How to Hire Employees in Colombia: Costs and Checklist

How to Hire Employees in Colombia: Costs and Checklist

consulting
Marketing Team
Marketing Team Nov 2 2022 • 7 min read
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Colombia is a very rich country surrounded by Venezuela, Panama, Ecuador and Peru. It is well known for their culture: in literature they have the Nobel literature prize winner Gabriel García Márquez, in visual arts they have the painter, and sculptor Fernando Botero and Santiago Martínez Delgado, in music they have so many musicians such as Shakira, Juanes, Carlos Vives; and many more artists that integrates their culture.

In economics terms, they have really growth since COVID-19, becoming one of the most rich countries in Latin America.

Colombia is a country where over 50 million people live, which means it is a large country with lots of culture in it. There is an entity in the government that controls the laws for the safety and control of safe and legal working conditions in Colombia which is called the Ministry of work.

Remote work in Colombia

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Law 2121 provided the main requirements for remote work as follows:

  • The modality of remote work must be agreed upon by the parties.
  • The contract can be carried out through existing or new technologies, and any other means that allow employees to perform their duties remotely.
  • The modality of remote work will apply throughout the entire employment contract.
  • The regulation applies to Colombian residents, both entities and natural persons, or even foreigner entities that hire employees who are within the national territory.
  • The manifestation of consent requires the use of a digital electronic signature, with methods such as codes, passwords, biometric data or private cryptographic keys, which identify a person.
  • The use of a “One time Password” authentication mechanism is also suggested to perform virtual actions securely.
  • The employee will not have right to the legal transportation aid.
  • A specific place of execution is not required, however, the employee's workplace must have a permanent internet connection and must be established by mutual agreement and approved by the Occupational Hazards Administrators – ARL (by its Spanish acronym).
  • Agreements between the parties require an electronic or digital signature. These technologies must be provided by the employer.
  • Remote workers that attest being caregivers of minors under the age of 14, people with disabilities or adults over the age of 60 to the first degree of consanguinity that require special assistance have a right to organize work schedules compatible to their tasks as caregivers or to interrupt the working hours with the employer's previous authorization.
  • Key Action Points for Human Resources and In-house Counsel

Even though Colombian law contemplated telework, work from home, and home office as a benefit, this new regulation is very significant, as it is the first Law in Colombia regarding remote work.

Hiring employees legally in Colombia

In order to hire employees legally in Colombia, as a first step, you need to set up your company in the country. To do this, you need to:

  1. Documents Required To A Set-Up A Branch Of A Foreign Company
  • Certificate of incorporation and registered agent of the investing company, issued by the official entity in the company’s domicile. If you are an individual, you must provide a copy of your passport.
  • Power of representation authorized for a lawyer or individual to act on behalf of the investment company.
  • By-laws of the parent company.
  • Resolution from the parent company’s relevant entity authorizing the opening of the branch in Colombia, indicating, at least:
  • The businesses the branch will be involved in
  • The amount of capital assigned to the branch
  • Its domicile
  • Its duration
  • The grounds for termination of the businesses
  • Appointment of the registered agent and his/her powers
  • Appointment of the statutory auditor

2. Register A Public Deed

The documents stated in the first step are required for this second step. The public deed must be signed by the foreign company’s registered agent in Colombia.

The signing of the public deed of incorporation generates the payment of notary fees, which vary between 2.7 and 3 per thousand of the value of the assigned capital.

3. Receive Letters Of Acceptance Of The Branch’s Job Positions

Letters of acceptance of the job positions must be obtained from the people appointed in the company’s bylaws, such as the registered agent and his/her alternate. Said letters must include the name of the person who accepts the position, the position, the identification document and number, and his/her signature.

4. Complete The Single Tax Registry (Rut, As Per Its Spanish Acronym)

This procedure can be carried out in person or by a legal representative at the National Tax and Customs Administration (DIAN, as per its Spanish acronym) to obtain the branch’s tax identification number (NIT as per its Spanish acronym).

Public deed of incorporation, letters of acceptance, and the completed additional form for tax purposes (Unique Registry - RUT and NIT if applicable), indicating the taxes the company will be subject to, must be registered in the chamber of commerce of the branch’s domicile. The business registration form must be completed in order to do this.

5. Register The Company’s Books In The Chamber Of Commerce

Every branch must have its accounting books, which include the following:

  • Accounts journal
  • General ledger

6. Open A Bank Account In The Financial Institution Of Your Choice

Every branch must open an account to its name in a banking institution. The investors will deposit the capital in this account.

7. Register The Foreign Investment In The Central Bank Of Colombia

Once the investment is made, that is, once the capital assigned to the branch is covered and subsequently in each increase of capital, the foreign investment must be registered with the Central Bank of Colombia. The procedure to register the investment varies depending on the category in which it was made.

Regarding social charges:

Every employee whose work contract is governed by Colombian labor regulations (except some foreign employees who may become voluntarily affiliated to the pensions' system) must be affiliated to the integral social security system, which includes the:

  • general pensions system
  • health social security system, and
  • general system of professional risks.

The basis for contributions is determined by the monthly salary (excluding non-salary items) earned by the employee, which may not be, for ordinary salaried employees, less than the minimum legal monthly salary (COP 1 million in FY 2022) and may not exceed 25 minimum legal monthly salaries (COP 25 million in FY 2022).

For employees who earn an integral salary, the basis for pension contributions will be the lower of 25 minimum legal monthly salaries or 70% of such integral salary.

Regarding the employment contract:

To hire a worker in Colombia, it must be understood that labor regulations in Colombia are governed by the International Labor Organization. The entity in charge of regulating this is the Ministry of Labor, which must guarantee the best for the worker and the company. To hire a worker in Colombia, the following types of contracts are used:

  • Indefinite-term contract: This is the most common used in companies. An agreement is signed between the employee and his employer, setting a salary, a schedule and determining an indefinite term of the contract.
  • Fixed-term contract: for this there is a term limit, which is three years, the agreement must be in writing.
  • Contract for work or work: it is applied for specific projects for a certain time. Remuneration is made depending on the time worked and the compensation should not be less than fifteen days.
  • Occasional, accidental or transitory contract: this contract is agreed when the worker performs functions other than those corresponding to his position. Its duration is less than a month.

The following should also be taken into account:

  • The working day is a maximum of 48 hours per week and 8 hours per day.
  • The worker's trial period cannot be longer than two months.
  • Vacations are equivalent to 15 working days of remuneration during the rest period per year of service.
  • It can be outsourced in Colombia through agencies, independent contractors or intermediaries.

The Colombian labor regime is divided into the individual regime, which regulates the types of contracts, salary, working hours, breaks and benefits. The collective regime regulates unions, collective conflicts, pacts and union contracts. All this is very important to consider when hiring a worker in Colombia.

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Hire and pay employees or contractors in Colombia via 4Geeks, even if don't have a legal local entity. Learn more.

What are the characteristics of a worker's contract in Colombia?

The agreement used to hire a worker in Colombia must have the following characteristics:

  • It must be consensual, it must be modified with the consent of the parties.
  • Bilaterally, the parties are obliged to respect the agreements reciprocally.
  • In commutative, the obligations that are agreed upon are certain and determined. The employer knows the service he is going to receive and the worker what he has to receive as salary.
  • Of successive tract, it is executed as the obligations are fulfilled in time.
  • Expensive, this because the considerations are economic.
  • The contract must contain:
  • Identification and address of the parties.
  • Place and date of celebration.
  • Place where the service is provided.
  • Nature of work.
  • Value of the salary, form and dates of payment.
  • Contract period.
  • Termination and method of granting notice.
  • The clauses freely agreed upon by the parties.

The employer and the worker have to know when a contract termination can be given. Knowing all these factors, it is possible to understand the most appropriate way to hire a worker in Colombia. In this way, both the worker and the company will know what their obligations are.

Holidays (non laboral days)

Saturday, January 1, 2022New Year's Day (Año Nuevo)
Monday, January 10, 2022Epiphany Holiday (Día de los Reyes Magos)
Monday, March 21, 2022Saint Joseph's Day (Día de San José)
Thursday, April 14, 2022Maundy Thursday (Jueves Santo)
Friday, April 15, 2022Good Friday (Viernes Santo)
Sunday, May 1, 2022Labour Day (Día del Trabajador)
Monday, May 30, 2022Ascension Day Holiday (Día de la Ascensión)
Monday, June 20, 2022Corpus Christi Holiday (Corpus Cristi)
Monday, June 27, 2022Sacred Heart Day (Sagrado Corazón)
Monday, July 4, 2022Feast of Saint Peter and Saint Paul (San Pedro y San Pablo)
Wednesday, July 20, 2022Independence Day (Día de la Independencia)
Sunday, August 7, 2022Battle of Boyacá Day (Batalla de Boyacá)
Monday, August 15, 2022Assumption Day Holiday (La Asunción de la Virgen)
Monday, October 17, 2022Columbus Day Holiday (Día de la Raza)
Monday, November 7, 2022All Saints' Day Holiday (Día de los Difuntos)
Monday, November 14, 2022Independence of Cartagena Holiday (Independencia de Cartagena)
Thursday, December 8, 2022Immaculate Conception (Día de la Inmaculada Concepción)
Sunday, December 25, 2022Christmas Day (Navidad)

Taxes in Colombia

Employer taxes:

  • 12.00% - Pension Fund
  • 8.50% - Healthcare Fund
  • 0.348 - 8.7% - General Labor Risk Pool
  • 4% - Family Allowance Fund
  • 3% - Colombian Institute for Family Welfare (ICBF)
  • 2% - National Learning Service (SENA)
  • 29.848-36.2% - Total Cost of Employment
🇨🇴
Hire and pay employees or contractors in Colombia via 4Geeks, even if don't have a legal local entity. Learn more.

Employee taxes:

  • 4.0% - Pension Fund
  • 4.0% - Healthcare Fund
  • 0.348-8.7% - General Labor Risk Pool

Employee income taxes:

  • 0 (Income up to 1090 tax units)
  • 19.0% (1090 to 1700 tax units + 116 tax units)
  • 28.0% (1700 to 4100 tax units + 788 tax units)
  • 33.0% (4100 to 8670 tax units + 788 tax units)
  • 35.0% (8670 to 18970 tax units + 2,296 tax units)
  • 37.0% (18970 to 31000 tax units + 5,901 tax units)
  • 39.0% (31000 tax units and up + 10,352 tax units)

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