How to hire employees in Colombia

Colombia's dynamic employment market, recognized for its prowess in digital innovation and creative industries, marks the country as an attractive destination for hiring. It boasts a diverse pool of talent in sectors such as IT, digital marketing, and content creation, positioning Colombia as a hub of creativity and technical skill.

Moreover, Colombia offers a competitive landscape for recruiting top-tier professionals, providing cost-effective solutions for businesses. This blend of skilled labor and affordability makes Colombia an ideal choice for Companies looking to expand their operations or strengthen their international presence.

What you need to know before hiring employees in Colombia

Job market in Colombia

When exploring how to hire employees in Colombia, the following trends can help you hire cost-effectively and pay talent correctly. 

• Colombia's employment rate decreased to 55.26% in January 2023 from 57.43% in December 2023, signaling fluctuations in the job market.
• The GDP is expected to increase by $92.2 billion by 2028, indicating economic growth and potential job creation.
• The youth unemployment rate dropped by 3.8 percentage points, showing an improving job market for younger workers.
• 9% of respondents globally associate "high quality" with products made in Colombia, boosting its economic image.
• Colombia's potential for digital growth and remote work is underscored by its rank of 85 with a GRWI score of 0.528, as per the Global Remote Work Index, which assesses countries based on cybersecurity, economics, infrastructure, and social safety, emphasizing its readiness for remote employment opportunities.

Understanding Colombia position in both the national and global job market is crucial for making informed hiring decisions, especially for businesses aiming for remote or international expansion.

Colombia Hiring Trends

In 2024, Colombia's hiring landscape is predominantly driven by the services sector, which is responsible for employing over 64% of the workforce. However, the country faces challenges with high unemployment rates and a large portion of its workforce engaged in informal employment, accounting for almost two-thirds of total employment. These hiring challenges are attributed to unequal access to employment rights and opportunities, influenced by regional disparities and educational levels.

Moreover, the hiring market is impacted by persistent inflation, significantly affecting household budgets, especially in essential goods. Colombia also grapples with notable income inequality, the highest in Latin America according to the Gini Index, and an increasing national debt, now nearly 60% of GDP. Addressing these issues requires a concerted effort to improve the educational system, promote gender equality, and enhance productivity across all employment sectors, essential steps for refining Colombia's hiring practices and ensuring equitable access to job opportunities by 2024.

How to hire employees from Colombia

1. Set up an entity in the country

Setting up a legal entity in Colombia is key for firms looking to tap into the vibrant Latin American market, ensuring long-term strategic advantages and direct oversight of workforce management. 

Initiating this process entails choosing the right corporate form, like the flexible Sociedad por Acciones Simplificada (SAS) or the traditional Sociedad Anónima (SA), followed by official registration with the Colombian Chamber of Commerce and securing a NIT for tax purposes. 

Navigating Colombia’s intricate legal and regulatory framework demands a thorough understanding of employment laws and meticulous HR and payroll handling. This highlights the need for diligent preparation or expert advice to seamlessly integrate into Colombia’s commercial landscape and leverage its economic opportunities.

2. Hire independent contractors

Hiring contractors in Colombia entails creating contracts with individuals or entities for specific tasks or projects, offering substantial flexibility ideal for temporary needs or particular project demands. Proper classification of workers is crucial to avoid legal complications and penalties. Additionally, it's important to recognize that contractors might not offer the same level of commitment or loyalty as full-time, permanent employees, an essential factor to consider in this employment strategy.

3. Partner with an EOR in the country

Leveraging an Employer of Record (EOR) service such as Gloroots provides a seamless entry into Colombia’s market, sidestepping the complexities of establishing a legal entity. This method notably reduces liabilities and offers cost savings. Collaborating with an EOR ensures compliance with Colombian labor laws, tax obligations, and regulations, significantly reducing legal risks and securing a compliant business environment.

Compliance risk while hiring in Colombia

Hiring in Colombia presents compliance risks related to labor laws, tax regulations, and the accurate classification of workers. It's crucial for employers to thoroughly understand Colombian and, if applicable, international regulations to avoid legal issues and ensure fair employment practices. 

To mitigate these risks, engaging with local legal expertise or utilizing an Employer of Record (EOR) service can be effective strategies. These approaches ensure adherence to regulatory requirements, safeguarding against potential legal complications and fostering an ethical hiring environment within the Colombian market.

Key Aspects of Colombia Labor Law

Employment Contract:

In Colombia, employment contracts often default to indefinite terms unless expressly defined as fixed-term. Although Colombian law doesn't require contracts to be in writing for validity, drafting a written agreement in Spanish provides clarity and security for both parties. These contracts typically include:

• The identities of both the employer and the employee.
• The commencement date of employment and, if applicable, the duration for fixed-term contracts.
• The place of work.
• A detailed description of the employee's role and responsibilities.
• The agreed compensation in Colombian pesos.
• Working hours as per Colombian labor law.
• Entitlements to annual leave.
• Notice periods for termination by either party.
• Reference to any applicable collective labor agreements or labor laws that govern employment conditions.

Fixed-term contracts in Colombia are allowed but must be written, specifying the start and end dates, and cannot exceed three years in duration, with the possibility of renewal. Employers and employees must also consider provisions for trial periods and the impact of termination decisions, ensuring they comply with local labor regulations and avoid discriminatory practices.

Working Hours:

Colombia's labor law caps work hours at 8-10 daily and 47 weekly. A phased reduction beginning July 2023 aims for a 42-hour week by 2026 without affecting salaries. Employers must avoid contacting employees after hours, respecting their personal time and gradually adjusting to the shorter workweek over three years.

Overtime:

Overtime beyond standard work hours must comply with employment or collective agreements. Work done from 22:00 to 06:00 commands a 35% higher rate than day shifts. Employees earning above 10 times the minimum wage or in managerial roles typically do not receive overtime. For others, daytime overtime pays 125% of usual wages, increasing to 175% for nighttime, Sundays, and holidays. This ensures fair compensation for extended or inconvenient hours, aligning with labor standards and agreements.

Minimum Wage:

In Colombia, the minimum monthly salary is set at COP 1,300,000..

Payroll laws in Colombia

In Colombia, payroll is distributed on a monthly basis.

Employment benefits in Colombia

Leave Policies in Colombia

1. Paid Time Off:

In Colombia, employees are entitled to a minimum of 15 days of paid annual leave after one year of service, apart from public holidays, as specified in the employment contract.

2. Public Holidays:

There are 18 Public holidays.

3. Sick Days:

Employees in Colombia are entitled to sick leave pay from their employer for the initial two days at their usual salary rate. To qualify for this, they must secure a medical certification from a Colombian social security agency. Starting from the third day, the social security system covers the payments at two-thirds of their salary rate, yet employers are mandated to continue payments up to the 180th day, for which they can later obtain reimbursement from the social security system. This regulation is applicable to both sick and disability leaves.

4. Maternity Leave:

Employees receive 18 weeks of maternity leave with full pay, covered initially by the employer and subsequently reimbursed by social security.

5. Paternity Leave:

Fathers are granted two weeks of paternity leave at their full salary rate, funded by the employer and later reimbursed by the social security system.

Public Health Insurance 

Colombia’s healthcare landscape is anchored by the EPS (Entidades Promotoras de Salud) system, offering comprehensive public health insurance at an affordable rate, managed by a range of insurers. This system welcomes all Colombian residents, with specific provisions for retirees who contribute 12% of their pension towards the premium, without any restriction on age for coverage.

The transformation towards universal healthcare began with pivotal reforms in 1993, building on constitutional changes in 1991 and the introduction of Law 100. These reforms expanded healthcare coverage dramatically, increasing it from less than a quarter of the population to two-thirds within just a decade. Law 100 was instrumental in instituting mandatory health insurance, ensuring providers' autonomy, and safeguarding patients' freedom to choose their healthcare provider. 

Despite facing economic challenges, these reforms are recognized for their crucial role in broadening healthcare access and advancing Colombia towards a more inclusive and universal healthcare system.

Filing tax in Colombia

Income Tax:

In Colombia, employee income tax rates start at 0% for earnings up to 1,090 tax units, escalating progressively to 39% for incomes exceeding 31,000 tax units. This tiered system ensures equitable contribution, with those earning more paying a higher rate of tax. For a detailed understanding of these tax brackets and further insights, our comprehensive guide on Colombian income tax provides a thorough examination.

Other Tax and Social Security Contributions:

In Colombia, employer payroll contributions cover a spectrum of obligations including pension fund, medical plan, labor risks, family compensation funds, family welfare (ICBF), and the National Apprenticeship Service (SENA), resulting in a total employment cost ranging from 21.02% to 27.46%. On the employee side, contributions are made towards the pension fund, medical plan, and potentially the Pension Solidarity Fund, bringing the total employee cost to between 9% and 10%. This framework exemplifies Colombia’s commitment to maintaining a supportive welfare system for its workforce. For more detailed insights into these contributions, our EOR guide on Colombian payroll contributions is available.

Business Culture in Colombia

• Comply with local regulations and understand corporate laws to avoid legal challenges.
• Partner with local experts for guidance through Colombia's legal and regulatory landscape.
• Dress codes vary by climate: business formal in cooler cities and more relaxed in warmer areas.
• Maintain formalities in professional interactions, respecting hierarchical relationships and using appropriate titles.
• Learning basic Spanish and practicing punctuality are crucial for making a good impression.
• Show interest in Colombia’s rich culture, including its history, cuisine, and traditions, to enhance social and professional relationships.
• Avoid stereotypes and demonstrate respect for Colombia's progress and cultural richness to foster positive business interactions.

Top sectors to hire from in Colombia

Service Sector

Dominating the employment landscape with 63.92% of the workforce in 2021, the service sector in Colombia offers extensive hiring opportunities. It encompasses a broad range of industries including finance, IT, healthcare, and tourism, all of which contribute significantly to the country's GDP and employment levels.

Industry Sector

Accounting for 20.15% of employment, the industrial sector remains vital for Colombia's economy. It covers manufacturing, construction, and engineering, among other fields, providing solid prospects for recruitment across diverse specializations.

Top cities to hire from Colombia

Bogotá:
‍As the capital and largest city, Bogotá is the country's economic and political heart, hosting a multitude of multinational corporations, financial institutions, and the tech industry.

Medellín:
‍Known for its innovation and entrepreneurship, Medellín has a strong presence of startups and tech companies, especially in the software and IT sectors.

Cali:
‍Recognized for its agribusiness, Cali also has a robust presence in the service sector and is becoming increasingly important in logistics and manufacturing.

Barranquilla:
‍A key port city, Barranquilla is crucial for trade and has significant industrial, logistical, and service sector employment opportunities.

Cartagena:
‍Aside from being a major tourist destination, Cartagena has a strong industrial base, particularly in petrochemicals, and offers opportunities in hospitality and services.

Hire in Colombia  compliantly with Gloroots

Gloroots, serving as an Employer of Record (EOR) in Colombia, provides a seamless solution to overcome hiring challenges. Their EOR platform facilitates quick candidate onboarding, enabling rapid start-up of operations while ensuring compliance with both local and international standards. Tailored for businesses of various scales, Gloroots streamlines payroll, benefits administration, and tax obligations, eliminating the necessity for establishing a local presence. This approach empowers companies to efficiently assemble a remote team in Colombia. For detailed insights on how Gloroots can support your Colombian hiring initiatives, please contact us.

Frequently Asked Questions 

1. What do I need to know about hiring employees in Colombia?

When hiring in Colombia, it's crucial to understand local labor laws, including contract types (e.g., fixed-term, indefinite), mandatory benefits, and termination regulations. Employment contracts should be detailed and comply with minimum legal requirements, including salary, working hours, and job description.

2. Can foreign nationals work in Colombia, and what's the process?

Yes, foreign nationals can work in Colombia but must obtain a valid work visa, sponsored by the Colombian employer. The process involves submitting necessary documentation, including a job offer and qualifications, to the Ministry of Labor.

3. What are the key compliance considerations for employers in Colombia?

Employers must adhere to Colombian labor laws, ensuring proper employee classification, paying minimum wage and mandatory benefits (health insurance, pensions, and severance pay), and following strict regulations on working hours and overtime compensation.