How To Hire And Pay Employees In Colombia

With over 50 million inhabitants, Colombia is the second most populous country in South America. Cities such as Medellin and Bogotá already represent important hubs for technology startups who want to establish business in Latin America. Fields like B2B (business to business) services, IT and education are all growing within the country. 

As in most Latin American countries, the whole population speaks Spanish. It is normal for most employment processes and documents to be conducted in Spanish. Though English proficiency is slowly rising, it is common for individuals to only have an elementary command of the language.

Employment costs in Colombia are projected to be 20-30% of the employee’s salary.

Full-time employees are entitled to a minimum of 15 paid working days’ annual leave per annum, continuous or consecutive, to which all workers who have worked during a calendar year are entitled. The annual leave entitlement may be divided if agreed between employer and employee and 9 days carried over to the following year.

There are 18 public holidays in Colombia.

January 1st: New Year's Day 
January 10th: Epiphany 
March 21st: Saint Joseph's Day
April 14th: Maundy Thursday 
April 15th: Good Friday 

Probation periods (Contrato de Trabajo) in Colombia cannot exceed 2 months. Any probation period must be confirmed in writing, or it will not be valid. For fixed term contracts of less than 12 months the trial period may not exceed one fifth of the term initially agreed upon for the contract.

The employee may unilaterally terminate the employment contract by giving the employer notice in writing. The required notice may vary depending on what has been agreed in the contract of employment but is generally a minimum of 30 days.

An employee on a fixed term contract will need to be provided with 30 days’ written notice by the employer before the end of the contract term. If this is not provided, then the contract will be assumed renewed. An employer may terminate employment without incurring liability if a justified cause established by law is relevant. These are mostly based around misconduct and poor performance.

A disciplinary process will need to take place before a termination with cause. Terminations without cause are valid but there will be a required severance payment. Examples of justified cause are acts of violence, intentional damage to company property, disclosing commercial or technical secrets, underperformance, and breach of H&S. At least 15 days’ notice is required for termination due to poor performance. In cases of misconduct, notice is not required, and termination can take place immediately. In cases of termination without just cause, the employee will be entitled to the following severance payments as well as any outstanding salary payments:

• Employees earning less than 10 legal monthly minimum wages are entitled to 30 days salary for up to one years’ service and an additional 20 days for each further years’ service, proportional to the fraction of the year.
• Employees earning more than 10 legal monthly minimum wages are entitled to 20 days salary for up to one years’ service and an additional 15 days for each further years’ service, proportional to the fraction of the year.
• Employees on a fixed term contract are entitled to severance that is equal to the salary owed until the term of the agreement expires.

There are certain cases where it is not possible to terminate employment, even if there is a just cause, without authorisation from the Ministry of Labour or a Labour Judge. These cases include:

• Employees who are, or have partners who are, pregnant or on maternity leave;
• Employees that are on sick leave or have restrictions that substantially limit their ability to complete their duties;
• Employees less than three years away from retirement;
• Employees under temporary collective bargaining protection (fuero circunstancial).

Provisions on restrictive covenants in Colombian labour law are scarce. The legislation only provides rules for non-compete clauses. Restrictive covenants are therefore allowed, under some limitations. Restrictive covenants may be included in the employment contract, or they can be included in separate documents during the employment relationship. A violation of a restrictive covenant during the employment contract can be subject to disciplinary measures from the employer. The violation of a restrictive covenant, which intends to apply after the employment relationship ends, can be enforceable through a legal claim against the former employee.

A contract of employment (Contrato de Trabajo) can be agreed either in written or verbal form. However, it is always best practice for these to be provided in writing. The contract should include the employee’s details, the employer’s details, probation period, contract length (if applicable), place of work, hours, days, holidays, and notice periods. All employers with at least 10 employees must have 90% of the company’s workforce as Colombian citizens or residents. The remaining 10% may be foreign nationals with the relevant work permissions. There are three main types of contracts in Colombia: permanent contracts (contrato a término indefinido), fixed term contracts (contrato a término fijo) - which must be provided in writing and cannot exceed three years - and temporary contracts (contrato temporal) for temporary or casual jobs not exceeding 30 days.

Expectant mothers are entitled to 18 weeks’ maternity leave, paid at 100% of their average salary. At least one week of leave must be taken before the due date, extended to two weeks when medically necessary. The employer pays the maternity leave and is reimbursed by social security. Fathers are entitled to eight working days’ paternity leave, paid at 100% of their average salary. Again, this is paid by the employer and claimed back from social security.

An employee is entitled to two days’ sick pay from their employer at two-thirds of their average salary. After the initial two days, the employer continues to pay for up to 180 days but is reimbursed by social security. If the absence is due to a work-related accident or illness, the employee will be entitled to 100% of their average salary. Medical authorisation from a Colombian social security entity will need to be obtained so the employee can be paid when they are unable to attend work.

Every employee in Colombia whose contract is governed by the Colombian labour regulations is required to be part of the social security system. Exceptions to this are foreign employees, if they are covered by an equivalent pension scheme in their home country. Both employers and employees are required to make contributions, which cover items such as pensions, the health social security system, professional risks, the family welfare fund, and the national learning service (SENA).

Colombia provides a public health insurance plan called EPS (Entidades Promotoras de Salud). Healthcare in Colombia is ranked 22 out of 191 countries by the WHO. Costs are inexpensive compared to countries such as the U.S and parts of Europe. Contributions for EPS are approximately 12.5% of an employee’s salary. All residents in Colombia are required to sign onto EPS. Foreign workers may opt-out but must be able to show proof of alternative coverage, such as a private or company plan. In addition to EPS, there are two other types of healthcare insurance available. The first is Prepagada, a private healthcare insurance which is paid as a monthly premium. The premium can vary depending on age, pre-existing conditions, and the plan chosen. The second is SISBEN, a free government-subsidised healthcare system for Colombians living below the poverty line.

This is the most common work visa for Colombia and can be valid for up to three years and extended for up to five years. The work visa allows multiple entries but will no longer be valid if the person stays out of Colombia for longer than six consecutive months. To begin the process of applying, a copy of the signed work contract with a Colombian employer is required. Other necessary documents include, but are not limited to, a letter of motivation from the employer, six months of bank statements, a photocopy of the passport, a passport-style photo, and academic proof of suitability to the job. After holding this visa for five years, a person can then apply for a R-Visa (residence visa).

The Mercosur visa is for citizens of countries that are part of the Mercosur economic bloc. These include Argentina, Brazil, Paraguay, Uruguay, Colombia, Bolivia, Chile, Ecuador, Peru, Guyana and Surinam. Citizens of these countries are able to apply for a M-3 visa, which is valid for up to two years, after which they may apply for residency. The visa allows multiple entries into Colombia but will lose its validity if the person stays out of Colombia for longer than six consecutive months. The main requirement of this visa is a legalised criminal history report.

The national minimum wage in Colombia, as of January 2022, is 1,000,000.00 Colombian Peso (COP) per month. Additionally, employees that earn up to two times the monthly minimum wage are entitled to a transportation allowance of 117,172.00 COP per month.

The Colombian tax year runs from January to December. It is the employer’s responsibility to ensure taxes are paid from salaries before payments are made to employees. The general personal income tax rates are listed below as guidance. One unit is equal to approximately 36,308.00 COP

Salaries in Colombia are generally paid on a monthly basis around the last working day of the month. Some industries may pay bi-weekly with payments made at the middle and end of the month. A 13th month salary payment (aguinaldo) is mandatory. This payment is split into two, the first half paid in the first 2 weeks of June and the second half within the first 20 days of December.

Social security contributions in Colombia are the responsibility of the employer to deduct from an employee’s salary before payment. Both the employer and employee are subject to social security contributions. Below are approximate contribution rates for employers and employees, please note that these can vary.

Payroll taxes cover the family compensation funds, family welfare (ICBF), and national learning service (SENA). These contributions are earnings related. Employees who earn less than 10 times the minimum wage monthly salary, contributions to ICBF and SENA do not apply.  The solidarity pension fund of 1% only applies if an employee earns more than 4 times the minimum wage monthly salary. If an employee earns more than 16 times the minimum monthly salary the percentage further increases as per the below table.

Contributions to the solidarity pension fund over 25 times the minimum monthly salary are capped.