Hiring in Colombia

Colombia's labor framework is governed by the Codigo Sustantivo del Trabajo (Substantive Labor Code), which applies to all workers regardless of nationality. Employment contracts can be fixed-term (up to 3 years, renewable), indefinite, or project-based. Fixed-term contracts under 1 year can only be renewed up to 3 times before they must convert to indefinite. Most EOR hires in Colombia end up on indefinite contracts because the rules around fixed-term renewals add administrative complexity that isn't worth the tradeoff for ongoing roles.

Termination rules depend on whether the employer has just cause (justa causa). With just cause, such as gross misconduct, repeated absences, or poor performance after documented warnings, no severance is owed. Without just cause, the employer must pay severance (indemnizacion) based on the contract type. For indefinite contracts, workers earning under 10 minimum wages get 30 days of salary for the first year plus 20 days for each additional year. Workers earning 10+ minimum wages get 20 days for the first year plus 15 days for each additional year. Fixed-term contracts require payment of remaining salary through the contract end date. There is no statutory notice period for termination in Colombia, which surprises many foreign employers, but severance effectively replaces the notice concept.

Vacation in Colombia is 15 working days per year after 12 months of service. Workers can accumulate up to 2 years of unused vacation, but employers must ensure at least 6 consecutive days are taken each year. Colombia has 18 public holidays per year, one of the highest counts globally. Many of these holidays follow a 'bridge day' system where holidays falling mid-week shift to the following Monday, giving workers long weekends throughout the year.

Payroll contributions in Colombia are substantial and split between employer and employee. For health insurance (EPS), the total rate is 12.5%% with the employer paying 8.5%% and the employee paying 4%%. Pension contributions total 16%%, split as 12%% employer and 4%% employee. The employer also pays ARL (occupational risk insurance) at rates ranging from 0.522%% to 6.960%% depending on the risk classification of the role, with most office workers at the minimum rate. On top of these, employers pay parafiscales: 4%% to a family compensation fund (Caja de Compensacion), 3%% to ICBF (Colombian Family Welfare Institute), and 2%% to SENA (national training service). Companies qualifying for the SIMPLE tax regime or meeting certain thresholds may be exempt from ICBF and SENA contributions.

Colombia has two mandatory bonuses called prima de servicios. Employers pay one half-month's salary by June 30 and another half-month by December 20 each year, effectively adding a full extra month of pay annually. Cesantias (severance savings) are another mandatory benefit equal to one month's salary per year, deposited into a government-approved fund by February 14 each year. Employers also pay 12%% interest on cesantias (intereses sobre cesantias), due by January 31. These three obligations combined add roughly 22%% on top of base salary costs, which catches many foreign companies off guard.

Overtime in Colombia is tightly regulated. The standard workweek is 47 hours (decreasing by 1 hour annually under the 2023 reform, reaching 42 hours by 2026). Daytime overtime (6am-9pm) pays a 25%% premium. Nighttime overtime (9pm-6am) pays a 75%% premium. Sunday and holiday work pays a 75%% premium for occasional work or 110%% for habitual work. Maximum overtime is 2 hours per day and 12 hours per week. These rules apply strictly, and the Ministry of Labor actively enforces them through workplace inspections.