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Hiring in Colombia
In Colombia, employment laws tend to favor employees, so it is best practice to have written employment contracts and have them reviewed by legal experts. There are no government-sponsored unemployment benefits in Colombia. If an employee feels they were wrongfully terminated, they can file a complaint, and the company can be liable for covering the costs of benefits to the employee. It is advisable to secure the proper in-region expertise in Colombia to ensure your company is in full compliance with the local law.
Employment contracts in Colombia
Although not required, best practice is to put a strong written employment contract in place in Colombia, as this document provides evidence of the labor relationship and the terms and conditions agreed upon by the parties. Additionally, certain provisions are valid only if set forth in writing, such as provisions on the probationary period and the duration of the contract for a fixed rather than an indefinite term. An offer letter and employment contract in Colombia should always state the salary and any compensation amounts in COP rather than an international currency.
For employees who are working remotely, either at home or at a location outside of the employer’s normal work center, a telework accommodation and its terms must be inserted in a writing contract. Working tools and a telework allowance (or the reimbursement of telework expenses) is required for employees under these working arrangements.
Working hours in Colombia
In general, Colombia has a 47-hour working week. Depending on the business, people work 5 days for about 9.6 hours per day, typically Monday to Friday, or 6 days for 8 hours a day, Monday to Saturday.
In August 2021, the government signed a new law to reduce the standard workweek from 48 hours to 42 hours. This reduction will be gradually placed into effect from 2023 to 2026. The maximum daily working hours will be reduced to 9 hours from 10.
The first decrease occurred on July 15, 2023, reducing the maximum weekly working hours from 48 to 47 hours. Going forward, the weekly hourly max will reduce on July 15 every year as follows:
- 2023: 47 hours
- 2024: 46 hours
- 2025: 44 hours
- 2026: 42 hours
Day-time overtime is paid with a surcharge of 25% over the value of the regular hourly rate, and nighttime overtime, as well as overtime on Sundays and holidays, is paid with a 75% surcharge over the regular hourly rate in proportion to the hours worked in excess to the new maximum weekly working hours.
Nighttime work, even if it is not overtime, is paid with a 35% surcharge over the hourly rate, in proportion to every nighttime working hour of the shift.
Employers cannot request employees to work overtime until the Labor Ministry has issued an authorization for the specific role or job position of the employee.
Holidays in Colombia
There are 18 public holidays in Colombia, which are:
- New Year’s Day
- Saint Joseph’s Day
- Maundy Thursday
- Good Friday
- Labor Day
- Ascension of Jesus
- Corpus Christi
- Sacred Heart
- Saint Peter and Saint Paul
- Declaration of Independence
- Battle of Boyaca
- Assumption of Mary
- Columbus Day
- All Saints’ Day
- Independence of Cartagena
- Immaculate Conception
- Christmas Day
Vacation days in Colombia
Employers are required to provide 15 paid working days of annual leave per year.
Colombia sick leave
In the event of a non-occupational illness, employees are entitled to receive from the employer an amount equal to 2/3 of their salary during the first 90 days of sick leave, and an amount equal to the half of their salary for another 90 days. However, the most common practice is to pay 100% of the salary. After the 90th day, the salary is paid by the social security risk system.
If an employee is injured on the job, they are eligible for 100% of salary for the duration of their absence.
Parental leave in Colombia
Pregnant employees are entitled to 18 weeks of paid maternity leave — 1 week before birth and 17 after. For medical reasons, the employee may take 2 weeks before childbirth and 16 weeks after the child is born. In case of adoption, female employees are also entitled to a paid leave of 18 weeks following the same terms as the maternity leave.
The last 6 weeks of the maternity leave can be split into shared parental leave and availed either by the mother or by the father (in which case, these weeks of leave are in addition to the paternity leave) upon agreement by the working mother and the working father.
Spouses are entitled to 2 weeks of paid paternity leave for a child’s birth or adoption, which can be extended one more week and up to 5 weeks, subject to the government’s decree about unemployment national rates.
In addition, part-time flexible parental leave allows either partner to give up a period of maternity or paternity leave in exchange for a period of part-time work at twice the length of the forfeited leave.
Adoptive parents and spouses in charge of the newborn in case of sickness or death of the other spouse are also entitled to parental leave.
Health insurance in Colombia
Colombia provides a universal health insurance scheme in which all citizens, irrespective of their ability to pay, are entitled to a comprehensive health benefits package.
People participate in one of 2 regimes depending on income:
- The Contributory Regime (CR), which covers employees and their families with monthly incomes above a minimum monthly amount.
- The Subsidized Regime (SR), which covers those identified as living below the poverty line through a proxy means test.
The CR is financed by mandatory payroll tax contributions of 11. The government uses national and local tax revenues and a payroll tax of 1.5% as a solidarity contribution.
It is very common for employers to provide additional health insurance in Colombia. G-P offers 2 prepaid medical plans in Colombia.
Colombia supplementary benefits
Employees earning up to twice the minimum wage are entitled to a minimum monthly statutory transportation allowance of COP 140.606. Such amount is updated annually and is only paid to employees working on-site (that is, this is not mandatory for employees under telework), and is not paid when they are under a leave.
Generally, we recommend budgeting 45% as benefits cost on top of the gross salary to allocate the total employer’s cost, including benefits in Colombia.
Employees with an ordinary type of salary (usually less than 13 minimum salaries per month) are entitled to a bonus every 6 months called prima de servicios. This benefit is equivalent to 15 days of salary payable to the employee on the last day of June and 15 days of salary payable within the first 20 days of December each year. This benefit is due upon termination of employment in proportion to the time worked during the calendar semester in which the termination takes place. Employees receiving more than 13 minimum salaries per month can remain classified as receiving “ordinary salary” instead of an “integrated salary” by agreement with the employer, to continue receiving the prima de servicios.
Termination and severance in Colombia
Probationary periods must be in writing, and employees terminated during or at the end of the probationary period will not be entitled to severance:
- For indefinite-term contracts and fixed-term contracts between 1 and 3 years, the maximum probationary period is 2 months.
- In fixed-term contracts for less than 1 year, the probationary period may not exceed 1/5 of the agreed term, not exceeding 2 months.
When the labor contract is terminated with just cause, the party that terminates is not legally obligated to pay an indemnity for dismissal as long as the facts and reasons that motivated the decision are real and can be further evidenced.
- Termination of employment with just cause must be handled with care and will always require further consideration with labor attorneys, as there is a prior “hearing” process that must be completed internally with the employee prior to termination.
- In any case, the employer must have serious evidence to demonstrate the just cause and documentation necessary to support its fair decision in the event of a judicial claim.
- The employer must prove the reasons for termination in the event the employee informs the judge that the just cause did not exist.
- For every dismissal, there is a high risk of a labor lawsuit, which requires representation and administrative costs on behalf of the employer.
- It is highly recommended to consider the termination of labor contracts by mutual consent of the parties, formalizing it through a settlement agreement or by a termination without cause notice which can be submitted by the employer by paying the severance costs as mentioned below.
An employment contract may be terminated by unilateral decision of any of the parties, whether or not there is just cause. The labor contract may also terminate upon mutual consent of the parties. In the case of termination without cause by the employer under an indefinite contract, the employer is required to make the following payments:
- All accrued and proportional wages.
- Severance for indefinite term contracts:
- Employees receiving a monthly salary that is less than 10 minimum salaries: (a) 30 days of salary for the first year or less, and (b) 20 days for each subsequent year (or proportional).
- Employees with 10 minimum salaries per month or more: (a) 20 days of salary for the first year or less and (b) 15 days of salary for each subsequent year of services (or proportional).
- Unemployment fund pay is compulsory and equivalent to 1 month’s salary for every year of service and proportionally for fractions of a year upon termination of employment, accrued from January 1 through the date of the termination.
- Unemployment fund interest is generated at 1% per month; it is paid upon termination date.
In case of fixed-term contracts, if an early termination before expiration date occurs, employers should pay an amount equal to the salaries from the (early) termination date through the completion of the expiration date or fixed-term agreed in the contract. In case of termination at the expiration date or fixed term agreed in the contract, the employer must give a 30-day prior notice to the employee, informing the employee of the decision not to renew the fixed term of the contract. Otherwise, if the prior notice was not given in a timely manner, the contract will become an indefinite-term contract.
Employers are permitted to terminate its employees without cause, as long as such terminations do not exceed a certain percentage of the headcount within the last 6 months. If such limits are to be exceed, the employer must get prior approval from the Labor Ministry. However, such authorization is difficult to obtain.
Paying taxes in Colombia
- Social security: Employers are obliged to pay social security in Colombia. The social security payments are made up of the following:
- Health: 12.5%, of which 8.5% is paid by the employer, and the remaining 4% is payable by the employee.
- Occupational risk: this contribution is fully borne by the employer and depends on the kind of risk in which the economic activity of the company is classified – ranging between 0.348% and 8.7% of salary.
- Family Welfare Fund: All employers must contribute 9% of the monthly payroll.
- Pension: 16% of the employee’s salary, from which 12% is paid by the employer, and the remaining 4% is payable by the employee.
- Income tax: For residents, income tax rates are progressive, meaning they increase based on income. The tax system is expressed on Tax Value Units (UVT). The maximum tax rate is 33% and is applicable to taxable income in excess of 4,100 UVT. Net income up to 1,090 UVT would be subject to an effective rate of 19%. Net income between 1,091 UVT and 1,700 UVT would be subject to an effective rate of 28%.
It is the responsibility of the employer to deduct and pay employees’ taxes and contributions to the Social Security System.
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