How to Hire Remote Employees In 

Colombia

The Basics

Currency
Colombian Peso (COP)
Employer Taxes
25% - 30%
Payroll Frequency
Bi-Weekly/Monthly
Official Language
Spanish

Employment in 

Colombia

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

Colombia

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Colombia can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in Colombia, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Colombia.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in Colombia is not the same as paying workers in your own country. Employees have to be paid using Colombia’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

Colombia

 Specific Information

Working Hours

Full-time employment is considered 48 hours weekly, and 8 hours daily.

Hours worked in a single day cannot exceed 10. 

Overtime

Overtime pay rates are as follows:

  • Daytime Overtime – 125% of the regular pay rate
  • Night Overtime – 175% of the regular pay rate
  • Sunday/Holiday Extra Daytime – 175% of the regular pay for holidays and  125% of the regular pay for work during the daytime
  • Sunday/Holiday Overtime – 175% of the regular pay for holidays and work during the night.

Exemptions on overtime compensation:

  • Employees who earn more than 10 times the minimum wage
  • Employees in trust positions- this title must be mandated in the employment contract, and an employee with this position is entitled to night and Sunday overtime only.

Payroll Tax

Employer

Employer

  • Pension Fund
  • Medical Plan
  • Labor Risks
  • Family Compensation Funds
  • Family Welfare (ICBF)
  • National Apprenticeship Service (SENA)

Note: Only applies to employees earning 10 times the minimum wage

Minimum Wage

The minimum gross monthly wage in Colombia is 908,526 COP. In addition to this, there is a monthly transportation assistance allowance of 106,454 COP. The transportation allowance applies to employees who earn up to two times the minimum wage.

Payroll

Pay Cycle

The payroll cycle is bi-weekly or monthly.

For employees who are paid bi-weekly, wages are paid on the 15th and last working day of the month.

For employees who are paid monthly, wages are paid on the last working day of the month.

13th Salary

Employees are entitled to a 13th salary equivalent to one months’ salary. It is paid in 2 installments (half in June and the other half in December).

Leave

Paid Time Off (PTO)

PTO is calculated by the:

  • Employees are entitled to 15 paid days of annual leave.

Public Holidays

There are 18 public holidays.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

  • The employer is responsible for paying for the first 2 days of sick leave at the rate of two-thirds of the regular salary.
  • From the third day on, sick leave is paid by social security at the same rate.

Maternity Leave

Maternity leave is 18 weeks, paid at a rate of 100% salary. The employer makes the payment to the employee and then claims the money back through social security (EPS). 

Paternity Leave

Paternity leave is 8 working days, paid at a rate of 100% salary. The employer makes the payment to the employee and then claims the money back through EPS. 

Parental Leave

There are no provisions in the law regarding parental leave.

Other Leave

None.

Marriage Leave

5 days of paid leave.

Bereavement Leave

5 days. Leave can be paid or unpaid and depends on company policy.

Termination

Termination Process

The reason for dismissal must be communicated to the employee in writing upon termination.

  • If the termination is initiated by the employer, it is not mandatory for the employer to give a reason for termination unless there is an allegation of an unfair cause.
  • For pregnant or disabled employees- the employer must get special permission to terminate the employee.
  • For unionized employees- the employer must get permission from a labor judge in order to terminate an employee.
  • If the employee terminates the employment contract due to a breach by the employer, they are entitled to severance payment.

Notice Period

The notice period in Colombia is:

  • When the employee is dismissed for poor performance, a maximum of 15 days’ notice must be given.  The employee is entitled to at least 24 hours to review the dismissal notification and respond.
  • In the case of misconduct or dismissal with a just cause, no notice is required.
  • For employees with a fixed-term agreement, written notice is required at least 30 days prior to the agreement’s expiration.

Severance Pay

The Severance Pay in Colombia depends on the Duration of Employment:

When the termination is without cause, employers are obligated to pay severance. For employees with an indefinite term agreement, the severance will be calculated as follows:

  • Employees earning less than 10 minimum legal monthly wages are entitled to 30 days of wages for the first year of service and 20 days of salary for each additional year of service.
  • Employees earning 10 minimum legal wages or more, will be entitled to 20 days of salary for the first year of service and 15 days of salary for each additional year of service.
  • For employees with a fixed-term agreement, the severance would be equal to the salary of the employee until the term of the agreement expires.

Probation Period

Indefinite contracts- The probation period is 2 months.

Fixed-term contracts- The probation period cannot exceed more than 1/5 of the initially agreed employment term.