Employer of Record in Colombia

Discover how partnering with a Colombia employer of record can simplify the hiring process and help you save on employment costs.

From $199/month per employee

Colombia is Latin America’s fourth-largest economy, with a GDP of over USD $420.38 billion and a population exceeding 53 million. The median age is just 32.5, making it one of the youngest workforces in the region. With free trade agreements in place, modern infrastructure, and a strong education system, Colombia ranks second in Latin America for university enrollment. The country has emerged as a preferred hub for companies scaling across the Americas.

The World Bank’s 2025 Doing Business indicators ranked Colombia in the top three Latin American countries for ease of doing business. However, despite these strengths, hiring employees in Colombia is not without challenges. Companies need to be compliant with Colombia’s labor laws relating to social security, contract terms, and terminations to avoid penalties and other consequences.

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How to Hire Employees in Colombia

Colombia has a formal employment rate of about 58.27%, with most salaried positions concentrated in urban centers like Bogotá, Medellín, and Barranquilla. The government offers tax incentives for hiring in emerging sectors such as tech and fintech, and bilingual professionals are widely available, especially in customer service and IT.

Formal workers must be enrolled in the national social security system, and employment contracts must include all statutory entitlements. For example, failure to register an employee with a health provider (EPS) or pension fund (AFP) can result in fines up to 5,000 UVTs (around USD $55,000). These rules apply even to short-term hires and probationary employees.

Setting Up a Local Entity

Establishing a legal entity in Colombia is a multi-step process that typically takes 6 to 8 weeks. The most common company structures are the Sociedad por Acciones Simplificada (S.A.S.), which is widely favored for its flexible governance and single-shareholder allowance. Foreign companies must submit a certificate of incorporation from their home country, translated and apostilled, to register with the Cámara de Comercio (Chamber of Commerce).

Following this, they must obtain a Registro Único Tributario (RUT) from the Dirección de Impuestos y Aduanas Nacionales (DIAN) for tax purposes and register with the social security system, including EPS (health provider), AFP (pension fund), and ARL (labor risk administrator). A local legal representative must be appointed, and the business must maintain an office address in Colombia.

Working with an Employer of Record (EOR)

An Employer of Record in Colombia allows businesses to sidestep the lengthy incorporation process while maintaining full operational control of local employees. The EOR acts as the legal employer of record on paper, while your company manages the day-to-day activities and performance of the employee.

This setup is especially valuable for companies:

Testing market demand or running pilot projects
Hiring a single remote employee or building a small support team
Bidding on Colombian government or NGO tenders that require local staff

EORs in Colombia hire employees under their legal entity and take over employment-related compliance. This includes drafting contracts that align with Colombian labor law, registering employees with EPS, AFP, and ARL, and ensuring contributions are paid monthly. They also handle complex requirements like Cesantías (severance fund contributions), the “Prima de Navidad” (13th-month salary), and vacation accruals.

Since Colombia mandates social security registration from day one, and any delays may expose a company to fines or employee claims, EORs provide a compliant onboarding process. With most EOR partners, employees can be onboarded within 7–10 business days.

Hiring Independent Contractors

The National Directorate of Taxes and Customs (DIAN) has tightened enforcement on disguised employment, especially among foreign tech and remote employers. Contractors earning more than 80% of their income from one client may be considered economically dependent, exposing the client to reclassification risk.

A 2022 labor court ruling upheld penalties against a U.S. company for failing to offer proper employment benefits to a Colombian contractor. To reduce risk, many companies use an EOR to ensure full labor compliance and avoid costly disputes or tax liabilities.

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Using an Employer of Record in Colombia

When working with an EOR in Colombia, the legal employer is the EOR’s registered S.A.S. entity, which handles all obligations related to payroll, taxation, social security, and labor law. Your company directs the employee’s duties, deliverables, and performance expectations.

The EOR will:

Draft bilingual employment contracts in line with the Colombian Código Sustantivo del Trabajo
Register the employee with health (EPS), pension (AFP), and labor risk (ARL) providers
Handle monthly payroll cycles, including salary disbursement, statutory contributions, and taxes
Administer mandatory benefits, including parental leave, paid holidays, and Cesantías
Manage offboarding and terminations, ensuring all severance requirements are met

A quality EOR will also manage compliance audits, respond to inspections by the Ministry of Labor, and maintain all employee records in DIAN-approved formats. This division of labor allows your company to enter the Colombian market rapidly while reducing legal exposure.

For businesses unfamiliar with Colombia’s employment culture, EOR partners also serve as a bridge, advising on market pay rates, customary benefits, and onboarding expectations.

Employment and Labor Laws in Colombia

Colombia’s labor framework is set out in the Código Sustantivo del Trabajo (Substantive Labor Code), a comprehensive set of regulations governing employment relationships, wages, leave entitlements, and dismissal processes. The law favors employee protections, and formal employment relationships are strictly regulated by national authorities such as the Ministry of Labor (Ministerio del Trabajo) and the DIAN.

Employers must register workers with the General System of Social Security, which includes health coverage (EPS), pensions (AFP), and labor risk insurance (ARL). All employees must be given a written employment contract in Spanish that outlines job functions, compensation, probation periods, and leave rights. Failure to register employees correctly or meet documentation standards can result in fines, retroactive benefit payments, and labor court sanctions.

Employment Contract Requirements

In Colombia, employment contracts are governed by the Código Sustantivo del Trabajo and must comply with strict legal requirements to be considered valid. While verbal contracts are technically allowed for indefinite-term relationships, written contracts are mandatory in nearly all practical scenarios, especially for fixed-term or project-based employment.

Each contract must be drafted in Spanish and signed before the employee’s start date. It should be specific, transparent, and contain no ambiguous terms. Failure to provide a proper contract may lead to legal disputes or automatic classification of the relationship as indefinite, with full benefits and protections.

A valid Colombian employment contract must include the following:

Identification of Parties
Type of Contract
Job Title and Description
Salary and Payment Details
Working Hours
Probation Period
Mandatory Benefits
Leave Policies
Confidentiality and Non-Compete Clauses
Termination Clauses
Signatures and Dates

Additionally, all contracts must be archived and made available during inspections by the Ministry of Labor. Employers are strongly advised to use legal templates vetted by Colombian counsel or work with an EOR that ensures all contracts meet national labor and tax compliance standards.

Working Hours

As of 2025, the legal maximum is 46 hours per week. These hours can be distributed across five or six days, provided no single shift exceeds 9 hours unless special agreements are made. Employers must provide at least one full day of rest per week, typically Sunday. Flexible scheduling is permitted if mutually agreed upon and documented in the employment contract.

Overtime

Colombian law strictly regulates overtime and imposes premium payments for any work performed beyond legal limits. Employers must pay:

125% of the standard hourly rate for daytime overtime (6 AM – 9 PM)
175% of the standard rate for nighttime hours or work on Sundays and public holidays

Only certain high-level employees under managerial, directive, or trust and confidentiality roles (cargos de dirección, confianza y manejo) may be exempt from overtime rules.

Probation Period

Colombian law allows a probation period, but it needs to be stated explicitly in the employment contract. The maximum duration depends on the type of contract:

For indefinite-term contracts: up to 2 months
For fixed-term contracts, the maximum is the shorter of 2 months or half the contract’s duration

During the probationary period, either party may terminate the contract without cause. However, employers must still observe formal procedures and provide written notice. Probationary employees are entitled to full labor protections, including social security coverage, paid leave accrual, and salary payments.

Payroll and Employment Taxes in Colombia

Fiscal Year

Colombia follows the calendar year for fiscal and tax purposes. The fiscal year runs from January 1 to December 31. This means companies align their accounting, tax filings, and payroll reporting within this period.

Colombian companies must submit annual tax returns and reports related to payroll taxes by April 15 of the following year.

Payroll Cycles

Employers are required to pay their employees at least once a month, often on a fixed date like the last working day of the month. Some companies also opt for biweekly payments, but monthly payroll is the standard practice.

Minimum Wage

The Colombian government sets the minimum wage annually, considering inflation and economic factors. For 2025, the minimum monthly wage is COP 1,300,606 (about USD 330). In addition, employees receive a mandatory transport allowance of COP 140,606 (roughly USD 36), making the total minimum legal remuneration COP 1,441,212.

Bonus Payments

Colombia mandates a 13th-month salary payment, known locally as the “Prima de Navidad”. This is a legally required bonus equivalent to one month’s salary, paid in two installments each year: one by June 30 and the other by December 20.

This extra pay acts as a mid-year and end-of-year financial boost for employees, a key benefit in Colombia’s labour rights framework. The 13th salary amount is proportional to the time worked during the semester for employees who joined mid-cycle.

Employer Tax Contributions

Colombian employers are responsible for significant mandatory contributions to social security and labor programs. These include contributions to health, pension, and occupational risk insurance, which together typically range between 17% and 22% of an employee’s gross salary, depending on the industry and job risk level.

Employers also contribute to payroll taxes, funding social welfare institutions like the Family Welfare Institute (ICBF), the National Apprenticeship Service (SENA), and family compensation funds, generally adding around 9% of payroll costs for employees earning above a certain threshold.

Contribution Type	Employer Rate	Notes
Health Insurance	8.5%
Pension Fund	12%
Occupational Risk Insurance (ARL)	0.348% – 8.7%	Rate depends on the risk level of the employee’s job (1 to 5 risk categories).
Family Welfare Institute (ICBF)	3%	Supports family welfare programs; applies to companies with 10+ employees.
National Apprenticeship Service (SENA)	2%	Funds vocational training; applies to companies with 10+ employees.
Family Compensation Funds	4%	Provides social benefits to workers; applies to companies with 10+ employees.
Payroll Tax (Parafiscales Total)	9%	Sum of ICBF, SENA, and Family Compensation; applies to companies with 10 or more employees.
Severance Pay (Cesantías)	8.33%	Equivalent to one month’s salary per year, paid to a severance fund annually.
Interest on Severance Pay	1%	Additional annual payment on the severance fund balance.

Employee Payroll Contributions

Colombian employees contribute a portion of their monthly salary toward mandatory social security programs. These include:

Contribution Type	Employee Rate	Notes
Health Insurance	4%	Based on gross salary
Pension Fund	4%	Based on gross salary
Solidarity Pension Fund	1% – 2%	Applies to high earners (over COP 5,200,000/month in 2025)

These deductions are automatically withheld by the employer during payroll processing.

Individual Income Tax Contributions

In addition, salaried workers are subject to income tax (retención en la fuente) based on progressive tax brackets. Colombia uses a system measured in UVT (Unidad de Valor Tributario), which adjusts annually to inflation. For 2025, 1 UVT = COP 49,799.

Monthly Income (UVT)	Monthly Income (COP)	Tax Rate
0 – 95 UVT	0 – COP 4,471,175	Exempt
95 – 150 UVT	COP 4,471,175 – COP 7,059,750	19%
150 – 360 UVT	COP 7,059,750 – COP 16,943,400	28%
360 – 640 UVT	COP 16,943,400 – COP 30,113,600	33%
640 – 945 UVT	COP 30,113,600 – COP 44,268,525	35%
945 – 2,300 UVT	COP 44,268,525 – COP 108,249,500	37%
Over 2,300 UVT	Over COP 108,249,500	39%

Time Off and Leave in Colombia

Mandatory Leave Entitlements

Employees in Colombia are entitled to 15 consecutive working days of paid annual leave after completing one full year of continuous service. The employer must schedule this leave within one year of it becoming due, and any unused balance can be carried forward by mutual agreement. During vacation, the employee receives their regular salary, excluding bonuses or commissions.

Public Holidays

Colombia observes one of the highest numbers of public holidays globally, with 18 national public holidays annually. These include both religious and civic observances, such as Independence Day (July 20), Christmas Day, and Labor Day (May 1). If a public holiday falls on a weekend, it is usually moved to the following Monday, as per the Emiliani Law.

Sick Leave

Employees who are medically certified as unfit for work are entitled to paid sick leave from day 3 onward, covered by the social security system (EPS). The first two days are typically paid by the employer. Sick leave compensation is generally 66.67% of the employee’s salary, up to a certain cap, and requires a valid medical certificate issued by an authorized healthcare provider.

Parental Leave

Maternity leave in Colombia covers 18 weeks of paid leave, starting at least one week before the expected delivery date. It is funded by the social security system. Fathers are entitled to 2 weeks of paid paternity leave, also covered by Social Security. If the child is born prematurely or requires special care, additional leave may be granted.

Bereavement Leave

Employees are entitled to 5 working days of paid bereavement leave in the event of the death of an immediate family member, such as a spouse, parent, child, or sibling. The leave is fully paid by the employer and must be taken immediately following the event.

Terminations and Severance in Colombia

Termination

Employment contracts can be terminated by mutual agreement, by employee resignation, or by employer dismissal with or without just cause. Just cause terminations, such as serious misconduct, breach of contract, or repeated absenteeism, must be well-documented to be legally valid. Dismissals without just cause are permitted but require the employer to pay severance compensation, even in the absence of wrongdoing by the employee.

For protected employees (e.g., pregnant workers, union representatives), prior authorization from the Ministry of Labour is required before any dismissal, regardless of the reason.

Notice Periods

Colombian law does not mandate a formal notice period for terminating employment. However, in practice, some employers choose to give 15 days’ notice to allow for smoother transitions. Alternatively, payment in lieu of notice is common in dismissals without just cause. In fixed-term contracts, failure to renew the contract must be communicated at least 30 days before the expiration date to avoid automatic renewal.

Severance and Redundancy Pay

Employees terminated without just cause are entitled to severance pay based on their length of service and salary level. The compensation structure varies:

For employees earning less than 10 times the minimum wage:

30 days’ salary for the first year
Plus 20 days’ salary for each additional year (proportional for partial years)

For employees earning more than 10 times the minimum wage:

20 days’ salary for the first year
Plus 15 days’ salary for each additional year (proportional for partial years)

All employees also accrue annual severance savings (cesantías) equivalent to one month’s salary per year, payable upon termination or annually if deposited into an approved severance fund. In redundancy or restructuring cases, additional compensation may be negotiated, especially if collective dismissal thresholds are triggered.

Why Hire in Colombia with an EOR?

With an Employer of Record (EOR), international businesses can tap into a highly educated, cost-efficient workforce without setting up a local entity. Colombia has strong labor protections, strict termination rules, and mandatory contributions that can be complex for foreign companies to manage independently. An EOR takes on the legal responsibility of employing workers, handling employment contracts, payroll, tax filings, social security, and compliance with the Colombian Labour Code.

This approach is especially valuable in Colombia, where employer contributions can exceed 30% of gross salary and missteps in contract classification or terminations can lead to fines or litigation. With an EOR, companies can onboard talent within days while staying fully compliant with local laws, including mandatory severance funds (cesantías), interest payments, and sector-specific benefits. It’s a risk-free way to test the Colombian market, scale teams, and manage cross-border talent without needing legal or administrative infrastructure in-country.

How to Choose an EOR in Colombia

Hiring through an Employer of Record is only as effective as the partner you choose. Here’s what to look for when selecting an EOR in Colombia:

Local Legal Expertise

Ensure the EOR has in-country legal professionals who understand the Colombian Labor Code, including complex rules around fixed-term contracts, probation periods, and termination.

Full Statutory Compliance

The provider must manage all mandatory employer contributions—pension (PILA), healthcare (EPS), occupational risk insurance (ARL), and family compensation funds—accurately and on time.

Registered Local Entity

Confirm the EOR is legally registered in Colombia and can act as the official employer for tax and labor authorities, not just a payroll intermediary.

Transparent Payroll and Benefits Handling

Look for detailed, compliant payslips, handling of 13th-month salary, severance funds (cesantías), and interest payments. They should also manage vacation, leave, and local bonus entitlements.

Expand into Colombia Easily with Remote People’s Employer of Record in Colombia

Hiring in Colombia doesn’t have to mean navigating local labor laws alone. With Remote People’s Employer of Record (EOR) service, you can hire employees quickly and compliantly—no entity setup required. We take care of employment contracts, payroll, benefits, and regulatory obligations, so you can onboard talent without delays or risks. Contact us today to get started.