Employer of Record Colombia
Infotree Global Solutions assists organizations planning for expansion in Colombia by providing employer of record services in Colombia. If you wish to recruit professionals in Colombia, you can easily accomplish it with us without even having an establishment in Colombia. Our team of dedicated professionals would take up all the recruitment and payroll management responsibilities for your organization. From searching for ideal employees to hiring and onboarding them, we take every step on your behalf with total compliance.
Our Colombia employer of record would give you insights into the compensation, benefits, and facilities required for your employees in Colombia. Here are some of the important factors you need to know before you start hiring in Colombia:
Table of Contents
Hiring in Colombia
For a new business looking forward to expanding its growth prospects in Colombia, it is necessary to understand the complexity of the hiring process. In Colombia, creating an employment contract by the employer is the first step. Moreover, it is compulsory to complete the registration on the same day as the beginning of employment. Therefore, it puts immense pressure on the employer to get the contract signed to proceed with the hiring process. Understanding market dynamics is fundamental as you proceed with your business expansion plan in Colombia. Thus, getting timely and proper guidance from an experienced Employer of record in Colombia can benefit and help you save a lot in terms of money and time.
The hiring process also requires legal and background checks of the prospective candidates and following the correct recruiting regulations. For instance, in Colombia companies cannot perform a background check that belongs to the discriminatory category unless they have a satisfactory justification for the same. Moreover, asking discriminatory questions during the hiring process is also considered highly undesirable. Colombia has strict rules and regulations concerning every stage in the hiring process, implying that businesses must stay mindful of their actions during the process.
Colombian employment law has few legal obligations which every employer needs to abide by. They should provide formal written employment letters for all employees. An Employer of Record Colombia assists you to learn about the contract. Every contract must include all required details like remuneration, job title, termination policy, and others. As your Employer of Record in Colombia, we will bring you expert guidance for each stage of expansion!
Compensation – Colombia has strict rules and regulations concerning compensation for employees. Therefore, all employees must be affiliated with one of the state benefits schemes or any other scheme equivalent to the state benefit scheme. Moreover, the Government of Colombia has set the minimum monthly wage at 1,117,172 Pesos (2022). The legal minimum wages are revised every year on or before December 30. Thus, managing compensation while expanding business operations becomes difficult. Therefore, it is better to get expert guidance from a credible Employer of Record in Colombia.
In Colombia, overtime employees are entitled to overtime pay of 25% above the regular wages and 75% in case of overtime at night between 9 pm and 6 am.
Working Hours – In Colombia, the minimum working hour for a regular workday is 8 hours and 48 hours for the workweek. However, employers and employees can agree to a different schedule, between 4 to 10 hours per day with or without overtime. It is up to their mutual agreement, but they must ensure that the same does not exceed 48 hours a week or 6 hours a day. Also, it is necessary to provide a rest break on every workday, where Sunday is a typically mandatory holiday.
Bonus – In Colombia, employers are required to pay a Semestral bonus to their employees based on their yearly earnings. This bonus is equivalent to one month’s salary paid in two parts. The first installment is paid within the last 15 days of June, while the other is paid on the initial 20 days of December. The bonus is commonly referred to as prima de servicios in Colombia.
Probationary Period – In Colombia, the probationary period in organizations usually lasts up to two months depending upon the employment contract between an employer and their prospective employees. During this duration, either party can terminate the contract with or without notice upon their will. Therefore, no specific law legislation practices concerning the probationary period in Colombia.
Termination and Severance – In Colombia, employers must provide 15 days of advance written notice to their employees in the case of termination. In such cases, employers must request authorization from the labor ministry to proceed with the employment contract termination if the employee’s interest is protected due to a specific health condition.
Typically, employers or employees can terminate the employment contract at any moment with an immediate effect without explicitly mentioning the reason for termination unless there is a fair and legal reason for it. The reasons for dismissal are covered under three main categories, including legal grounds, termination due to a fair reason, and termination without a reason.
The category concerning termination without a cause includes situations that do not qualify as a legal reason for termination of the employment contract. Under this category, the Employees can also terminate the employment contract due for any reason.
In Colombia, severance pay is mandatory and determined by the employee’s yearly earnings and length of service.
- For employees earning less than 10 minimum legal monthly wages – 30 days of salary for the first year and 20 days of salary for each additional year of service.
- For employees earning 10 minimum legal monthly wages or more – 20 days of the salary for the first year and 15 days salary each additional year of service.
- For employees on a fixed-term agreement – the salary is owed to the employee until the term of the agreement expires.
Compensation and benefits in Colombia form an important part of employment law compliance. To maintain it, employers are entitled to pay the minimum wage. However, it has been observed that many employers add more benefits to stay competitive in the challenging business environment. Being your Colombia Employer of Record, we provide you with the required guidance.
Maternity leave – Female employees in Colombia are entitled to 18 weeks of government-funded maternity leaves (20 weeks for multiple births). It is expected that leave must be taken one week prior to the delivery which can be extendable to two weeks in case of medical urgency and rest after childbirth. The mothers are responsible for informing their employer about their pregnancy and disclosing medical documents indicating the specific or expected dates.
It is required for expected mothers to ask their doctor for a Licencia de maternidad pre parto which will provide her entitlement to maternity leave for one or two weeks before the delivery date. However, if there is premature birth, it is necessary to contact the health care service provider to follow the respective procedure and inform the employer about the same.
Vacation – As per the legislation defined in the law, employees are entitled to their regular remuneration for public holidays and vacations. Therefore, every employee in Colombia is entitled to 15 consecutive days of paid holidays after completing 12 months of services with the employer. The provision applies irrespective of the type of employment contract or duration. Employees are expected to take at least six annual leaves a year. They can accumulate the pending leaves for up to four years or have a provision to accept payment in lieu of leaves.
Sick Leave – In Colombia, employees are entitled to up to 180 days of sick leaves at 2/3 of their regular wages. The employer is required to pay the employee for the first two days of the leaves, and from the third day to up to 180 days employee gets the amount from the social security system. In case of a work-related illness or injury, the social security system covers 100% of the monthly wages. Employees need to provide a medical certificate issued by their registered practitioner or any other Healthcare professional belonging to a competent authority.
Paternity Leaves – The duration of paternity leave in Colombia lasts up to two weeks. However, in the case of parents, employees can also transfer the last six weeks of maternity leave to paternity leave by mutual agreement. Moreover, with the effect of the amendment in 2021, an employee can also ask for an extension of maternity leave.
Health Benefits – In Colombia, the social security system’s contributions guarantee health care for all residents. The responsible affiliates and contributors contribute to this subsystem to make a bundle of healthcare services accessible to the citizens, irrespective of whether they belong to the public sector or the private sector. However, only those employees will be eligible to avail of the benefits who forward their social security contribution.
Therefore, this benefit does not ignore parties’ responsibilities to contribute to the social security system. For additional assistance with health benefits and other employee entitlements with business expansion, it is ideal for working with an experienced Colombia Employer of Record to make the process seamless.
Pension – In Colombia, pension falls under three different circumstances: old age, invalidity, and survivorship. Furthermore, the pension amount depends on the contributions concerning the social security system before achieving some specific criteria requirements by the affiliate. Therefore, the labor risks of the system are responsible for recognizing only the pensions concerning the origin of the listed benefits in cases of work-related accidents or mishaps.
Other Benefits – Other employee entitlements/ benefits of the legislation include compassionate leave, voting leave, burial leave, and mourning leave in emergency cases. Therefore, Colombia is one of the few countries with a lot to offer regarding employment entitlements to prospective employees. However, expanding a business can be an exhausting process but not with us at Infotree Global as your Employer of record in Colombia. Get in touch with us today to get the best employer of record services in Colombia.
Payroll Tax in Colombia
Colombia is one of the few countries that follow a standardized taxation system for each relevant category. Both employees and employers have to contribute towards compulsory taxation categories, but it only includes social contributions, often referred to as the social security tax. Moreover, it also includes individual income tax, VAT, and corporate income tax. However, managing payroll and tax often gets tricky and requires expertise for an expanding business in a new country. Therefore, we at Infotree Global are here to help as your Colombia Employer of Record to manage payroll and taxation.
Income Tax – Colombia follows a progressive tax system for individual income tax. According to this system, the unit of taxation refers to TVU. The income tax slab ranges from 19% to 39%. Employees with income over 31000 TVU are liable to pay 39% tax on gross earnings.
VAT – The general rate for VAT in Colombia is 19%. However, the rate also stands at 5% and 0% for specific categories of services and goods. Certain categories of goods and services are eligible to fall under the category. The 5% category of goods includes a form for industrial use and other grains classified under section 468 of the Colombian Tax Code.
It is not always easy to keep track of the tax requirements, significantly when a business is expanding into a new country. Therefore, working under the guidance and assistance of an experienced Colombian Employer of Record is an ideal step.
Corporate Tax – The corporate income tax in Colombia applies at 30% for local companies and 30% for foreign companies. While most of the international payments address withholding tax applicable at 20%, a Colombian taxpayer is also responsible for paying the withholding tax. The taxable corporate income costs and expenses of a business are generally acceptable in operating and non-operating revenue. However, qualifying businesses located explicitly in free trade zones have to pay corporate income tax at the reduced rate of 20%.
Employment & Labor Laws in Colombia
Colombia provides some of the best protection to employers and employees regarding personal security and private properties. However, both parties must comply with the employment laws that serve their respective interests. In addition, employment agreements applicable in Colombia are referred to as Contrato de Trabajo. Employers can choose to prepare them either in writing or orally; however, specific provisions apply for the trial period in case of 6 duration employment or fair termination of the employment contract.
Visa & Work Permits in Colombia
Foreign individuals looking forward to working as an employee in Colombia must apply for a working visa. However, the requirements depend on the type of visa. An individual also requires a letter of motivation issued by the employer, including a record of bank statements for the previous six months, a photocopy of the passport, and a passport-size photograph. Employers usually work closely with an experienced employer of record Colombia to make the process easy while working on their business expansion plans.
Categories of applicable work visas in Colombia include the following –
Visitor V: This work visa category is appropriate for those who are not looking forward to a permanent establishment in the country.
Visitor M: This work permit is ideal for those seeking temporary residence in Colombia. It is also one of the most common work permits among working individuals.
Resident R: This work permit is ideal for individuals looking forward to permanent residence as a citizen of Colombia.
Challenges When Expanding into Colombia
Despite being an attractive market for new businesses worldwide, doing business in Colombia has different challenges. Therefore, it is necessary to consider the aspects and plan in advance concerning dealing with these challenges in the short and long terms. Some of these critical aspects include the following-
- The first and most common challenge while expanding into the Colombian market is the language barrier. It is one of the most critical scenes, especially for individuals who do not belong to Hispanic countries. Although Colombia is one of the best countries to learn Spanish in-depth and with moral clarity, conducting business operations can be tricky if it is not already part of the expansion plan.
- The taxation structure of Colombia is another critical challenge for businesses expanding their operations in the country. For new businesses, paying taxes can be a critical challenge. Therefore, it is always advisable to work closely with a credible employer of record for better assistance and guidance. The real problem lies in the rules and regulations for foreign individuals and businesses since they also indulge in international trade.
- Any business would need financial and credit support to run its operations smoothly. For this purpose, establishing a solid line of credit becomes an important matter. Unfortunately, in Colombia, the process is extremely tiring, especially since getting a loan for a foreign national is a short scene. Moreover, foreigners do not qualify for direct financing unless there is a Colombian National living in the same country.
- Contract enforcement is another critical challenge for businesses looking forward to expanding their operations in the Colombian market. Ensuring that the contract enforcement process runs smoothly is a priority for any business. Therefore, having a well-established local representative working closely with a credible employer of record can be extremely helpful in dealing with such cases.
Benefits of Colombia Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees, distributing payroll, or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of a Colombian employee to work for its company. Besides quick access to the Colombia market, the employer of record also enables the client to ease off worries related to payroll and HR.
In Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Colombia, you need to be well aware of the payroll and taxation rules. With Colombia Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expense management, withholding charges, or business tax, an EOR or PEO company takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company in an international location or you are going to establish one, an employer of record can help you significantly. The employer of record Company can hire staff on your behalf without setting up a subsidiary in Colombia. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as it can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
We at Infotree Global work dedicatedly on your business expansion plan as you take a step ahead and bring your ambition closer to reality. As your Employer of Record in Colombia, we will help you deal with legal requirements, various taxation policies, and other employment-related concerns. With us, you will get the proper assistance in establishing your company in Colombia by handling payroll processing and other legal procedures in the least amount of time.
If you plan to expand your business operations into Colombia, reach out to us and get the proper assistance. As your employer of record, we will ensure that you get the proper guidance and support in making your business expansion story a successful one!