Colombia’s economy is South America’s third largest, behind Brazil and Argentina. So, many international businesses have their sights on Colombia hiring. Colombia’s economy depends heavily on exports of petroleum, coffee, and agriculture. Although in the last months the economy of Colombia has seen turmoil due to the fall in commodity prices, according to Bloomberg the “country remains the leader among the biggest Latin American Economies.” Colombia is friendly to foreign investment and has a qualified workforce. It is definitely worth a look if you are considering establishing operations in Latin America.
Here are some high-level details of Colombia hiring and employment that you don’t want to miss:
Known as “Contrato de Trabajo,” employment agreements in Colombia can be oral or written. Provisions such as fixed duration of employment, just cause for termination, and probationary periods are only valid if they are agreed upon in writing and signed by both employer/employee. Fixed term agreements cannot exceed a period of three consecutive years. Those that provide a term of employment of less than one year can only be renewed for three equal or lesser terms. We always recommend having a written contract for our international business clients. It is far more proactive in terms of compliance and enforceability.
Integral salary, a unique feature in Colombian labor law
In Colombia, there are two salary tiers that define the employer contributions and the benefits employees receive from the government. “Ordinary salary,” under which salary and contributions are paid separately, results in approximately 54% of salary in employer contributions. On the other hand “integral salary,” in which the mandatory benefits are deemed to be included pro-rata in the monthly salary payment, reduces the contribution to almost 30%. This option must be agreed upon with the employee in writing and clearly stated in the employment contract. Integral salary is attractive for many employers. Not only because it reduces the cost to the company, but also guarantees higher salaries to employees – as it is only applicable at a certain salary cap established by law.
Employers are required to pay a “prima” or 13th-month salary to all employees in two installments; the first on the last day of June and the second within the first 20 days of December. The total of this payment is equivalent to a month’s salary. If the employment relationship is terminated before it is due, it must be paid in the employee’s last check.
Indemnities and compensation at the time of termination
At the time of termination, the employer must pay all outstanding mandatory amounts due and owed to the employee. This includes unpaid wages, accrued but unused vacation time and the prorated 13th-month salary. Additionally, according to the Labor Code (except in cases where the contract is terminated by mutual consent or for just cause), the employer must pay an indemnity to the employee. This amount can vary but is calculated in accordance with all terms of employment (type of employment contract and the length of service, etc.). For example, if there is a fixed-term contract, the amount of the indemnity will equal the amount that would have been paid for the remainder of the contract.
If you need help with Colombia hiring and international expansion, get in touch with our International Consulting division. We also offer a fully managed International PEO solution for hiring in Colombia as well.