Colombia

Currency CurrencyColombian Peso (COP) Working Time Work Week48 hours Employer Taxes Employer Taxes approx. 30%

Hire in Colombia

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Low wages and modest annual leave requirements make Colombia an attractive hiring destination for international companies looking to grow their remote teams. With an average weekly working time of 48 hours, employees in Columbia are used to working more than employees in other countries and are generally known for their good work ethic. Although Columbia itself is lacking qualified workers, the country has attracted many highly skilled professionals from Venezuela in recent years. 

Basic Facts about Colombia

  1. Official state name Republic of Colombia (República de Colombia)
  2. Capital Bogotá
  3. population 50.37 million
  4. language Spanish
  5. currency Colombian Peso (COP)
  6. time zone UTC -5

Employment Contract

Although verbal employment agreements are also possible, it is best practice to draft a written employment contract when hiring an employee in Colombia. Colombian labour law distinguishes between permanent and fixed-term employment contracts – the latter need to be in writing and must not be concluded for a period longer than three years (but renewable). 

Employment contracts should include the following information:

  • Identification of both parties 
  • Date of commencement (and employment duration for temporary contracts) 
  • Workplace
  • Job description, duties and responsibilities
  • Salary and benefits (if applicable, information on whether an integrated salary is paid)
  • Working hours 
  • Total number of holidays
  • Notice periods for employment termination
  • Probation period

Probation Period

Probation periods for employees hired under a permanent contract should not exceed two months – one fifth of the employment duration for fixed-term contracts.

Working time

Working Hours and Breaks

An employee’s standard working week should not exceed 48 hours, i.e. eight hours per day over a six-day workweek. Every employee must have one day off per week which is usually Sunday but may be shifted to another day if detailed in the employment contract.

Overtime

Overtime work must not exceed two hours per day, i.e. twelve hours per week, and must be paid at a rate of at least 125% for daytime work and 175% for work at night or on public holidays.

Payroll

Colombian law distinguishes between three different types of payment: minimum wage, ordinary salary (payments higher than the minimum wage which do not include any additional payments such as bonuses or other) and integrated salary (fixed monthly salary which is higher than ten times the minimum wage and set at a rate 30% higher than usual, thus including all additional payments such as bonuses). 

Minimum Wage 

In 2021, the national minimum wage in Colombia is set at COP 908,526 per month (not including transportation allowance).

Sick Pay

If an employee is unable to work because of sickness or injury, the employer is obligated to provide sick pay equal to the employee’s usual wages for the first two days of absence. Starting with the third day of sick leave, sick pay is covered by Social Security at a rate of 66.67%. However, payments are limited to 180 days. 

Bonuses

Except for those earning an integrated salary, employees in Colombia are entitled to a 13th salary (Prima de Servicios) which is to be paid out in two installments, one in June and the other one in December.

Taxes and Social Security Contribution

Employees and employers in Colombia are subject to the following tax and social security contribution rates (as of 2021):

Taxes
Employer

31% corporate tax rate

19% VAT (standard rate)

Employee

Individual income tax rates range from

19% to 39% *

Social Security

around 30% of employee salary, of which: 

8.5% health insurance

12% pension plan

9% diverse social security funds (certain contributions only apply to income exceeding ten times the minimum wage)

Plus 0.522% to 6.96% for coverage against professional risks.

Please note that social security contributions for integrated salaries are calculated based on 70% of the employee’s income.

8% – 9% of employee salary, of which: 

4% health insurance

4% pension plan (additional 1% on monthly income exceeding COP 3,634,000)

* Individual income is taxed progressively based on the following tax brackets (percentage rates given only apply to income exceeding the respective tax bracket threshold):

up to 1,090 TVU: 0%
1,090 TVU to 1,700 TVU: 19%
1,700 TVU to 4,100 TVU: 28% + 116 TVU
4,100 TVU to 8,670 TVU: 33% + 788 TVU
8,670 TVU to 18,970 TVU: 35% + 2,296 TVU
18,970 TVU to 31,000 TVU: 37% + 5,901 TVU
above 31,000 TVU: 39% + 10,352 TVU

The “TVU” is the tax unit used by the Colombian government to reset tax thresholds. In 2021, one tax unit equals COP 36,308.

Employee Benefits

Annual Leave

Colombian employees earn 15 days of paid annual leave per year. In addition, the country observes 18 public holidays on which employees are not required to work.

Maternity Leave and Paternity Leave

Female employees can take 18 weeks of fully paid maternity leave which can start up to two weeks before birth. Payments are made by the employer who is later reimbursed by Social Security.

Paternity leave is currently limited to eight working days which is paid in the same way as maternity leave.

Parental Leave

Colombian labour law does not provide for further parental leave.

Additional Leaves and Benefits

In addition to the leave entitlements mentioned above, employees in Colombia are entitled to paid time off under the following circumstances:

  • trade union leave
  • voting leave
  • bereavement leave (5 days)
  • burial leave for co-workers

It is mandatory to grant employees a monthly transport allowance (in 2021, this allowance needs to be at least COP 106,454) if they earn less than two times the minimum wage.

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Employment termination

Both employees and employers can terminate the employment relationship at any given moment without having to respect a notice period. Recognised causes for employment termination include:

  • death of employee
  • employment termination by default, i.e. in case of a fixed-term contract
  • gross misconduct
  • invalidity
  • collective dismissal (previous authorisation required)
  • termination without a fair cause

The only time an employer has to give notice to his employee is when the concluded fixed-term contract is about to expire and no extension of the contract is intended. In this case, the notice period is 30 days. 

Severance pay is required if the employee is dismissed without cause as well as in cases where the employee voluntarily ends the employment relationship. Its amount depends on the employee’s seniority and usual salary:

  • 30 days of salary during the first year and 20 days of salary for every year thereafter – employees earning less than ten times the minimum wage
  • 20 days of salary during the first year and 15 days of salary for every year thereafter – employees earning more than ten times the minimum wage
  • severance pay equal to any outstanding payments until the initially agreed end date for employees hired under a fixed-term employment contract

As there is no unemployment insurance in Colombia, employers must transfer an annual amount equal to one month’s salary (Cesantías) to a special fund for this purpose which is paid out to the employee under special circumstances – including a 12% interest rate. However, this only applies to employees who do not receive an integrated salary. 

Hiring in Colombia?

Not sure if you should start with a contractor or go ahead and hire a full-time teammate in Colombia? The Lano platform makes it easy to go from freelance to full-time employee. Get expert guidance from the Lano team to compare your options and keep growing.