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.
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 Colombia 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, entity establishment is 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 partnering with an employer of record (EOR). An EOR simplifies the hiring process in Colombia by setting up payroll, benefits, and onboarding for companies and their supported employees.
An EOR solution takes the guesswork out of hiring internationally and ensures compliance for global, forward-thinking companies.
Learn more: What Is an Employer of Record (EOR)?
Hire and pay Colombian contractors
To avoid entity establishment in Colombia, companies often choose to hire and pay contractors in Colombia for short-term projects. Working with international contractors also saves organizations time and money that would otherwise be spent on onboarding, training, salary, and benefits for full-time employees.
However, companies that hire contractors in Colombia risk worker misclassification. While you may consider them contractors, Colombian employment law may classify them as employees. Worker misclassification leads to severe legal and financial penalties, as well as reputational damage.
How much does it cost to hire an employee in Colombia?
The cost of hiring an employee in Colombia ranges from roughly 50% to 58% of an employee’s base salary due to mandatory employer contributions to a pension fund, health insurance, unemployment insurance, welfare, and the National Training Service. The cost percentage also includes mandatory 13th-month pay and vacation accrual contributions.
Still, total employee cost and contribution caps in Colombia vary widely based on factors like salary range and type, job title, industry, and occupational risk.
Interested in hiring employees in Colombia? Use our employee cost calculator below to get reliable insights into employee costs and payroll contributions 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.
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.
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.
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 due to employee misclassification.
- 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 rolled out its Digital Nomad Visa in October 2022, allowing 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. Quickly and compliantly hire Colombian talent by partnering with Velocity Global.
Velocity Global's Employer of Record (EOR) solution eliminates the hassle of setting up an entity and helps you navigate Colombia's local employment laws with ease and compliance.
We handle hiring, payroll, benefits administration, HR support, and risk mitigation on your behalf so you can focus on growing a top team in Colombia and beyond.
Contact Velocity Global today to learn how we can help you quickly and compliantly engage the talent pool and grow your business in Colombia and more than 185 countries.