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How to Hire Employees in Colombia

Colombia offers global firms a prime expansion spot with its strategic location, skilled workforce, and pro-business climate. It is a gateway to the Americas, bolstered by free trade agreements. Learn how to tap into Colombia’s educated, diligent talent pool in this hiring guide.

Key Takeaways

  • Understand labor laws: Familiarize yourself with Colombian labor laws.
  • Advertise the job: Post the job on Colombian job websites, newspapers, or through local recruitment agencies.
  • Interview and select: Conduct interviews and select the best candidate.
  • Prepare an employment contract: Prepare a contract that complies with Colombian labor laws, and onboard the employee.

What are the key legal requirements when hiring employees in Colombia?

Hiring employees in Colombia involves several legal requirements to ensure compliance with labor laws. These are some of the key considerations:

  1. Employment Contract: While oral agreements are valid for indefinite term contracts, it is highly recommended to have a written contract to clearly define the terms of employment, including role and responsibilities, compensation, and conditions for termination.
  2. Fixed-Term Contracts: A written contract is mandatory for fixed-term contracts. The term cannot exceed three years but can be renewed indefinitely.
  3. Working Hours and Overtime: The standard work week is 48 hours, usually over six days. Overtime is legally defined and must be compensated at a higher rate (25% premium for daytime, 75% premium for nighttime or Sundays/holidays).
  4. Minimum Wage and Compensation: Employers must pay at least the minimum wage set by the government annually. Other mandatory compensation includes a service bonus (prima de servicios) and transportation allowance for lower-wage workers.
  5. Social Security Contributions: Employers must make contributions to the social security system on behalf of their employees, which includes health insurance, pension, and occupational hazards.
  6. Payroll Taxes: Employers must withhold and pay income taxes and other applicable deductions from their employees’ wages.
  7. Vacation and Leave: Colombian law requires employers to provide 15 consecutive business days of paid vacation for each year of service. There are also provisions for maternity, paternity, and sick leave.
  8. Health and Safety: Employers must provide a safe and healthy work environment. This includes compliance with occupational health and safety regulations and enrollment in the Social Security occupational hazards section.
  9. Termination of Employment: Specific rules govern termination of employment, including notice periods and severance payments. Understanding these is important to avoid legal issues.
  10. Anti-Discrimination Laws: Colombian law prohibits discrimination in hiring based on race, gender, religion, political opinion, national or social origin, or disability.
  11. Registration of Employees: Employers must register their employees with the social security system and the family compensation fund (Cajas de Compensación Familiar).
  12. Visas and Work Permits: If you hire foreigners, they’ll need a valid work visa and permit. To find out more, see our guide to Colombia work visas. 

These are just some of the main legal requirements. It’s recommended to consult with a local labor lawyer or HR professional to ensure you’re in full compliance with Colombian law, as the regulations can be complex, and there can be severe penalties for non-compliance.

How much does it cost to hire employees in Colombia?

The cost of hiring employees in Colombia involves several components:

  1. Salaries: Salaries vary widely depending on the industry, location, and job level. As of 2023, the minimum wage in Colombia was around 1 million Colombian Pesos per month (approximately 250-300 USD at the time, but this varies with exchange rates). However, skilled professionals will command much higher salaries. Check online job sites or consult a local HR professional to understand current salary ranges.
  2. Benefits: Colombian law mandates certain benefits. Employers must pay a service bonus (prima de servicios) equivalent to one month’s salary per year, divided into two payments. Additionally, there’s a transportation allowance for employees earning less than twice the legal minimum wage. Employers also pay for employee uniforms if they’re required.
  3. Social Security and Payroll Taxes: Employers are required to contribute to social security, which includes health insurance, pensions, and occupational hazards. This is approximately 30-40% of an employee’s salary.
  4. Recruitment Costs: include advertising the position, time spent reviewing applications and interviewing, and possibly fees paid to recruitment agencies. For higher-level positions, you might also incur costs for background checks or relocation expenses.
  5. Training and Onboarding: New employees may require training, and administrative costs are associated with onboarding.
  6. Severance: If the employment relationship ends, you may have to pay severance depending on the circumstances.
  7. Workspace and Equipment: Depending on the job, you may need to provide a workspace, equipment, software, etc. If the employee works remotely, you may still need to provide specific equipment or cover expenses such as internet access.

In summary, the cost of hiring an employee in Colombia is significantly more than just their gross salary. It’s essential to account for all these factors to understand the total cost. The specific amounts can vary, so it’s recommended to consult with a local expert to get the most accurate information.

What are the key ways to hire employees in Colombia, such as PEO and EOR solutions?

Hiring employees in Colombia can be done directly through a Professional Employer Organization (PEO) or an Employer of Record (EOR). Each has its pros and cons, and the best method depends on your specific needs and circumstances.

  • Direct Hiring: This involves setting up a local entity, such as a subsidiary or branch office, in Colombia. This method gives you the most control over your employees, but it also involves the most administrative work and legal complexity. You’ll need to comply with all Colombian labor laws, handle payroll and taxes, and manage any HR issues.
  • Professional Employer Organization (PEO): A PEO is a company that provides HR services for other companies, including hiring and managing employees. When you use a PEO, the PEO technically becomes the employer, but the employees work for you. This can simplify compliance with labor laws and handling of payroll and taxes, but you still have significant responsibility for managing the employees.
  • Employer of Record (EOR): An EOR is similar to a PEO but takes on even more responsibility. The EOR hires the employees and takes on the full legal responsibility for them. This can simplify things even further for you, but it also means you have less control over the employees.

Here’s a comparison of the methods:

  • Control: Direct hiring gives you the most power, followed by a PEO and an EOR.
  • Simplicity: An EOR provides the most simplicity, followed by a PEO and then direct hiring.
  • Cost: Direct hiring can be the least expensive if you have a large operation and can spread the administrative costs over many employees. However, for smaller operations or short-term needs, a PEO or EOR can be more cost-effective.
  • Speed: An EOR or PEO can often hire employees more quickly than setting up a new local entity.
  • Risk: An EOR takes on the most risk, followed by a PEO, and then direct hiring.

Remember that each situation is unique, and the best method depends on factors such as the number of employees, the nature of the work, the length of the assignment, your budget, and your level of familiarity with Colombian labor laws. It’s recommended to consult with a local expert or a firm that specializes in international hiring to help determine the best approach.

What are the steps businesses need to take to hire employees in Colombia?

Hiring employees in Colombia involves several steps to ensure you comply with local labor laws. Here are the general steps:

  1. Establish a Legal Entity or EOR/PEO solution: You’ll need to establish a legal entity in Colombia to hire employees directly. This could be a subsidiary, a branch office, or some other form of legal presence. This process involves various legal and administrative steps and can take some time. Otherwise, you could set up quickly and cost-effectively with a Colombia PEO or EOR solution. 
  2. Understand Labor Laws: It’s crucial to have a good understanding of Colombian labor laws, including rules about contracts, working hours, overtime, minimum wage, benefits, social security contributions, and termination of employment. You should consult a local labor lawyer or HR professional to ensure you’re fully compliant.
  3. Create Job Descriptions: Clearly define the roles you’re hiring for, including the responsibilities, qualifications, and experience needed.
  4. Advertise the Positions: Post the job openings on job sites, in local newspapers, or through recruitment agencies. Ensure your job advertisements don’t discriminate based on race, gender, religion, political opinion, national or social origin, or disability.
  5. Interview Candidates: Conduct interviews to assess the candidates’ skills and fit for the role. This might be done in person, over the phone, or via video call.
  6. Select the Candidate: Once you’ve chosen the best candidate, you can offer a job. The job description should include the role, salary, benefits, and start date.
  7. Prepare Employment Contract: Prepare a written employment contract that clearly outlines the terms of employment. A written agreement is mandatory for fixed-term contracts.
  8. Register the Employee: Once the employee has accepted the offer and signed the contract, you must register them with the social security system and the family compensation fund (Cajas de Compensación Familiar).
  9. Onboarding: Provide training and orientation to help the new employee get started.

Remember that the regulations can be complex, and there can be serious penalties for non-compliance. It’s recommended that you consult with local experts to ensure that you’re following all the necessary steps.

How to hire employees in Colombia — our take

Colombia is an attractive hiring location for global companies looking to hire highly-skilled talent overseas. To learn more about hiring employees in Colombia, check out our Colombia PEO and Colombia Employer of Record guides. 

FAQs

The standard work week in Colombia is 48 hours, usually spread over six days. Any work beyond that is considered overtime and must be compensated at a higher rate. Night work, defined as work between 10 PM and 6 AM, also requires a premium payment.

Colombian law mandates certain benefits for employees. These include a service bonus (prima de servicios) equivalent to one month's salary per year, divided into two payments, and a transportation allowance for employees earning less than twice the legal minimum wage. Employers are also required to contribute to social security, which includes health insurance, pension, and occupational hazards.

Termination of employment contracts in Colombia should be handled carefully. Colombian law provides strong protections for employees, and if a contract is terminated without just cause, employers may be required to pay severance to the employee. Just cause reasons are defined by law and include serious misconduct by the employee. It's recommended to consult with a local labor lawyer or HR professional to understand the rules around termination.

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