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What Expanding Companies Need to Know about Employment Legislation in Colombia

By June 12, 2019 July 1st, 2019 No Comments

Colombia’s reputation as a global expansion destination continues to grow for a number of reasons. Not only does the country provide access to one of the most highly-skilled workforces in South America, but it’s also the third-easiest country in which to do business across the whole of Latin American, outpaced only by Mexico and Chile. It’s an investor-friendly destination, and its geography (coupled with its developed logistics infrastructure) provides access to other major markets in the region.

For organizations eying Colombia as part of their global expansion and hiring employees in-country, there are a number of legislative considerations to keep in mind.

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What Organizations Need to Know About Doing Business in Colombia

Labor contracts in Colombia are generally structured in one of three ways. A fixed term contract is one that cannot exceed three years, though it can be extended. Decision makers may also choose to contract with someone for the specific duration of a job to be performed. Finally, an indefinite term contract is one where the term is not specified, nor is it determined by the task.

There are two main types of contracts (Integrated Salary and a Regula Salary) with which employers should be familiar:

  • An integrated salary otherwise operates like a lump-sum salary. It is the sole sum that someone gets as compensation in addition to their ordinary work, any advance social legal benefits (like unemployment fund contributions), and overtime and any associated surcharges.
  • The regular salary involves adhering to the minimum monthly legal wage, which is something that is agreed upon annually by the government, employers’ unions, and labor unions. In some circumstances, it may also be set by an official government decree. For 2019, for example, the minimum monthly legal wage is about $276 USD.

There are a number of other factors employers should keep top of mind, too—including contributions to the social security system (pensions, healthcare, and work-related risks) that become the employer’s responsibility. The current monthly pension rate is 16%, for example, and 12% of that comes from the employer. Health contribution rates are currently 12.5%, and 8.5% of that comes from the employer.

That is just one example of labor-related costs associated with hiring workers in Colombia. Others include state tax contributions (like payments to the Family Welfare Institute) and benefits that include severance pay assistance, annual bonuses, and more.

Additional Considerations for Doing Business in Colombia

It’s also important to note that, while an employer can terminate the employment contract of an individual at any time, severance pay is still required in cases of a dismissal without cause. The amount of that payment will vary depending on certain factors, including but not limited to considerations like seniority, type of contract, and the person’s salary. There is no limitation in the amount recognized by the employer in terms of severance payments in Colombia.

Break into the Colombian Market with a Seasoned Expansion Partner at Your Side

The employment landscape in Colombia can spell challenges for companies of any size—which is why partnering with an experienced expansion ally can help ease any trepidation and make sense of Colombia’s employment legislation.

Through our International Professional Employer Organization (PEO) solution, Velocity Global has helped hundreds of companies realize their global expansion goals in more than 185 countries, with many making Colombia their next market.

If you’d like more information about employment legislation in Colombia (or one of the 185+ markets in which we have capabilities) reach out to Velocity Global today to learn how we can have your organization operating in your new market in as few as 48 hours.

Ready to get started? Let’s talk.