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ToggleAn Employer of Record (EOR) is the legal employer for workers. It handles HR responsibilities like payroll, taxes, and compliance while the company directs the employees’ day-to-day tasks. This setup allows businesses to hire globally without establishing a local entity.
Hiring workers from Colombia offers benefits due to their high level of education, technical skills, and proficiency in Spanish and often English. Colombia is recognized for its strong engineering, IT, and customer service talent.
Employment in Colombia has shown positive trends in recent years. According to the National Administrative Department of Statistics (DANE), the employed population increased from 21.6 million in January 2021 to 22.3 million in January 2022, representing a 3.2% growth. However, Colombia still faces challenges in specific sectors, with skills shortages reported in industries like technology and advanced manufacturing.
To use an EOR in Colombia, there are 6 basic steps to follow to make sure you are set up properly:
- Find talent to hire in Colombia
- Compare using an EOR to setting up a legal entity in Colombia
- Get the information needed from your talent
- Choose an EOR provider with expertise in Colombia
- Communicate your hiring needs to the EOR
- Have the EOR set up the contracts and hiring procedure
An EOR manages payroll, taxes, and benefits administration, ensuring compliance with local laws and regulations, thus simplifying the employment process for companies.
Different labor laws in Colombia, such as those governing work hours, termination processes, and mandatory employee benefits, must be considered when hiring remotely. The hiring process in Colombia involves identifying talent, ensuring compliance with local employment laws, and executing contracts, typically facilitated by an EOR for companies without a local presence.
1. Find talent to hire in Colombia
To find talent to hire in Colombia, businesses should explore a variety of channels, emphasizing both local and global platforms. CompuTrabajo and Elempleo are Colombia’s largest job boards, offering extensive listings across various industries. LinkedIn has a strong presence in Colombia and is crucial for networking and headhunting, particularly for professional and managerial roles.
Specialized recruitment agencies like Michael Page and Adecco have a strong presence in Colombia and can provide tailored solutions for industries requiring specific expertise. For entry-level positions or internships, partnering with career centers at top Colombian universities like Universidad Nacional de Colombia or Universidad de los Andes can be beneficial.
Job posting websites like Indeed and Glassdoor also have a presence in Colombia and can be effective for reaching job seekers. Additionally, considering local professional associations and industry-specific job boards can be advantageous, especially for technology, finance, or engineering roles.
When searching for talent, consider Colombia’s strong sectors, such as IT, business process outsourcing, and creative industries. Many Colombian professionals are bilingual (Spanish and English), which can benefit international businesses.
2. Compare using an EOR to setting up a legal entity in Colombia
When working with employees in Colombia, you should consider using an EOR rather than setting up your own legal entity. An Employer of Record offers a quicker, less complex route to hiring local staff, bypassing the need for a formal company presence. This approach suits companies looking to test the Colombian market or expand quickly without significant upfront investment.
An EOR manages all local employment laws, tax, and compliance issues, assuming responsibility for hired employees. This setup allows companies to start operations in weeks, compared to the months required to establish a legal entity.
On the other hand, setting up a legal entity in Colombia offers greater control and the ability to customize business operations and policies. However, establishing a legal entity involves complex registration processes, significant upfront fees, and a deeper understanding of local laws and tax regulations.
In comparison, using an EOR is generally less expensive. It involves less risk, making it a suitable option for small to medium-sized businesses or those in the initial stages of market exploration. It eliminates the need for a local expert or dedicated legal and tax teams, as the EOR handles these aspects. However, it offers limited flexibility in tailoring employment contracts and benefits to specific company policies.
Comparison of Employer of Record (EOR) vs. Setting Up a Legal Entity in Colombia
Factor | Employer of Record (EOR) | Setting Up Legal Entity in Colombia |
---|---|---|
Setup Time | Weeks | Months |
Initial Cost | Low | High (significant upfront fees) |
Ongoing Cost | Moderate (EOR fees + employee costs) | Variable (operational costs, compliance, etc.) |
Complexity | Low (EOR handles most administrative tasks) | High (complex registration processes) |
Control over Operations | Limited (company directs daily work, EOR handles employment) | Full (complete control over all aspects of business) |
Compliance Management | Handled by EOR (payroll, taxes, social security) | Company Responsibility (requires local expertise) |
Language Barrier | Managed by EOR | Company must handle (documents in Spanish) |
Scalability | Highly Flexible (easy to add or remove employees) | Less Flexible (changes may require legal procedures) |
Local Expertise Required | Minimal (EOR provides guidance) | Extensive (need for local legal and tax advisors) |
Suitable for | Market testing, small-scale operations | Long-term presence, full operations |
Risk | Lower (EOR assumes employer liabilities) | Higher (company bears all legal and financial risks) |
Customization of Employment Terms | Limited (must adhere to EOR’s policies) | Extensive (can create company-specific policies) |
Handling of Labor Law Changes | Managed by EOR | Company must stay updated and compliant |
3. Get the information needed from your talent
To hire employees in Colombia, you’ll need their personal information, employment contract details, and tax identification number, among other things. Remember, it’s important to collect this data before the employee starts working.
Typically, you’ll need the following essential personal information:
- Employee’s full name
- Address
- Date of birth
- Cédula de Ciudadanía (national ID number)
- Tax identification number (NIT)
- Bank account details for salary payments
- Comprehensive job description, including title, duties, and place of work
While not mandatory, written employment contracts detailing the contract type, start date, salary, work hours, and other employment conditions are strongly recommended in Colombia.
4. Choose an EOR provider with expertise in Colombia
When choosing an EOR provider to work with in Colombia, deep expertise in the Colombian market and a strong understanding of local labor laws are crucial to ensuring compliance and smooth business operations. Evaluate the provider’s experience managing employee onboarding, payroll, and legal compliance in Colombia. Look for a provider with a proven track record of working successfully with companies similar to yours, and check their reputation through client case studies or reviews.
Assess the range of services offered to see if they align with your needs, such as visa and work permit support, benefits management, and payroll processing. It is important to choose a provider that offers comprehensive employment services and is flexible enough to adapt to changes in Colombian labor laws.
Consider the provider’s technology and platforms, ensuring they offer secure, user-friendly systems with strong data protection measures. Evaluate their pricing models, looking for transparency in fees, whether they charge a fixed monthly fee or a percentage of the employee’s salary, and assess the cost-effectiveness for your business.
Finally, choose an EOR provider that demonstrates a commitment to staying up-to-date with Colombian employment laws and can provide proper guidance and support to ensure your business remains compliant while operating in Colombia.
What are the best EOR providers to use in Columbia?
EOR Provider | Why It’s a Good Fit for Colombia |
---|---|
Deel | – Extensive global coverage including Colombia – Streamlines hiring, onboarding, and payroll processes – Ensures compliance with Colombia’s regional labor laws and practices |
Remote | – Strong focus on compliance with Colombian employment laws – Offers comprehensive benefits management, crucial for meeting Colombia’s statutory employee benefits requirements – Provides robust data security and IP protection |
Remofirst | – Cost-effective pricing, starting from $199 per employee/month – Provides efficient payroll and tax compliance services tailored to Colombian regulations – Offers 24/7 customer support to address time zone differences and urgent needs |
Multiplier | – Covers 150+ countries, including Colombia – Facilitates quick market entry and scalability in Colombia’s dynamic business landscape – Offers comprehensive benefits management, essential for Colombia’s complex employee benefits system |
Rippling | – Effortlessly hire, manage, and pay employees in Colombia – Simplifies onboarding and compliance with local laws – Provides integrated HR, IT, and finance management in one system |
If you are looking for a more in-depth overview, please read our best employer of record in Colombia guide.
5. Communicate your hiring needs to the EOR
Communicating your hiring needs to the EOR to ensure the process aligns with company goals and legal requirements is essential. Providing a detailed job description, including title, responsibilities, required qualifications, and skills, is key.
Specify the job’s expected start date, location, and whether it’s remote or onsite. Outline the proposed salary, bonuses, commission structures, and other compensation benefits. Clarify the contract length, whether permanent or probationary and detail the working hours, including any flexibility or shift requirements.
Discuss the company culture, growth plans, and how the position fits into future expansion. Specify equipment needs and onboarding procedures. By accurately representing these aspects, the EOR can find the right talent and ensure legal and administrative compliance.
6. Have the EOR set up the contracts and hiring procedure
Once you have chosen which provider to work with and communicated your hiring needs, the EOR will set up the contracts and hiring procedure, ensuring compliance with local labor laws and employment practices.
The EOR drafts employment contracts that adhere to Colombian labor laws, including specific terms regarding job details, working hours, and termination procedures. They’ll manage the necessary documentation for tax, social security, and payroll setup, adhering to mandatory withholdings and reporting requirements. The EOR also registers employment with relevant Colombian authorities to ensure the company is properly licensed and authorized to operate and hire employees in Colombia.
The EOR assists in obtaining work permits and visas for foreign employees, if necessary, collects personal and bank account information for payroll, and outlines the onboarding procedures in accordance with Colombian employment laws. They’ll ensure your company complies with collective bargaining agreements, if applicable, and adjust contracts and practices as laws and agreements change. Additionally, the EOR administers benefits and handles formal onboarding, including the introduction to company systems and culture.
What help does an EOR provide in Colombian payroll, taxes, and benefits administration?
The EOR will support all Colombian payroll, taxes, and benefits administration, ensuring compliance with complex local laws. It calculates and processes employee salaries, withholds the correct tax amounts, and handles social security contributions.
The EOR manages payroll in compliance with Colombian regulations, including calculating and paying mandatory benefits such as the prima de Servicios (a bi-annual bonus equivalent to half a month’s salary). It also handles the withholding and payment of income tax, which in Colombia follows a progressive system with rates ranging from 0% to 39%.
For benefits, the EOR enrolls employees in statutory programs, such as the National Health Insurance System (EPS) and pension system. It manages statutory paid time off, including the minimum 15 days of paid vacation per year, and ensures correct accrual and payout of severance pay (cesantías), which is equivalent to one month’s salary per year of service.
The EOR also manages contributions to the family compensation funds (Cajas de Compensación Familiar), which provide various benefits to employees and their families. They handle any additional benefits you choose to offer, such as private health insurance or life insurance, which are common in Colombia to attract and retain top talent.
What labor laws do you need to consider when hiring in Colombia?
When hiring in Colombia, several key labor laws must be considered, reflecting the country’s protective stance on employee rights. Colombia’s approach to labor laws is generally employee-friendly, offering extensive protections that are considered more stringent than those in many other countries in Latin America.
Law / Regulation | Key Points |
---|---|
Employment Contracts | Written contracts recommended. Can be indefinite term, fixed term (max 3 years), project-based, or temporary. Probation period max 2 months or 1/5 of contract term. |
Working Hours | Standard work week is 48 hours over six days. Flexible arrangements possible. Overtime rates: 125% daytime, 175% nighttime/Sundays/holidays. |
Paid Time Off | 15 consecutive working days of paid vacation per year. 18 public holidays annually. |
Social Security | Employer contributes to health insurance (8.5%), pension (12%), professional risks (ARL), and compensation funds (4%). |
Maternity and Paternity Leave | 18 weeks paid maternity leave. 8 working days paid paternity leave. Special protection against dismissal for new parents. |
Severance Pay | One month’s salary per year of service (Cesantías), paid annually into a fund. 12% annual interest on severance. |
Termination | Just cause required for dismissal. Severance for unjust dismissal varies based on contract type and salary level. |
Additional Benefits | Transportation allowance, service bonus (Prima de Servicios), clothing allowance (Dotación) for eligible employees. |
This protective nature ensures that employees receive significant benefits and safeguards, particularly regarding employment contracts, working hours and paid holidays, taxes, and severance pay.
Employment Contracts
Employment contracts in Colombia are governed by the Substantive Labor Code (Código Sustantivo del Trabajo) and subsequent modifications. Key aspects include:
- Written Form: While verbal contracts are legally valid, written contracts are strongly recommended to establish terms and conditions.
- Language: Contracts should be in Spanish to ensure complete understanding by all parties.
- Types of Contracts:
- Indefinite Term: No specific end date, which is the most common type.
- Fixed Term: Cannot exceed three years but can be renewed indefinitely.
- Project-Based: Lasts for the duration of a specific project.
- Temporary or Occasional: For non-regular activities, cannot exceed one month.
- Probationary Period: Cannot exceed two months for indefinite contracts or one-fifth of the contract term for fixed-term contracts, with a maximum of two months.
- Essential Elements: Contracts must specify job duties, compensation, working hours, place of work, and duration (for fixed-term contracts).
Working Hours and Paid Holidays
- Standard Work Week: 48 hours, typically spread over six days.
- Flexible Working Hours: Recent reforms allow for more flexible arrangements, but the 48-hour limit still applies over any given week.
- Overtime:
- Daytime (6 am to 9 pm): 125% of regular hourly rate
- Nighttime (9 pm to 6 am): 175% of regular hourly rate
- Sundays and Holidays: 175% of the regular hourly rate, plus a compensatory rest day
- Night Work: Defined as work between 9 pm and 6 am, paid at 135% of the daytime rate.
- Paid Holidays: Colombia has 18 public holidays per year. Work on these days is paid at 175% of the regular rate.
- Vacation: 15 consecutive working days of paid vacation per year of service.
Compensation and Benefits
- Minimum Wage: This is set annually and applies to all workers. As of 2024, it’s 1,300,000 Colombian pesos per month.
- Transportation Allowance: Mandatory for employees earning up to twice the minimum wage.
- Severance Pay (Cesantías): One month’s salary per year of service, paid annually into a severance fund.
- Interest on Severance: 12% annual interest on severance, paid directly to the employee.
- Service Bonus (Prima de Servicios): Equivalent to half a month’s salary, paid in June and December.
- Clothing Allowance (Dotación): Provided three times a year to employees earning up to twice the minimum wage.
Social Security and Healthcare
- Health Insurance (EPS): Employer contributes 8.5%, employee 4% of salary.
- Pension: Employer contributes 12%, employee 4% of salary.
- Professional Risks (ARL): Entirely employer-funded, rates vary based on the risk level of the activity.
- Compensation Funds (Cajas de Compensación): Employer contributes 4% of payroll.
Maternity and Paternity Leave
- Maternity Leave: 18 weeks of paid leave, starting 1-2 weeks before the expected delivery date.
- Paternity Leave: 8 working days of paid leave.
- Protection: Pregnant employees and new mothers (up to 3 months after childbirth) have special protection against dismissal.
Termination and Severance
- Just Cause: Employers must have a valid reason for termination, as defined by law.
- Notice Period: It is not legally required for termination with just cause. For fixed-term contracts, 30 days notice is required before the expiration date.
- Severance for Unjust Dismissal:
- For fixed-term contracts: Remaining salary until the end of the contract term.
- For indefinite-term contracts:
- 30 days’ salary for the first year of service, plus 20 days’ salary for each additional year (for employees earning less than 10 minimum wages).
- 20 days’ salary for the first year of service, plus 15 days’ salary for each additional year (for employees earning more than 10 minimum wages).
- Collective Dismissals: Special rules apply for large-scale layoffs, requiring Ministry of Labor authorization.
Understanding and complying with these laws is crucial for any company hiring in Colombia. An EOR can provide invaluable assistance in navigating these complex regulations and ensuring full compliance, helping to mitigate risks associated with employment in Colombia.
How does the hiring process work in Colombia?
The hiring process in Colombia typically involves the following steps:
- Job Posting and Recruitment: Companies advertise positions through various channels, including online job boards, social media, and recruitment agencies.
- Application Review: HR teams or recruiters review applications and resumes to shortlist candidates.
- Initial Screening: Often involves a phone or video interview to assess basic qualifications and cultural fit.
- In-depth Interviews: Qualified candidates are invited for more comprehensive interviews, which may include multiple rounds.
- Skills Assessment: Candidates might be asked to complete tests or practical assignments depending on the role.
- Reference Checks: Employers often contact previous employers or provide references.
- Job Offer: A formal job offer is extended, usually in writing.
- Contract Negotiation: The terms of employment are discussed and finalized.
- Contract Signing: Both parties sign the employment contract.
- Registration and Onboarding: The new employee is registered with the relevant authorities, and the onboarding process begins.
When hiring through an EOR in Colombia, many of these steps are managed or facilitated by the EOR provider, ensuring compliance with local regulations throughout the process.
Is Colombia a relatively easy country to hire employees remotely through an EOR?
Colombia is considered a moderately complex country for hiring employees remotely through an Employer of Record (EOR). While it’s not the most challenging market, several factors contribute to its complexity:
Pros
- Well-developed legal framework for employment
- Large, skilled workforce, especially in technical fields
- Strategic location for businesses targeting Latin American markets
Cons
- Complex labor laws with strong employee protections
- Frequent changes in tax regulations
- Language barriers, as many legal documents must be in Spanish
Colombia’s labor laws are more protective of employees compared to countries like the United States, which can make terminations and contract changes more challenging. The country also has specific requirements for employment contracts, working hours, and benefits that must be carefully navigated.
However, Colombia’s growing economy, improving business environment, and skilled workforce make it an attractive market for remote hiring. Many EOR providers have extensive experience in Colombia, which can help streamline the process for foreign companies.
While Colombia is not the easiest country for remote hiring, with the right EOR partner, companies can successfully navigate the complexities of employing workers there. The key is working with an EOR with deep local expertise and a strong track record of compliance with Colombian labor laws.