Hiring remote workers in Colombia is an exciting growth move for international companies.
Colombia is a Pacific Alliance member, which accounts for half of all Latin America’s foreign trade. There are many young and technology-savvy professionals in Colombia, who have a 95% literacy rate and 68% smartphone adoption rate.
Employment in Colombia is a complex system—this guide will help clarify how to hire remote workers in Colombia.
Can I Hire Someone Based in Colombia?
Foreign companies can hire someone based in Colombia, but there are strict employment laws to consider. Hiring someone in Colombia isn’t as simple as putting a Colombian employee on your existing payroll or paying the individual as an independent contractor. Companies must be fully cooperative to avoid fines and reputational damage. Here’s what you need to know to remain compliant when hiring remote workers in Colombia.
Employment in Colombia 101
As with most countries, employment law in Colombia is multifaceted. Foreign companies that want to maintain compliance should consider the following Colombian labor laws including payroll tax, social security, onboarding and probation, leave entitlements, and termination periods.
Payroll Tax and Social Security
Colombian payroll tax is structured by units and salary ranges. The Colombian tax value unit (UVT) is COL$38,004, and the income tax code has categories according to units.
For example, an individual earning up to 1,090 UVT pays no income tax, whereas those in the next category up (1,091 UVT – 1,700 UVT) would pay 19% payroll tax. The top threshold—above 31,000 UVT—would pay 35%.
The Colombian Social Security scheme maintains pensions, survivor benefits, disability, healthcare, and paid leave entitlements. Both the employer and employee pay into the scheme: Employers pay roughly 20% and employees, 8%.
Onboarding and Probation Periods
Employment contracts are not required by law in Colombia, but there are terms that must be agreed upon for onboarding, including the following (if applicable):
- Probation period
- Fixed-term contract (if not fixed-term, assumed agreement is indefinite)
- Integral salary (benefits included in the salary)
- Non-salary payments
Colombia has different probation rules for fixed-term versus indefinite-term contracts. For fixed-term contracts, the probation period is one-fifth of the contract’s duration. Indefinite-term contracts have a probation period of two months.
Leave Entitlements
There are many forms of leave and time off entitlements for employment in Colombia: Annual, parental, sick, and several holidays.
- Annual leave. Colombian employees are entitled to 15 days of paid annual leave for each year of employment after one year in a job. Employees can roll any untaken vacation into the next year but must use at least six annual leave days each year.
- Parental leave. Colombian labor law guarantees 18 weeks of paid maternity leave for pregnant employees—and the week prior to birth is mandatory leave. The employer pays the employee directly but is reimbursed by the Colombian social security scheme. Paternity leave provides 15 days of paid leave, fully paid by the employer.
- Sick leave. Colombian employment law allows unlimited sick leave but requires employees to obtain a medical report from a doctor with the number of prescribed rest days. Both the employer and social security program pay for sick leave: For the first two days of sick leave, employers must pay two-thirds of the employee’s salary. Then, social security will pay the same percentage of the employee’s salary for any additional days.
- Holidays. There are 18 public holidays in a Colombian calendar year, but these are not included in the minimum paid leave entitlement. Public holidays are taken in addition to standard annual leave.
Termination and Notice Periods
Colombian employment law allows for both the employee and employer to terminate the labor agreement at any time. The law dictates that notice of termination must be provided 30 days prior to dismissal with a fixed-term contract. When poor performance is the cause for termination, employers must give 15 days notice prior to dismissal.
Employees have the right to severance pay unless there is just cause for termination. Colombian employment law requires that it’s calculated according to years of service, employment agreement term, and salary.
How to Employ and Pay Workers in Colombia
Foreign companies can engage Colombians as employees or contractors. When pursuing employment in Colombia, companies have two options: Either set up a legal entity in Colombia or partner with an employer of record (EoR).
Set Up a Colombian Entity
International companies that want to establish permanently in Colombia can set up a legal entity. Through a Colombian entity, the business can employ workers directly and pay them from their Colombian payroll provider. For long-term business operations, this might be the best option. However, it’s a costly process that takes time and opens the door for more compliance risks.
Partner With an Employer of Record
Companies that want to engage Colombian talent without putting down roots benefit from a global employer of record. An EoR simplifies the hiring process in Colombia by setting up payroll, benefits, and onboarding for companies and their supported employees. The EoR solution takes the guesswork out of hiring internationally and ensures compliance for global, forward-thinking companies.
Hire and Pay Colombian Contractors
It sometimes makes more sense for companies to engage with remote contractors than hire employees.
However, hiring international contractors has its own challenges. Companies face risking misclassifying contractors, which could damage their reputation and incur fines. However, foreign companies can opt for a contractor classification solution to ensure compliance when onboarding new talent.
Paying Colombian contractors can also be a complicated process. Companies need a secure, fast way to pay their talent—but it’s not as simple as setting up a Paypal account. International companies typically utilize a contractor payment solution to pay contractors across markets.
Companies that want to engage Colombian contractors long term benefit from a contractor management solution. Contractor management handles everything from onboarding to classification to invoicing and payroll, making it easy for foreign companies to bring on talent in Colombia.
Risks When Hiring and Paying Workers in Colombia
Bringing on new Colombian workers comes with hurdles, from misclassifying contractors to making errors in payroll contributions. Let’s review some common risks when hiring and paying workers in Colombia.
- Misclassification. It’s important to correctly classify contractors to avoid costly fines and reputational damage.
- Permanent establishment. Setting up a permanent establishment in a foreign country is a time-consuming, expensive process. The most common risk is not paying corporate taxes, which has dire consequences.
- Inaccurate payroll contributions. Payroll contributions are highly variable and complex in each country. Colombia is no exception, and failing to comply with payroll contributions has financial and legal risks.
- Immigration requirements. Companies must ensure employees meet immigration requirements. Colombia will roll out its Digital Nomad Visa in October 2022, which will allow foreign nationals who are employed outside of Colombia to reside in and work remotely from Colombia for up to two years.
Navigate Employment in Colombia With Ease
Colombia offers an exciting landscape for growing international companies. With its young labor force and tech-savvy professionals, it’s an attractive location for many foreign businesses.
With Velocity Global’s Global Work Platform™, your company will hit the ground running in Colombia. Our Global Work Platform™ has various options for your business, including global Employer of Record, Contractor Management, and Contractor Payment solutions.
Contact Velocity Global today to find out how to grow your international business in Colombia.
