Colombia is one of Latin America’s fastest-growing economies and a strategic hub for companies expanding into the region. With a population of over 50 million, it offers a large, young, and cost-competitive workforce. Key industries include technology, finance, oil & gas, manufacturing, and business process outsourcing (BPO/SSC).

Cities like Bogotá, Medellín, and Cali are emerging talent hubs, home to a growing pool of skilled professionals in IT, engineering, finance, and customer services. Medellín, in particular, has transformed into a global innovation center, supported by government initiatives and strong academic partnerships.

However, Colombia’s labor market is also complex and heavily regulated. The Colombian Labor Code imposes strict requirements on contracts, working hours, benefits, and termination. Employers must also comply with mandatory social security contributions, payroll taxes, and severance accruals (Cesantías). Setting up a legal entity can take months and requires significant investment.

Working with an Employer of Record (EOR) like Gloroots helps companies:

• Hire employees in days instead of months without opening a Colombian entity.
• Stay compliant with the Colombian Labor Code and social security regulations.
• Streamline payroll, taxes, and statutory benefits like severance, bonuses, and pensions.
• Focus on scaling teams while Gloroots manages compliance, contracts, and HR administration.

What is the work culture and talent pool like in Colombia?

Colombian work culture blends hierarchical structures with strong interpersonal relationships. Managers are often viewed as authority figures, but collaboration and teamwork are highly valued. Personal connections, trust, and communication style are important in building lasting professional relationships.

Employees are loyal, hardworking, and adaptable, but younger professionals increasingly value work-life balance, flexibility, and career growth opportunities. Remote work has gained strong traction in Colombia post-pandemic, especially in IT and professional services.

White-Collar Talent Strengths

• Technology: Software development, IT support, and cybersecurity.
• Finance & Professional Services: Bogotá is Colombia’s financial hub.
• Engineering & Manufacturing: Mechanical, civil, and electrical engineers are widely available.
• BPO & Multilingual Services: Large pool of English- and Spanish-speaking professionals; growing French and Portuguese proficiency.

Key Hiring Hubs

• Bogotá: Finance, IT, consulting, BPO.
• Medellín: Tech startups, innovation, software development.
• Cali & Barranquilla: Manufacturing, logistics, customer service.

Q: What is the process of setting up an entity in Colombia?

Establishing a legal entity in Colombia requires navigating multiple government agencies and complying with local labor and tax laws. The most common structure is a Simplified Joint Stock Company (Sociedad por Acciones Simplificada, or S.A.S.), which is favored by foreign investors for flexibility.

Steps to Set Up an Entity in Colombia

1. Company Name Reservation – With the Chamber of Commerce.
2. Draft Incorporation Documents – Must be notarized.
3. Deposit Minimum Capital – No minimum required for an S.A.S.
4. Register with the Chamber of Commerce – Legal incorporation.
5. Obtain Tax Identification Number (NIT) – From DIAN (Colombian tax authority).
6. Register with Social Security Authorities – Including pensions, health insurance, labor risks, and compensation funds.
7. Open a Corporate Bank Account – For salaries and tax payments.

Timelines

• Incorporation: 4–8 weeks.
• Additional time required for registrations and approvals.

Entity Setup vs. Gloroots EOR in Colombia

Q: What are the key employment laws in Colombia that employers should know?

Colombia’s labor framework is governed by the Colombian Labor Code and overseen by the Ministry of Labor. The law is employee-friendly, requiring written contracts, strict working hour limits, and mandatory benefits. Collective bargaining agreements (CBAs) also apply in many industries.

Key Employment Regulations in Colombia

• Employment Contracts
  • Must be in writing, in Spanish.
  • Common types: indefinite-term (default), fixed-term (up to 3 years), and probationary contracts.
  • Must specify salary, role, working hours, benefits, and termination clauses.
• Working Hours
  • Standard: 42 hours per week (as of July 2026; phased reduction from 48 hours).
  • Typically spread over 5–6 days.
• Overtime Pay
  • 125% for overtime on weekdays.
  • 175% for Sundays and public holidays.
• Minimum Wage (2025)
  • COP 1,320,000/month (~USD 330) plus a mandatory transportation allowance (~COP 162,000/month).
• Annual Leave
  • 15 working days of paid vacation per year.
• Public Holidays
  • 18 national holidays, among the highest in the region.
• Sick Leave
  • First 2 days paid by employer.
  • From day 3, Social Security covers 66% of salary.
• Maternity Leave
  • 18 weeks, fully paid (funded by Social Security).
• Paternity Leave
  • 2 weeks, fully paid.
• Severance Pay (Cesantías)
  • Mandatory accrual equal to 1 month’s salary per year, deposited into a severance fund.
  • Paid upon termination or during employment for housing/education.

Employment Law Snapshot – Colombia

How to Hiring Foreign Talent in Colombia?: Work Visas and Immigration

Colombia allows foreign nationals to work legally with the appropriate visa and permits. The Ministry of Foreign Affairs manages visa issuance, while employers must comply with local registration and reporting requirements.

Common Work Visa Options in Colombia

1. M-Type (Migrant) Work Visa
   • For foreign employees with a Colombian employment contract.
   • Typically valid for up to 3 years, renewable.
2. V-Type (Visitor) Work Visa
   • For short-term assignments, up to 2 years.
   • Suitable for contractors, consultants, or technical specialists.
3. R-Type (Resident) Visa
   • For long-term foreign nationals with 5+ years of legal stay.
   • Allows indefinite work and residence.

Employer Responsibilities

• Work Authorization: Must issue a valid employment contract in Spanish.
• Social Security Enrollment: Register the employee with pensions, health insurance, severance fund, and labor risk insurance (ARL).
• Notification: Report hiring of foreign employees to the Colombian Migration Authority.

How Gloroots Simplifies Immigration in Colombia

With Gloroots as your Employer of Record, you can:

• Hire foreign nationals in Colombia without setting up an entity.
• Get visa sponsorship and residence support through our legal entity.
• Handle work permit applications, renewals, and compliance filings.
• Ensure employees are correctly enrolled in social security and severance funds.
• Provide relocation and onboarding assistance for a smooth transition.

Result: You access Colombia’s international talent pool while Gloroots manages immigration and compliance.

Q: What are the risks of misclassification in Colombia?

In Colombia, the distinction between employees and independent contractors is tightly regulated under the Colombian Labor Code. Misclassification is a significant risk for foreign companies hiring freelancers or consultants without understanding local rules. Courts look beyond contracts to the actual working relationship, applying a “subordination test”.

Criteria for Employee vs. Contractor Status

A worker is likely an employee if:

• The company controls working hours, workplace, or method of work.
• The worker uses company-provided equipment.
• Payment is a regular salary, not project-based.
• The worker is economically dependent on one employer.
• The employer supervises and evaluates performance.

A true contractor should:

• Have control over schedule and work method.
• Invoice multiple clients.
• Use their own tools and equipment.
• Operate with a tax registration (RUT) as an independent business.

Penalties for Misclassification in Colombia

• Reclassification: Contractors may be declared employees by labor courts.
• Back Payments: Employer must retroactively pay social security contributions (health, pension, severance, ARL).
• Employee Benefits: Retroactive vacation, overtime, and statutory bonuses.
• Fines: The Ministry of Labor can impose fines of up to 5,000 minimum wages (~USD 1.5M).
• Reputational Damage: Labor lawsuits and audits can damage credibility.

Misclassification Risk Snapshot – Colombia

Use our Misclassification Risk Calculator to assess your compliance risk in Colombia.

Q: How does an EOR help you run payroll in Colombia?

Payroll in Colombia is highly regulated, with strict requirements around social security contributions, taxes, and mandatory benefits. Employers must align with the DIAN (Tax Authority) and various social funds.

Payroll Compliance Requirements in Colombia

• Payroll Cycle
  • Salaries are paid monthly, typically on the last working day.
  • 13th-month salary is mandatory, split into two payments: June and December (Prima de Servicios).
• Mandatory Deductions
  • Income Tax (Renta): Withheld at source based on progressive rates.
  • Social Security Contributions:
    • Pensions: 16% (12% employer, 4% employee).
    • Health Insurance: 12.5% (8.5% employer, 4% employee).
    • Labor Risk Insurance (ARL): Employer-only, 0.5%–6.96% (based on risk level).
    • Family Compensation Fund (Caja de Compensación): 4% employer.
  • Severance (Cesantías): 1 month’s salary per year, deposited into a severance fund.
  • Interest on Severance: 12% annual interest paid directly to the employee.
  • Vacation: 15 days per year, employer-paid.
• Payslips
  • Employers must issue payslips showing gross salary, deductions, and net pay.
• Reporting
  • Monthly filings to DIAN and social security entities.
  • Annual tax certificates (Certificado de Ingresos y Retenciones) provided to employees.

Risks of In-House Payroll

• Missing severance or interest payments.
• Incorrect contributions to ARL or compensation funds.
• Penalties from DIAN for late or incorrect filings.

How Gloroots Simplifies Payroll in Colombia

As your Employer of Record, Gloroots:

• Automates salary processing, deductions, and contributions.
• Ensures compliance with DIAN and all social security entities.
• Manages Prima de Servicios (13th-month salary) and severance accruals.
• Issues compliant payslips in Spanish.
• Handles monthly and annual reporting.

Result: Employees are paid correctly and on time, while employers avoid compliance risks and penalties.

Q: How does tax compliance work in Colombia?

Tax compliance in Colombia is overseen by the Dirección de Impuestos y Aduanas Nacionales (DIAN). Employers must withhold personal income tax from salaries, remit social contributions, and, if operating a subsidiary, file corporate tax returns.

Personal Income Tax (PIT) in Colombia – 2025

Colombia applies progressive tax rates:

• Income up to COP 47M/year (~USD 12,000): 0%
• COP 47M – 170M (~USD 12,000–43,000): 19%
• COP 170M – 410M (~USD 43,000–105,000): 28%
• Above COP 410M (~USD 105,000): 33–39%

Employees also pay a wealth tax surcharge above certain thresholds.

Social Security Contributions

• Employer:
  • Pension: 12%
  • Health: 8.5%
  • Labor Risk Insurance (ARL): 0.5%–6.96% (industry risk-based)
  • Family Compensation Fund: 4%
• Employee:
  • Pension: 4%
  • Health: 4%

Corporate Income Tax (CIT)

• Standard Rate: 35%
• Financial Institutions: 38% (special rate)
• VAT: 19% standard, 5% on essentials.

Employer Compliance Duties

• Withhold PIT and employee contributions.
• Pay employer contributions to pension, health, ARL, and compensation funds.
• File monthly payroll reports and remit payments.
• Provide annual tax certificate to employees.

Tax Compliance: Direct Entity vs. Gloroots EOR in Colombia

Q: What benefits and entitlements do employees in Colombia receive?

Colombia offers robust statutory benefits, many of which are mandatory by law. Employers often provide supplemental perks to compete for talent.

Statutory Benefits

• Annual Leave: 15 working days paid vacation.
• Public Holidays: 18 national holidays.
• Maternity Leave: 18 weeks fully paid.
• Paternity Leave: 2 weeks fully paid.
• Severance (Cesantías): 1 month’s salary per year, deposited into a fund.
• Interest on Severance: 12% annually, paid directly to employee.
• 13th-Month Salary (Prima de Servicios): Two installments — June & December.
• Health Insurance: Mandatory enrollment via social security.
• Pensions: Funded via employer and employee contributions.
• Occupational Risk Insurance (ARL): Employer-only, risk-based.

Common Additional Benefits

• Private Health Insurance (to supplement state coverage).
• Meal & Transport Allowances.
• Life & Accident Insurance.
• Flexible Work & Remote Options.
• Performance Bonuses & Profit Sharing.

Employee Benefits Snapshot – Colombia

Q: What’s involved in hiring and onboarding employees in Colombia?

Hiring in Colombia is formal and documentation-heavy. Employers must issue Spanish contracts, register employees in multiple social systems, and follow strict timelines for severance fund deposits and payroll reporting. Without a local entity, you’ll need an Employer of Record (EOR) like Gloroots to hire legally.

End-to-end hiring & onboarding checklist (Colombia)

1. Define role & pay
   Set salary in COP gross, job grade, working-time model (daytime/night, split shifts), and eligibility for transport allowance and Prima de Servicios.
2. Issue a compliant Spanish contract
   • Indefinite-term (default) or fixed-term (max 3 years; renewals allowed).
   • Probation: up to 2 months (or ≤20% of fixed-term, capped at 2 months).
     Include: salary, schedule, place of work/remote clause, benefits, severance fund, IP/NC/confidentiality, and termination mechanics.
3. Collect statutory employee data
   National ID/visa, bank details, RUT (tax), beneficiary forms, EPS (health), AFP (pension) choices, ARL risk level, and Caja de Compensación enrollment data.
4. Register in social systems (PILA)
   Enroll the employee with:
   • EPS (health), AFP (pension), ARL (labor risk), and Caja de Compensación.
     Configure monthly remittances via PILA (Planilla Integrada de Liquidación de Aportes).
5. Severance fund setup
   Open a Cesantías account and map employer deposits (1 month’s salary/year) and 12% annual interest obligations.
6. Occupational health & safety (SG-SST)
   ARL onboarding, risk induction, and role-appropriate medical exams/training; provide PPE if applicable.
7. Payroll & tax setup
   Configure DIAN withholding tables, transport allowance (if eligible), dominical/night/overtime premiums, and the two Prima payments (June/December).
8. Onboarding & equipment
   Handbook (code of conduct, remote-work policy), data protection notices, device handover. (Gloroots can procure & ship laptops/mobiles for EOR employees.)
9. Foreign hires
   Ensure M-type/V-type visa in place; report hiring to Migración Colombia and register in social systems on start.

Hiring & Onboarding: Direct Entity vs. Gloroots EOR (Colombia)

With Gloroots, you get fast, compliant hiring in Colombia: we manage contracts, payroll, social contributions, severance funding, and onboarding logistics—so you focus on performance.

Q: How do you successfully manage a workforce in Colombia?

Winning in Colombia means combining tight legal compliance with market-standard benefits and people practices. The Labor Code and case law set strict baselines for hours, premiums, severance, and leave; CBAs may add sector rules.

Management essentials for Colombia

1. Working time & premiums
   • Weekly cap trending to 42 hours (phased reduction).
   • Track overtime (125%), Sunday/holiday work (175%), and night surcharges.
   • Maintain auditable time records.
2. Pay & benefits hygiene
   • Budget for Prima de Servicios (June/Dec), Cesantías + 12% interest, vacation accruals, and ARL/Caja contributions.
   • Offer private health, meal/transport, and bonuses to stay competitive.
3. Remote work compliance
   • Align with telework/“trabajo en casa” rules (ergonomics, cost reimbursement for eligible employees, data & security).
4. Employee relations & representation
   • Respect union rights and fuero sindical protections; follow consultation where CBAs apply.
   • Use clear, respectful communication—relationship-building matters culturally.
5. Data protection & HR files
   • Provide Habeas Data notices; secure storage and limited processing of employee data.
6. Performance & growth
   • Regular feedback cycles, career paths, and training (English, cloud, cybersecurity) drive retention in tech and services hubs.

How Gloroots supports workforce management

• Compliance guardrails: We monitor legal/sector changes and keep payroll, premiums, and leave compliant.
• Benefits & equity: Curate global benefits and advise on equity/performance plans.
• Local HR partner: Guidance on CBAs, SG-SST, investigations, and documentation.
• Device logistics: Laptops/mobiles and secure deprovisioning for EOR employees.
• Integrated global compliance across hiring, pay, and terminations.

Q: What are the key steps and requirements in terminating employees in Colombia?

Termination in Colombia is governed by the Colombian Labor Code, which provides strong employee protections. Employers must carefully apply the correct legal grounds, observe notice obligations, and ensure statutory benefits like severance are handled correctly.

Grounds for Termination

• With Just Cause: Misconduct, breach of contract, or poor performance (must be well documented).
• Without Just Cause: Employer may dismiss but must pay statutory indemnification.
• Mutual Agreement: Both parties agree to end the contract.

Notice Periods

• No general statutory notice for termination, but just cause must be documented.
• Termination without cause requires immediate payment of indemnification.

Severance & Indemnification

• Fixed-Term Contracts: Employer must pay remaining wages for the contract period.
• Indefinite-Term Contracts: Indemnification depends on tenure:
  • < 1 year → 30 days’ salary
  • 1–5 years → 20 days + 20 days per year of service
  5 years → 20 days + 15 days per year of service
• Severance (Cesantías): Paid separately as accrued during employment.

Probationary Periods

• Up to 2 months maximum.
• Easier termination but still requires written justification.

Termination Snapshot – Colombia

How Gloroots Supports Terminations in Colombia

• Ensures correct application of just cause vs. indemnification.
• Calculates and pays Cesantías and indemnities.
• Prepares compliant termination documentation.
• Minimizes risk of labor claims and disputes.

Q: What is the offboarding process in Colombia?

Offboarding requires final settlements, social security deregistration, and delivery of statutory documentation. Employers must complete these steps promptly to avoid disputes or penalties.

Key Steps in Offboarding Employees in Colombia

1. Termination Documentation
   • Written termination letter citing grounds.
   • Mutual agreement must be documented if applicable.
2. Final Payroll Settlement
   • Outstanding salary and benefits.
   • Accrued but unused vacation.
   • Prima de Servicios (if due).
   • Cesantías and interest.
   • Indemnification (if without cause).
3. Social Security Deregistration
   • Remove employee from EPS (health), AFP (pension), ARL (labor risk), and Caja de Compensación.
4. Tax Reporting
   • File final withholding with DIAN.
   • Provide employee with annual income & withholding certificate.
5. Company Assets & Handover
   • Recover laptops, phones, access cards.
   • Ensure secure data return and knowledge transfer.
6. Exit Support
   • Optional outplacement and exit interviews to protect employer reputation.

How Gloroots Simplifies Offboarding in Colombia

• Manages final payroll, severance, and indemnity calculations.
• Handles deregistration across EPS, AFP, ARL, and DIAN.
• Prepares compliant exit documents in Spanish.
• Ensures smooth asset recovery and secure offboarding.

Result: With Gloroots, offboarding is structured, compliant, and employee-friendly.

Q: What costs and financial planning do you need with an Employer of Record in Colombia?

Hiring in Colombia requires careful budgeting because employers must account for mandatory contributions, severance accruals, and statutory bonuses. The total cost of employment (TCE) can be 30–40% higher than gross salary.

Key Employment Cost Components

1. Base Salary
   • Example benchmarks (2025 averages):
     • Software Engineer: COP 80M–120M/year (~USD 20K–30K).
     • Finance Analyst: COP 60M–90M/year (~USD 15K–22K).
     • Marketing Specialist: COP 55M–85M/year (~USD 14K–21K).
2. Employer Contributions
   • Pension: 12%
   • Health Insurance: 8.5%
   • Labor Risk Insurance (ARL): 0.5%–6.96% (by risk level)
   • Family Compensation Fund: 4%
3. Mandatory Benefits
   • Prima de Servicios: 1 extra month’s salary/year (split in June & Dec).
   • Cesantías (Severance Fund): 1 month/year.
   • Interest on Severance: 12% annually.
   • Vacation: 15 days/year.
4. Indirect Costs
   • Payroll admin, notary/legal costs (if direct entity).
   • CBAs may add industry-specific allowances.

How Gloroots Optimizes Cost Planning

Gloroots ensures cost predictability by:

• Bundling salaries, contributions, and severance accruals into one monthly invoice.
• Managing Prima, Cesantías, and statutory benefits on time.
• Providing salary benchmarks and benefits guidance to remain competitive.
• Avoiding hidden legal and admin costs of direct entity setup.

Cost Comparison: Own Entity vs. Gloroots EOR

Q: What challenges might you face, and how do you solve them using an EOR in Colombia?

While Colombia offers a large, young, and cost-competitive workforce, navigating the labor market is not simple. Foreign employers face several operational and compliance hurdles.

Key Hiring Challenges in Colombia

1. Strict Labor Regulations
   • Mandatory Prima, Cesantías, 12% interest, and vacation require careful tracking.
   • Mistakes lead to fines and labor lawsuits.
2. Complex Payroll & Social Security
   • Employers must remit via PILA across multiple systems (EPS, AFP, ARL, Caja).
   • Misreporting can trigger audits.
3. Termination Risks
   • Indemnification rules vary by contract type and tenure.
   • Mishandling terminations often results in labor claims.
4. Entity Setup Delays
   • Incorporation takes weeks and requires ongoing compliance.
   • Slows down hiring in competitive talent markets.
5. Union & Employee Representation
   • Strong union presence in manufacturing, mining, and transport.
   • Employers must respect union rights and avoid unfair dismissals.

How Gloroots Solves These Challenges

Gloroots acts as your Employer of Record in Colombia, removing complexity:

• Labor Law Compliance: Manages statutory benefits and contributions.
• Payroll & PILA: Automates filings with EPS, AFP, ARL, and Caja.
• Severance & Terminations: Ensures indemnification and Cesantías compliance.
• Faster Hiring: Hire in 2–5 days without waiting for entity setup.
• HR Support: Provides local expertise for workforce relations.

Challenge vs. Solution: Direct Entity vs. Gloroots EOR

Conclusion

Colombia offers a large, youthful, and cost-competitive workforce, making it a prime destination for companies expanding into Latin America. With strong expertise in technology, finance, BPO, and engineering, Colombia provides both scale and innovation opportunities.

However, employers must navigate complex labor laws, mandatory benefits (Prima, Cesantías, vacation, severance interest), and strict payroll compliance (PILA system). Entity setup is slow, and mishandling terminations or social security filings can lead to fines or litigation.

With Gloroots as your Employer of Record in Colombia, you can:

• Hire employees in days instead of months.
• Stay compliant with the Labor Code and social security requirements.
• Offer competitive benefits while Gloroots manages payroll and contributions.
• Simplify payroll management, severance accruals, and tax filings.
• Focus on building teams while Gloroots handles compliance and HR complexity.

Gloroots makes hiring in Colombia fast, compliant, and cost-efficient.

Start hiring in Colombia today.