Colombia’s diverse and proficient workforce make it an attractive proposition for enterprises that want to hire remotely. . The country's demographic characteristics, marked by a substantial segment of young individuals, combined with an education system that consistently produces top-tier graduates, contributes to a vibrant and thriving labor market.

Employers of Record (EORs) can be highly beneficial in the recruitment of skilled personnel within Colombia. EORs offer direction on employment agreements and guarantee adherence to regional labor regulations, safeguarding enterprises against legal risks. Collaborating with an EOR based in Colombia provides companies with the opportunity to leverage localHR expertise ,without adding significant expenses. .

Colombian labor laws tend to be more protective of employees than many economies in the West. There are strict regulations regarding wages, work hours, severance pay, notice periods, and the ability to terminate contracts. For example, non-compliant terminations can lead to penalties, unlike labor markets like the USA where employment relationships may begin and end on an “at-will" basis. Also, employers from employer-friendly countries such as the USA and UK must be aware that Colombian labor laws are heavily influenced by labor unions and collective bargaining in addition to the federal labor law. In contrast, unionization in countries  USA and the UK varies by industry and region.

By forging a partnership with a Colombian Employer of Record (EOR) or Professional Employer Organization (PEO), enterprises can stay compliant when hiring in Colombia - all at a cost-effective rate. EORs/PEOs help navigate the canopy of complex labor laws, mitigating employment risks and ensuring compliance with Collective Bargaining Agreements (CBAs). 

The cost of Columbia EOR/PEO services in  Columbia may differ based on various factors, such as the number of employees, the extent of services needed, and the project’s complexity. The pricing structure for Columbia EOR/PEO services usually involves a monthly fee per employee or a percentage of the employee's salary. Extra charges may apply for additional services or customization.

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Key Metrics For Foreign Employers

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The table below helps you reflect on metrics from the Global Talent Competitiveness Index to better hire in Colombia.

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Source: The Global Talent Competitiveness Index 2023

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Through the Gloroots' Recrew platform, you can discover amazing talent in Colombia and grow your team effectively.

The term "misclassification of employees" refers to the inaccurate classification of workers by their employers. Misclassification occurs when an employer categorizes a worker as an independent contractor or exempts them from certain employment laws and benefits, even if the worker should be classified as an employee and entitled to legal protections, benefits, and rights.

Utilizing a PEO/EOR in Colombia helps mitigate the risks associated with misclassification by ensuring compliance with labor laws, proper employee classification, accurate payroll processing, and access to comprehensive benefits. This lets businesses focus on their core operations while entrusting employment-related responsibilities to experienced professionals.

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EMPLOYMENT CONTRACT

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While verbal employment agreements are enforceable, we advise employers to offer a written employment contract when hiring in Colombia. Colombian labor law differentiates between permanent and fixed-term contracts. Fixed contracts must be written in nature and can only apply for a maximum duration of three years (with the possibility of renewal).

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Key details to include in an employment contract are:

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• Identification of the parties involved
• Start date of employment (and duration for fixed-term contracts)
• Workplace location
• Job description and responsibilities
• Salary and benefits (if applicable, mention of integrated salary)
• Working hours
• Total number of holidays
• Notice periods for termination of employment
• Probation period if applicable

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Having a well-drafted employment contract ensures clarity and compliance with labor regulations, protecting both employers and employees.

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This might sound overwhelming, but it doesn't have to be. A solution like Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.

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Get an overview of what you need to know when hiring in Colombia. Contact us.

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Probation Periods:

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Probationary periods must be documented in writing. For indefinite term contracts and fixed-term contracts ranging from one to three years, the maximum probationary period is two months. In fixed-term contracts shorter than one year, the probationary period cannot exceed one-fifth of the agreed-upon term, with a maximum limit of two months.

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Overtime:

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Employees can work overtime up to two hours on a working day. Over the entire week, employees can work for a maximum of 12 hours.

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The following table reveals overtime wages. 

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Minimum Wage:

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The national minimum wage was increased to 1.16 million COP per month at the beginning of 2023. If an employee earns less than two times the national minimum wage, the company is required to give the worker a transportation and connection allowance amounting to COP 140,606.

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Maternity Leave and Paternity Leave

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Female employees are entitled to 18 weeks of fully paid maternity leave, starting up to two weeks before childbirth, with reimbursement from Social Security. Fathers can take 2 weeks of paid paternity leave, following the same payment process. Additionally, fathers have the option to share the final 6 weeks of the mother's maternity leave.

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Sick Pay:

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If an employee is unable to report to work due to an illness or accident, the employer is required to pay sick pay equivalent to the employee's regular salary for the first two days of absence. This obligation applies even if the employee's absence was not job-related. Sick pay is paid by Social Security at a rate of 66.67%, starting from the third day of sick leave that an employee takes. However, the time period for making payments is capped at 180 days.

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Income Tax 

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Colombia follows a progressive tax system; taxes increase with increase in income. Income tax for Colombian employees are measured in tax units.

Look at the table below for the varying rates of taxation.

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Note: Tax Units (1 Tax Unit= 36,308 COP)

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The Colombian government utilizes the term "TVU" as a tax unit for recalibrating tax limits. As of 2023, the TVU holds a monetary worth of COP 42,412.

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Other Tax and Social Security contribution:

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Note: Integrated salaries combine all components of an employee's compensation, including base salary, bonuses, allowances, and benefits, into a single amount. This simplifies the payroll process and provides employees with a clear understanding of their total earnings. Social Security contributions for integrated salaries are calculated based on 70% of the employee’s income.

Termination Process:

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When either party unilaterally terminates an employment contract in Colombia, it is necessary to provide a written statement explaining the cause or motive behind the termination unless specific exceptions apply. The termination process must adhere to the regulations outlined in the employment contract law, salary law, and social security regulations. Employers must provide a valid and "fair" reason for terminating an employee to comply with legal requirements and avoid potential penalties and fines.

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Notice Period:

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The duration of the notice period in Colombia depends on the circumstances surrounding the termination:

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Severance Pay:

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Severance payments in Colombia are determined by several factors, including the nature of the termination, the employee's current salary, and the type of agreement:

• For fixed-term agreements, the severance pay must cover the remaining salary owed to the employee until the end of the agreement.
• In indefinite agreements, severance pay is calculated based on the employee's years of service and current salary.
• Employees earning less than COP$9,085,260 (10 times the monthly minimum wage) receive 30 days' salary for the first year of employment and 20 days' salary for each additional year.
• Employees earning more than 10 times the monthly minimum wage receive 20 days' salary after one year and 15 days' salary for each additional year with the company.

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Choose Gloroots as your Columbia Employer of Record for a seamless and efficient business expansion. With our expertise and experience in the local market, Gloroots ensures compliance with labor laws, handles administrative tasks, and provides local market insight. Streamlining operations, including payroll processing, tax compliance, and benefits administration, Gloroots allows you to focus on core business activities. Our comprehensive services minimize risks, maximize efficiency, and provide peace of mind. Trust the Gloroots team to navigate the complexities of the Columbian labor market, ensuring smooth operations and legal compliance, while you concentrate on growing your business.

Discover how Gloroots can help you grow your global team

Employers in Colombia must have a local legal organization and utilize local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in Colombia makes compliance with employment laws demanding.

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With Gloroots' global Employer of Record (EoR) service, you can let Gloroots handle the heavy lifting of payroll, tax, benefits, and compliance, allowing you to concentrate on what matters most: your employees and company growth.

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