (COP) per month, equivalent to 305.32 USD, serving as the baseline for fair compensation.
- Payroll Cycle: In Colombia, payroll is typically processed on a monthly basis, with salaries disbursed on the last day of the month. Some employees may receive bi-weekly payments around the 15th and 30th of each month for added flexibility.
- Probation Period: Employment contracts in Colombia may include a probation period of up to 2 months for indefinite contracts. For fixed-term contracts, the probation period is set at 1/5th of the contract duration or a maximum of 2 months.
- Working Hours: Standard working hours in Colombia amount to 47 per week, with daily limits ranging from 8 to 10 hours. These regulations help ensure a balanced and fair work schedule.
- Overtime Pay: Colombian employees are entitled to overtime pay, set at 125% of their regular pay. Overtime hours are capped at 2 hours per day and 12 hours per week, with a maximum weekly limit of 56 hours.
- 13th Month Salary: Colombian labor laws mandate the payment of a 13th-month salary, reflecting the commitment to providing additional financial support to employees.
- Notice Period
- Fixed-term Contracts: Employers must provide a notice of 30 days whether to renew or end the contract. The same rule applies to the termination of the contract. In Colombia fixed term contracts renew automatically.
- Open-ended Contracts: Employees who are terminated without any cause are entitled to receive severance pay as per the Colombian labor laws.
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Severance Pay
Severance pay in Colombia is calculated based on the employment duration and the salary range.
Over (TU) Not Over (TU) Tax Rate Tax Rate Calculation Tax (TU) 0 1,090 0 0 1,090 1,700 19 19% of the amount exceeding 1090 TU 115.9 1,700 4,100 28 28% of the amount exceeding 1700 TU + 116 TU 672 4,100 8,670 33 33% of the amount exceeding 4100 TU + 788 TU 1508.1 8,670 18,970 35 35% of the amount exceeding 8670 + 2296 TU 3605 18,970 31,000 37 37% of the amount exceeding 18970 + 5901 TU 4451.1 31,000 And up 39 39% of the amount exceeding 31000 + 10353 TU
Personal Income Tax
Tax liability is calculated based on taxable income (TU) within specified income ranges.
| Over (TU) | Not Over (TU) | Tax Rate | Tax Rate Calculation | Tax (TU) |
|---|---|---|---|---|
| 0 | 1,090 | 0 | 0 | |
| 1,090 | 1,700 | 19 | 19% of the amount exceeding 1090 TU | 115.9 |
| 1,700 | 4,100 | 28 | 28% of the amount exceeding 1700 TU + 116 TU | 672 |
| 4,100 | 8,670 | 33 | 33% of the amount exceeding 4100 TU + 788 TU | 1508.1 |
| 8,670 | 18,970 | 35 | 35% of the amount exceeding 8670 + 2296 TU | 3605 |
| 18,970 | 31,000 | 37 | 37% of the amount exceeding 18970 + 5901 TU | 4451.1 |
| 31,000 | And up | 39 | 39% of the amount exceeding 31000 + 10353 TU |
1 TU = COP 42,412 for FY 2023
Employees vs Independent Contractor Compliance in Colombia
Employers in Colombia are required to classify the workers appropriately to avoid misclassification penalty. Misclassifying employees may result in financial consequences, including reimbursing unpaid wages, making overdue social security contributions, settling back taxes, and facing penalties and other punitive actions.
The classification is based on the below
- Employees are covered under Colombian social security and labor laws. They are entitled to certain benefits, such as minimum wage, overtime pay, paid vacation, and paid sick leave. Employees are hired to perform a task and are subject to the employer’s control.
- Contractors are not covered under Colombian social security and labor laws. They are not entitled to certain benefits, such as minimum wage, overtime pay, paid vacation, and paid sick leave. Contractors are hired to perform a task and are flexible to work on their own terms as discussed prior to the engagement.
Employee Benefits in Colombia
Leave Entitlements in Colombia
- Vacation Leave: 15 days annually, beginning after 12 months of service. Prorated for partial years.
- Public Holidays: 18 days annually, provided by the employer, covering standard public holidays.
- Sick Leave: Up to 180 days, with the first 2 days paid by the employer. The remaining period is covered by social security and the employer.
- Maternity Leave: 18 weeks of fully paid maternity leave, including prenatal and postnatal leave. Covered by social security and the employer.
- Paternity Leave: 2 weeks of fully paid leave, extended from 8 days in 2021. Covered by social security and the employer.
- Shared Parental Leave: 6 weeks, divisible between parents. Covered by social security and the employer.
- Adoption Leave: Same duration as maternity and paternity leave, covered by social security and the employer, applicable to adoptive parents.
- Bereavement Leave: 5 days provided by the employer, applicable in the event of a close family member's death.
- Jury Duty Leave: Duration not specified by law and is unpaid. Varies based on military service.
- Military Leave: 1-2 years of unpaid leave, with the employment contract suspended during service.
- Voting Leave: Half-day leave provided by the employer, requiring proof of voting.
- Marriage Leave: 5 days provided by the employer for an employee's wedding.
Colombia Overview
| Overview | |
| Continent | Americas |
| Country | Colombia |
| Capital | Bogota |
| Time zone | UTC−05:00 |
| Total Time zones | 1 |
| Working hours per week | 48 |
| Working week | Monday–Friday |
| Typical hours worked | 10 |
| Personal Tax filing deadline | The deadline for tax returns depends on your tax ID's last two digits. Tax filing starts in August and ends in October the next year after your income was earned. |
| Financial Year | 1st January to 31st December |
| Date format | dd/mm/yyyy |
| Currency | Colombian Peso (COP) |
| VAT | the standard rate is 19% |
In conclusion, choosing an Employer of Record (EOR) in Colombia can be a strategic decision for businesses looking to expand their global presence or simplify their workforce management. EOR services in Colombia provide a comprehensive solution for legal compliance, payroll processing, and HR administration. By partnering with an EOR, businesses can navigate the complexities of Colombian labor laws, ensuring that their operations are not only compliant but also efficient and cost-effective. The flexibility and expertise offered by EORs empower companies to focus on their core objectives while leaving the complexities of employment and regulatory compliance in capable hands. Colombia's dynamic and growing economy presents exciting opportunities for businesses, and EOR services can serve as a key enabler for success in this vibrant market.
Social Security in Colombia
As an employer in Colombia, ensuring the well-being of your employees and complying with social security regulations is paramount. But navigating the intricacies of contributions, benefits, and legal requirements can be daunting. This Employer's Guide to Colombian Social Security cuts through the complexity, providing you with a clear and concise roadmap. Whether you're a seasoned HR professional or new to the game, this guide empowers you to manage your obligations efficiently and confidently.
1. Coverage
2. Legal Monthly Salary
Contributions are calculated based on a minimum and maximum legal monthly salary (COP 1,160,000 to COP 29 million in 2024). This does not apply to Parafiscal contributions.
3. Total Social Security Contributions
4. Specific Contributions
Employee Contributions
Employer Contributions
5. Pension Systems
6. Public vs. Private Regimes
Colombia offers both public (General Pensions System) and private (IRAs, voluntary plans) regimes. Choose the one that best suits your needs and risk tolerance.
7. Ordinary vs. Integral Salaries
8. Deciphering Pension Systems and Regimes
General Pensions System (Public Regime)
Individual Saving with Solidarity (Private Regime)
Navigating Public vs. Private Regimes
The choice depends on your individual circumstances:
Investing in your employees' social security well-being translates to a well-equipped, motivated, and productive workforce. This guide equips you with the knowledge to navigate the system effectively, minimizing risks and maximizing compliance. Remember, this is just the beginning – for specialized insights, consulting qualified legal and financial professionals is always recommended. So, let's build a positive and secure work environment, together, starting with a firm grasp on Colombian Social Security.