How to use an Employer of Record in Colombia

If you’re looking to expand operations in Latin America, Colombia could be a solid option. South America’s second-most populous nation has come a long way from being the continent’s narco hub. The city of Medellín is easily one of the fastest-growing tech hubs in Latin America, where technology giants like Oracle, SAP, Amazon, and IBM are putting down roots.

But hiring new team members in Colombia is not as simple as posting a job ad and sifting through applicants. You might need to create a local entity in the country, get employment permits, and stay on top of labor laws before you’re cleared to hire Colombian talent.

And that’s where an employer of record comes in: an EOR does the legal legwork and provides all the infrastructure you need to hire employees in Colombia. An EOR typically takes on the hassle of hiring and managing employees — from onboarding and payroll to benefits, intellectual property protections, and local compliance.

In this article, we explain how you can use an EOR to hire employees in Colombia, the costs and benefits of using an EOR, and how to choose an EOR that’s right for your needs.

Six steps to hiring employees in Colombia using an employer of record

An EOR employs employees on your behalf and provides the infrastructure you need to pay salaries, provide benefits, track time off, and withhold taxes, etc. Since the EOR stays compliant with local Colombian laws, you have nothing to worry about — if you chose an employer of record that actually does all that.

So, how do you choose the EOR that has the systems in place to keep you compliant with Colombia’s labor laws? Follow these six steps to find the right EOR for you.

Step 1: Weigh up the pros and cons of each potential partner

Create a checklist of functions to hire employees in Colombia and outside your home country. This includes:

• A partner that owns its own entity in Colombia

• A simple payroll system for paying employees and contractors (in the local currency, if possible)

• Vacation and holiday tracking

• Benefits, like healthcare, dental, vision, and 401K retirement accounts

• Fast onboarding

• A digital interface that removes the need for paperwork

• Rights to the intellectual property produced by your foreign employees

• Data protection

• Access to legal support to help you understand Colombia’s local laws

Use this list to grade each provider to determine the best option(s) for you.

Step 2: Take the time to select the most appropriate EOR service provider (making sure your partner owns its local entity in Colombia)

EOR services often use other EORs to offer their services. So, what happens if the third party gets into legal trouble, jacks up prices, or gets hacked? Since you’re not directly dealing with these providers, you can’t control their pricing or vet their security measures directly. This is why it’s better to make sure your partner owns its local entity in Columbia rather than depend on third-party providers. That’s the only way to stay safe and guarantee reasonable long-term prices.

Step 3: Check the reviews, testimonials, and coverage of your shortlist of providers

What are existing customers saying about the EORs you’ve shortlisted? Be sure to check online testimonials, review third-party reviews, and browse the company website and press coverage, to learn more about the services offered by the EOR. Reading testimonials and reviews will help you gauge how well (or not) the employer of record treats its past and existing customers. 

Step 4: Ensure that the EOR solution for Colombia will provide a best-in-class employee experience

Do they pay salaries on time? Can you take their payroll function for a test run? How quickly do they onboard employees? Can they address employees’ concerns quickly? Make sure the EOR provider you choose has a track record of providing reliable, employee-friendly services. At the end of the day, the EOR is the face of your brand and should provide a positive experience for your employees.

Step 5: Work with your partner to make sure you always provide a fair and equitable compensation package 

Salaries for remote employees can be hard to figure out. You have to factor in the employee’s local cost of living, skill, experience, and market rates for whatever role you’re hiring for.  An employer of record can help you determine what’s a competitive salary for any role you’re hiring for so that you can save money and still pay employees well.

Additionally, to attract the best candidates, make sure you work with your EOR to offer locally compliant benefits to all global employees, factoring in the specific labor laws of the location, as well as the individual’s experience, role, and level

Step 6: Make sure your partner will guard your intellectual property and maintain data security for your business

Employment contracts for all your employees should transfer any intellectual property produced by your employees to your company, through the EOR. An ideal EOR should also have provisions in place to protect your data, backed with certifications like GDPR and SOC 2 compliance.

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What are the benefits of using an employer of record in Colombia?

An employer of record can help you meet all the legal requirements you need to hire Colombian employees. What’s more, an EOR provides the infrastructure you need to onboard, pay, and roll out benefits to your employees across the world.

As a result, you can focus on finding and hiring the right candidates with minimum stress. An employer of record can help you:

• Hire and onboard employees quickly

• Roll out a range of locally relevant benefits like health care, insurance, and pensions quickly

• Stay compliant with Colombian labor laws

• Handle the legal paperwork involved in hiring and paying workers abroad

• Avoid the legal trouble of misclassifying employees as contractors

• Pay employees and contractors on time, and in their local currency

• Protect your intellectual property and sensitive data

For more information about EOR services, read our article on when to use an EOR and how to select the right EOR for you.

How much does it cost to use an EOR in Colombia?

EOR costs vary on the kind of services provided, the number of workers you want to hire, and their location. Legacy operators can charge as much as $2,000 per employee per month, whereas smaller companies charge from $599 onwards. While smaller EORs charge less, they may not own their own local entities or have strong security or compliance solutions in place.

In contrast, Remote offers everything you need to hire in Colombia and across the world. For an affordable, flat fee you get the whole deal — fully compliant local entities, payroll, benefits, IP and data protection, and a team of global employment experts to guide you through the process of international hiring.

Learn how Remote compares to other EOR providers on pricing and services, and how you can get the best value for money.

Hiring in Colombia

Colombia’s Labor Code of 1950 is the primary employment law that sets out provisions for employment contracts, working conditions, anti-discrimination policies, salaries, benefits, trade union membership, etc.

Employment contracts and agreements in Colombia

Verbal and written contracts are equally valid under Colombian law and should specify terms of employment, such as:

• probationary period

• effective salary

• causes for fair termination

Labor compliance in Colombia

Colombian law protects employees from discrimination or harassment based on sex, race, national identity, language, religion, or ideology. Employees who serve as witnesses in a harassment case cannot be dismissed without just cause in the six months following a formal complaint.

While non-compete clauses can prevent employees from soliciting fellow employees or an employer’s customers, any agreement that limits an employee’s right and access to work is void by default, even if the employee agrees to a contract.

Employees are entitled to safe, dignified working conditions, and working hours are limited to eight hours daily and 48 hours per week. If employees are required to put in overtime work, they must be paid a 75% premium in addition to their normal pay.

Payroll and payroll taxes in Colombia

Personal income and payroll taxes are capped at 16.7% and 39% respectively. Employer payroll taxes cover:

• Pensions (12%)

• Healthcare (8.5%)

• General Labor Risk Pool (0.348 – 8.7%)

• Family Allowance Fund (4%)

• Colombian Institute for Family Welfare (3%)

• National Learning Service (2%)

This amounts to a total of 29.848 – 36.2%. Our guide to employing in Colombia explains Colombian income and payroll taxes in detail.

Employment benefits and compensation in Colombia

Colombian workers are entitled to social security, healthcare, annual vacation, parental leave, etc.

Maternity and paternity leave

Expectant mothers are entitled to 18 weeks of fully paid (100% of the normal salary) maternity leave, starting a week before delivery. Employers are required to pay maternity benefits and file for reimbursements from the government.

Fathers are entitled to eight days of fully paid paternity leave.

Vacations and public holidays

Employees are entitled to 15 consecutive working days of paid leave, as well as 18 paid public holidays. Fun fact: Colombia has the second-most public holidays, behind India (21 days).

Healthcare and sick leave

Colombian employees are covered by universal healthcare, funded by contributions by both employers (8.5%) and employees (4%).

Other benefits that Remote can help you roll out

Here at Remote, we believe that companies should be able to hire anyone anywhere across the world. Remote can help you put together country-specific benefits that can help you attract the best candidates.

Remote offers a comprehensive global benefits package that is tailored to employees regardless of where they are based. Remote will help you offer benefits like:

• Health insurance

• Dental and vision insurance

• 401k retirement accounts

• Life insurance

Learn more about how Remote can offer customized global benefits for your distributed workforce in Columbia and across the world.

Severance pay and employee terminations in Columbia

Colombian employees are entitled to severance payments if they’re dismissed without just cause. Employees earning ten times the monthly minimum wage (i.e., $2,400) are entitled to 30 days' pay for the first month of employment and 20 days for the following years.

Workers earning more than ten times the monthly minimum wage are entitled to 20 days’ pay for their first year of employment, and 15 days’ pay for the following years.

What are the risks of employee misclassification in Colombia?

When you’re hiring abroad, you’ll have to make sure that you’re assigning the right employment status to your worker, or you run the risk of misclassification. 

Most countries, including Colombia, make the distinction between employees and contractors. Generally, employees work for one employer for regular payments, and their performance, office location, and schedule are decided by the employer. Contractors are self-employed and can choose their own working hours and location. They don’t have to be committed to one employer and can have many clients who pay them at intervals or at the end of a project as mutually agreed.

Misclassifying employees in Colombia can attract hefty fines and penalties if the authorities determine you’re trying to get out of paying benefits. It’s important to examine your relationship with your contractors to ensure they’re not stepping into employee territory.

Working with an employer of record like Remote in Columbia is the best way to mitigate misclassification risks. Remote’s employment experts have a strong understanding of local labor laws and can help you classify your workers correctly and remain compliant with Columbia’s regulations.

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Get started with an employer of record for Colombia

If you’re looking to expand business operations in Latin America but find international hiring challenging, an employer of record is your best bet.

Using an EOR is the easiest and quickest way to streamline your global expansion process. Remote’s global HR platform gives the infrastructure needed to hire international employees in days, for a fraction of what it would cost if you had to do it all yourself. Remote offers everything you need to hire employees in Colombia, including:

• The ability to view and manage your global workers within a single platform

• A fast onboarding process and assistance with termination procedures

• Benefits and compensation management 

• A team of legal experts with experience in Columbian law

• Global payroll processing for employees and contractors

• Intellectual property and data security protections.

Our team of global hiring experts can help you figure out how to navigate benefits and admin as you grow your team with remote employees. Learn more about how to take your business to the next level with Remote. If you’re ready to onboard employees in Colombia, get started with our employer of record services in Colombia right away! 

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