Most people know Colombia as a vibrant and growing country in South America with a rich cultural heritage. However, the country’s notability isn’t just limited to its tourism and exports but also its business climate. According to The World Bank, Colombia is expected to see a 2.9% increase in GDP in the following years.

To benefit from this growth, you have to know all the ins and outs of doing business in Colombia. However, the process can be a bit tricky, especially if it’s your first time venturing into South America.

A professional employer organization (PEO) can serve as your ally in this situation. Their expertise in the local market and employment laws helps make sure that you are compliant with Colombian laws and regulations. Let’s touch more on what a PEO can do for you.

What Is a Colombia PEO?

A professional employer organization (PEO) is a company that provides outsourced human resource services. Think of them as an external HR department that manages your employees and all compliance-related tasks on your behalf.

In Colombia, such a company must be registered with the Ministry of Labor to operate legally. Once registered, the PEO can act as an employer and handle all employment-related matters for your business.

While the extent of a PEO’s involvement in your business can vary, they are typically co-employers with you. So, they share certain employer responsibilities with you, such as payroll, benefits, and tax withholdings. The day-to-day business operations, however, remain solely under your control.

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Which Services Does a PEO Provide?

Every PEO has its unique suite of services. However, here are a few services you can expect most of them to provide.

Employee Recruiting and Onboarding

Colombia has a labor force of over 26 million, so there’s no shortage of employees for your business. However, finding the top talent can be complicated, especially because of two reasons:

  • Existing Businesses: You’re competing with local Colombian businesses for the same workforce. Jobseekers are typically more likely to choose a local brand over an unknown foreign entity. So, unless you’re a popular international company like Samsung or McDonald’s, you may have a disadvantage.
  • New Businesses: You’re new in Colombia, and you don’t have a recruiting network or any established hiring processes. Due to this, you may struggle to find the right candidates for your business.

However, a PEO in Colombia would have already helped businesses like yours with recruiting and onboarding, so they know where to look and how to bring these people on your team. They don’t only find this talent but also onboard it.

Onboarding employees could include everything from introducing them to company culture and policies, providing training, conducting background checks, and setting up payroll. All you have to do is assign tasks to the new employees; the pre-employment process is 100% handled by the PEO.

Payroll and Benefits Administration

When you’re a new business in Colombia, you’re up against a lot of competitors. You don’t want to slip and make a mistake, especially in the way you treat your employees.

A part of that is paying them right. The Colombian government has set a minimum wage in the country along with the benefits that are required to be provided to employees. On top of that, there’s a compulsion to differentiate between permanent and temporary employees.

You don’t want to misclassify a full-time employee as a contractor and end up getting fined. It’s an expensive mistake, easily avoidable with the help of a PEO.

A PEO in Colombia will manage payroll and benefits administration on your behalf. Many of them have an automated system that tackles the complexity of payroll in Colombia, such as calculating taxes and social security contributions. Their dedicated payroll system would also have an analytics dashboard where you can see employee costs, benefit contributions, and other metrics.

Policy Creation and Performance Management

Besides the primary HR processes like payroll management, a PEO in Colombia also assists with other tasks. Some of these are:

  • Policy Creation: When in a new country, companies need to be aware of all the laws and regulations. At times, they must develop policies for some situations that are specific to the country they operate in. A PEO can help new businesses create appropriate policies and procedures that comply with Colombian employment laws.
  • Performance Management: Your business performance in a foreign country matters a lot. After all, you’ve spent time and money expanding to Colombia, so you want your employees to perform well. Your designated PEO can also help you in this regard.

Additional Services

Not all PEOs provide services in addition to HR, but some do. These services may be related to the legal and employee development side of your business.

Colombia is a developing country, so its laws are changing to accommodate the changing business landscape. Being new in Colombia, you might not know how to keep up with these changes. However, a PEO will stay on top of these developments. So, their services may involve legal compliance.

Similarly, if you plan to bring employees from your home country to work in Colombia, a PEO would assist you with immigration services. They can get the necessary visas and work permits for your team. This way, you can focus on other aspects of your business expansion.

Some PEOs also provide employee development services. They have local teams that can train your employees on various topics such as cultural sensitivity, language skills, and labor laws. Their development assistance can help integrate your employees into the Colombian work culture smoothly.

Which Businesses Can Use a PEO in Colombia?

The short answer is that every business can work with a PEO in Colombia. However, there are certain types of businesses that stand to benefit more from a PEO partnership.

Foreign Companies Expanding to Colombia

The first one is obvious. If you’re a foreign company that wants to set up a presence in Colombia, you may work with a PEO to make the process smoother and cost-effective.

Startups in Colombia

Startups typically don’t have as many resources as enterprises and large businesses. They often struggle with keeping up with HR and compliance responsibilities due to limited budgets. Plus, they have a lot on their plates. HR can eat up a lot of their time, which could be spent on product development and other vital tasks.

A PEO helps startups overcome this hurdle. They can outsource their HR tasks to a PEO and meet their business objectives with full concentration.

Small Businesses

Just like startups, small businesses also have limited budgets. They may not afford to hire dedicated HR personnel or set up an in-house HR department. Partnering with a PEO in Colombia is often the best way forward for them.

Companies With Seasonal Employees

You may be an established company in Colombia with a moderate HR department. However, this team may only be able to handle the workload of your permanent employees.

Depending on the customer influx, you may have to hire seasonal employees during peak periods like the holiday season. A PEO can manage HR for these additional employees to make sure they are paid on time and there’s a record of their employment. 

Benefits of Working With a PEO in Colombia

When you partner with a PEO in Colombia, you can expect to benefit from their expertise and local presence. Some other advantages of working with a PEO are as follows.  

Ease of Local Penetration

Bringing your business to a new country isn’t a walk in the park. You’re dealing with a lot of local laws and cultural norms you may not be familiar with. On top of that, you have to grow your business.

Amidst all of this, complying with local regulations can be a bit of a struggle. However, with a PEO by your side, you don’t have to worry about this. They make local penetration a breeze by taking care of all the legalities and regulations for you.

HR Assistance

Like marketing and sales, HR also takes a lot of time and resources for any business. However, just like you can work with a digital marketing agency and outsource sales operations, it’s possible to hand over your HR responsibilities to a PEO.

The PEO then acts as your HR department. You can manage everyday operations with less hassle and expense this way.  

Cost Savings

Many PEOs claim that they can save your HR and recruitment costs up to 50% and above. These claims are not exaggerated.

The cost savings occur in various forms. For example, you don’t have to invest in HR infrastructure, which can be quite expensive for a newly established business. You also don’t have to hire an HR team. Plus, you can avoid penalties for non-compliance with local laws and regulations.

What to Look For in a PEO in Colombia?

Nowadays, as more and more companies are expanding internationally, PEOs have become a popular option for managing human resources. However, not all PEOs are reliable or even operational in Colombia. So, here are some factors to keep in mind when looking for a PEO in Colombia.

Local Presence

First, make sure that the PEO you’re considering operates in Colombia. Many PEOs offer their services across 100 or so countries. But then again, many of them focus on the United States and Europe, leaving Latin America out of their reach. So, it’s important that you choose a PEO with a strong local presence and understanding of the Colombian business market.

Services Offered

Every business has a list of services they require from a PEO. For some, payroll and benefits administration is enough. However, others may require recruitment, training and development, and performance management, too.

You should first make a list of all services you need. Then, start narrowing down your options. It also helps to confirm with the PEO that they understand your specific requirements.

Language Capabilities

It’s always preferable to work with a PEO who can communicate fluently in your preferred language. Miscommunication in HR can lead to costly mistakes and delays. Work with a PEO with team members who are proficient in both English and Spanish to avoid language barriers.

You can also check if the PEO can provide payroll in both USD and Colombian pesos for your convenience. This way, employees can get paid in their preferred currency.

HR Management Tools

All PEOs use some tools and software to manage HR operations for their clients. Some have proprietary systems that they have developed and fine-tuned over the years. Others may use widely available HR management software like ADP or Gusto.

Find out what tools the PEO uses and what their interface looks like. You should also ask about security measures they use to safeguard your data.

Maybe you already use an HR system that you want the PEO to integrate with. Ask them if they can support this request before finalizing your decision so that you don’t have to migrate data from one platform to another repeatedly.

Pricing Structure

  • Per Employee: You will be charged a certain fee for every employee. Basically, it’s a headcount fee. So, if you have more employees, your fees will be higher.
  • Percentage of Payroll: In this model, the PEO charges you a percentage of your payroll expenses. Suppose your total payroll expense for the month is $80,000, and the PEO charges a 5% fee. You would be paying $4,000 to the PEO for that month.
  • Fixed Fee: Some PEOs charge a fixed fee for their services, regardless of the number of employees or the size of your payroll. It can be beneficial for small businesses with a limited budget and headcount.

Know your budget beforehand so that you can make this decision strategically. The PEO may also have additional fees for specific services, such as legal compliance. You should account for these fees, too.

Streamline Your Business Expansion in Colombia with a PEO

There’s no denying that working with a PEO in Colombia can significantly ease your business operations and help you focus on your core competencies. A PEO can also reduce your overall expenditures in the country.

Remote People provides fully managed PEO services in Colombia, giving businesses a compliant and cost-effective way to expand without setting up a local entity. Our team handles payroll, HR, benefits, and compliance, allowing you to focus on scaling your operations.

Contact us today to explore how Remote People can support your business expansion in Colombia.

Frequently Asked Questions

There may be three types of PEO in Colombia, including local PEOs, EORs, and staffing companies. While PEOs are co-employers that mainly focus on the provision of HR tasks, EORs are the legal employers of your workers in Colombia. Staffing companies act as recruitment agencies and usually only provide temporary employees.

Every PEO in Colombia has its own payroll system, but most commonly, salaries are paid through bank transfers or checks. These systems usually include automated payments for taxes and other contributions on behalf of the employer. The PEO may use the employer's corporate bank account or a separate account for payroll purposes.

PEOs in Colombia generally offer benefits packages that comply with local Colombian laws. These may include health insurance, retirement plans, vacation days, and other benefits commonly provided by employers in the country. The PEO also takes care of the administrative tasks related to these benefits, such as enrollment and contribution payments.