Employer of Record in Colombia

Colombia presents an appealing landscape for international businesses seeking to expand their talent pool, boasting a skilled workforce and a growing economy. Successfully engaging employees in the country, however, necessitates a thorough understanding of its unique labor laws, social security system, and tax regulations. Companies looking to hire must carefully evaluate their approach to ensure full compliance and operational efficiency.

When considering hiring employees in Colombia, companies typically have a few primary avenues:

• Establishing a local entity: This traditional method involves setting up a legally registered business within Colombia, which requires significant upfront investment in time and capital for registration, ongoing legal compliance, payroll, and human resources management.
• Partnering with an Employer of Record (EOR): An EOR service, such as Rivermate, enables companies to compliantly hire employees in Colombia without the need for their own local legal entity. The EOR legally employs the staff, managing all local employment responsibilities while the client company retains full control over the employee's day-to-day tasks and operations.
• Hiring as an independent contractor: This approach involves engaging individuals as self-employed professionals rather than full-time employees. While it may appear simpler, it carries a substantial risk of misclassification if the working relationship resembles that of an employee, potentially leading to severe legal penalties and financial liabilities.

How an EOR Works in Colombia

An Employer of Record in Colombia acts as your legal employer for your local team, taking on all associated liabilities and administrative burdens. This comprehensive service ensures your operations remain fully compliant with Colombian labor laws and typically covers:

• Payroll and tax administration: Ensuring accurate and timely processing of salaries, mandatory deductions, and remittance of all relevant employer and employee taxes.
• Social security management: Handling mandatory contributions to health (EPS), pension (AFP), and professional risk insurance (ARL) funds, alongside family compensation funds and other statutory payments.
• Employment contract creation: Drafting and maintaining legally compliant employment contracts in Spanish, tailored to Colombian regulations and specific job roles.
• Benefits administration: Managing statutory benefits such as severance pay (Cesantías), service bonuses (Prima de Servicios), paid leave, and other entitlements mandated by Colombian law.
• Labor law adherence: Ensuring full compliance with all aspects of Colombian labor law, including working hours, termination procedures, and employee rights.

Benefits for Companies Looking to Hire in Colombia Without Establishing a Local Entity

Utilizing an EOR service offers significant advantages for businesses aiming to expand their workforce into Colombia efficiently and compliantly, without the commitment of establishing a local entity:

• Accelerated market entry: Onboard employees in Colombia quickly, often in a matter of days or weeks, bypassing the lengthy process of local entity registration.
• Reduced compliance risk: Mitigate the complexities and potential legal pitfalls of navigating Colombia's intricate labor, payroll, and tax regulations.
• Cost efficiency: Avoid the substantial expenses associated with entity setup, ongoing legal fees, and establishing an internal HR and payroll infrastructure.
• Access to diverse talent: Tap into Colombia's rich talent pool without geographical limitations or the administrative burden of setting up local operations.
• Strategic focus: Delegate administrative and compliance tasks, allowing your internal teams to concentrate on core business growth and strategic initiatives.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Colombia includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Colombia.

Employers in Colombia have key tax obligations, primarily related to social security contributions and payroll taxes. They must contribute to health (8.5%), pension (12%), occupational risk insurance (0.522%-6.96%), family welfare (4%), ICBF (3%), and SENA (2%), with the employer bearing the larger share. Additionally, employers must deposit severance pay (Cesantías) equivalent to one month’s salary annually and pay 12% interest on these deposits.

Regarding income tax, employers are responsible for withholding taxes based on employee income levels, with rates ranging from 0% to 39% across various income brackets measured in UVT (Unidad de Valor Tributario). Employees can benefit from deductions such as dependents, mortgage interest, prepaid healthcare, voluntary pension contributions, and charitable donations, which reduce taxable income.

Employers must adhere to strict reporting deadlines, including monthly withholding returns (Formulario 350), annual income tax filings (Formulario 110), and payroll reporting via PILA. Non-compliance can lead to penalties. Foreign workers and companies face additional rules, such as residency status affecting tax obligations, double taxation treaties, transfer pricing regulations, and potential permanent establishment considerations. Staying updated and seeking professional advice is crucial for compliance.

Colombia's salary landscape varies significantly across industries, roles, and regions, with typical monthly salaries ranging from COP 1.8 million for customer service agents to COP 12 million for software engineers. Key positions such as software engineers (COP 4M–12M), marketing managers (COP 3.5M–10M), and operations managers (COP 4M–11M) reflect the country's diverse economic sectors. Employers must consider regional differences, skill levels, and experience to offer competitive packages.

The statutory minimum wage in 2025 is COP 1.3 million, plus a transportation allowance of COP 162,000, applicable to employees earning up to two minimum wages. Compensation packages often include bonuses like the Christmas bonus (equivalent to one month’s salary), vacation bonus, transportation allowance, and performance or meal allowances. Salaries are predominantly paid monthly via bank transfer, with detailed payslips required by law.

Salary trends are expected to rise in 2025, driven by economic growth, inflation, and demand for skilled professionals, especially in technology, finance, and healthcare sectors. Companies should monitor inflation, address skills shortages, and adapt to remote work trends to remain competitive in attracting talent.

Colombia's labor law mandates 15 days of paid annual vacation leave after one year of service, which must be taken within the following year. Vacation can be split into two periods, with at least six consecutive days, but cannot be compensated with money unless employment ends, in which case monetary compensation is required for unused days.

The country observes numerous public holidays in 2025, including New Year's Day, Labor Day, Independence Day, and Christmas, with employees generally entitled to paid time off. Working on these days typically warrants additional pay.

Sick leave requires a medical certificate; the first two days are paid by the employer, while subsequent days are covered by Colombia's health insurance (EPS) at about 66.67% of salary for up to 180 days. Parental leave includes 18 weeks of paid maternity leave and two weeks of paid paternity leave, both paid at 100% by EPS. Adoption leave aligns with biological parental benefits.

Additional leaves include bereavement, marriage, and voting leave, with specifics often determined by employer policies.

Colombia mandates a comprehensive set of employee benefits that employers must provide, including social security contributions (health, pension, occupational risks), family subsidies, severance pay, a service bonus, paid vacation, and legal holidays. These benefits form the core of employee compensation and are legally non-negotiable, requiring careful planning of associated costs and compliance.

Key mandatory benefits include:

Understanding these legal requirements and market expectations is essential for companies aiming to attract and retain talent in Colombia. While mandatory benefits are fixed, optional benefits are increasingly competitive, and offering a compliant, attractive package can significantly impact employer success in the Colombian labor market.

Employment agreements in Colombia are governed by the Labor Code and must meet specific legal requirements to ensure validity. They define the employment relationship, including rights and responsibilities, and must include essential clauses such as identification of parties, job description, work location, salary, working hours, contract type, start date, probationary period (if applicable), and termination conditions. Properly drafted contracts help employers comply with Colombian law and protect their interests.

Colombian law recognizes two main contract types: fixed-term (up to three years, converting to indefinite if renewed or extended beyond this period) and indefinite-term contracts, which offer greater job security. Probation periods are limited to two months and cannot exceed one-fifth of the contract duration if shorter than a year. During probation, employees retain full rights, and either party may terminate without cause with proper notice.

Additional clauses often include confidentiality and non-compete agreements, which must be reasonable in scope and duration to be enforceable. Confidentiality clauses protect trade secrets, while non-compete clauses are limited geographically and temporally (typically up to one year) to restrict post-employment competition.

Colombia has experienced a notable rise in remote work, supported by legal frameworks such as Law 1221 of 2008 and Decree 884 of 2012, which regulate employee rights and employer obligations. Employees can request remote work, and employers must provide necessary equipment, ensure safety, and comply with labor laws, including social security registration. Key legal requirements include written agreements detailing work terms and adherence to occupational health standards.

Flexible arrangements like part-time work, compressed workweeks, flextime, and job sharing are permitted, allowing tailored solutions for both parties. Data security and privacy are critical, requiring robust policies, employee training, and compliance with Law 1581 of 2012. Employers should also establish clear policies on equipment provision and expense reimbursement, ensuring fairness and transparency.

Successful remote work depends on reliable technology infrastructure, including minimum internet speeds, collaboration tools, and technical support. The following table summarizes key data points:

In Colombia, employment termination laws differentiate between with and without just cause, each with specific procedural and financial obligations. Employers must adhere to notice periods based on the employee's tenure: less than 1 year (30 days), 1–5 years (30 days), 5–10 years (60 days), and over 10 years (90 days). Failure to provide proper notice requires compensation equivalent to the employee's salary during the notice period.

Severance pay, or cesantías, is mandatory and calculated as one month's salary per year of service, plus proportional amounts for partial years. Additional severance applies if termination occurs without just cause: less than 1 year (45 days' salary), and for 1+ years, 45 days plus 15 days for each subsequent year. Terminations with just cause are limited to breaches like misconduct, violence, or serious negligence, and require thorough documentation, employee notification, and opportunity to respond to ensure legality.

Employers must follow strict procedural steps—document reasons, notify employees in writing, allow response, and possibly involve legal review—to avoid wrongful dismissal claims. Employees can challenge unjust terminations in labor courts, which may result in reinstatement, compensation, or penalties for employers. Proper adherence to legal procedures and documentation is essential for lawful termination in Colombia.

Colombia's labor market prominently features independent contracting, offering flexibility for businesses and individuals. This model allows companies to access specialized skills for specific projects without traditional employment commitments, while individuals enjoy autonomy and the ability to work with multiple clients. However, distinguishing between an employee and an independent contractor is crucial to avoid legal and financial repercussions, such as back pay and social security contributions. The legal framework defines an employment relationship by three criteria: personal service, subordination, and remuneration. Independent contractors operate autonomously, using their own methods and resources.

Engaging independent contractors typically involves a service agreement, which outlines the scope of work, remuneration, independence, and intellectual property rights. Properly drafted contracts must reflect the actual working relationship to ensure compliance. Contractors are responsible for their own tax and social security obligations, including income tax, VAT, and contributions to pension, health, and occupational risks. These are calculated based on a percentage of their income, with specific thresholds and rates subject to Colombian law.

Independent contractors are prevalent in sectors like technology, creative services, consulting, education, and professional services, where specialized skills and flexibility are highly valued. These industries benefit from the ability to quickly adapt and scale teams without the long-term obligations of traditional employment.

Colombia offers various work-related visas, primarily the M Visa for employment and the R Visa for permanent residence, with specific requirements for each. The M Visa requires a formal job offer from a Colombian employer, proof of qualifications, and submission of necessary documents. The R Visa is available after holding a valid work or migrant visa for typically five years, with some exceptions for investors. Additionally, the Visa R for investors is available for significant investments, with minimum amounts varying by regulation.

The application process involves obtaining a job offer, applying for the appropriate visa at a Colombian consulate or online, submitting required documentation, undergoing background checks, and registering the visa with Migración Colombia. Processing times can range from a few weeks to several months, with fees varying by visa type. Employers must ensure their foreign staff have valid permits, comply with labor laws, and report changes to authorities. Employees are responsible for adhering to visa conditions, registering their visas timely, and avoiding overstays.

Compliance is critical; violations can lead to fines, deportation, or penalties. Both employers and employees should stay informed and seek professional advice to ensure adherence to Colombian immigration laws.