Hire employees in Colombia using an Employer of Record

One employee in Colombia means registering with DIAN (tax authority), SENA (training institute), ICBF (family welfare), and your local compensation fund. Miss any registration and penalties start at $2,500 USD per violation. Most companies don't find out until they're already non-compliant.

Then there's the 14th salary payment (prima de servicios), mandatory vacation bonuses, and severance calculations that change based on contract type and termination reason. Get the math wrong and you'll owe back payments plus interest when employees inevitably find out their rights.

You've got three ways to hire in Colombia, each with different costs and headaches.

Option 1: Set up your own entity

• Cost: $15,000-40,000 upfront, $8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: DIAN registration, payroll system, multiple government filings, HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines ($10,000+), back taxes, social security penalties
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

The math is straightforward. If you're hiring 1-5 people, entity setup costs more than 4-5 years of EOR fees ($179/month = $2,148/year per employee). An EOR like Hire with Columbus handles employment contracts, payroll taxes, social security contributions, mandatory benefits, and compliance updates so you don't have to track Colombia's frequent labor law changes.

Ready to hire in Colombia without the compliance headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Colombia. Here's how the costs and risks compare.

Setting up your own entity runs €15,000-25,000 upfront plus 4-6 months of paperwork. Hiring contractors seems cheaper until you get hit with misclassification penalties that can reach €50,000 per worker. Using an employer of record costs $179/month per employee and gets you compliant in 3 days.

Let's break down each option so you can pick the right one for your situation.

How can you hire in Colombia?

Set up your own entity

You'll need €15,000-25,000 just to get started, covering incorporation fees, legal costs, and initial compliance setup. Then add 4-6 months for business registration, tax enrollment, and setting up payroll systems.

The ongoing costs hurt more than the setup. You're looking at monthly accounting fees (€800-1,200), annual compliance audits (€3,000-5,000), and dedicated HR staff once you hit 10+ employees. Plus someone needs to stay current on Colombia's labor law changes - and they change frequently.

This makes sense if you're planning 20+ employees long-term or need a permanent legal presence for client contracts. Otherwise, you're burning cash on infrastructure instead of growth.

Hire contractors/freelancers

Contractors look tempting because you can start immediately with zero setup costs. Just draft an agreement and start paying invoices.

But Colombia's labor authorities don't mess around with misclassification. If your "contractor" works set hours, uses your equipment, or takes direction like an employee, you'll face penalties up to €50,000 per worker plus back taxes and social security contributions.

The real test: Can they work for your competitors simultaneously? Do they set their own schedule? Do they use their own tools? If you answered no to any of these, you need an employment contract, not a contractor agreement.

Stick to contractors for genuine project work under 6 months or highly specialized skills where you truly need independence.

Use an employer of record (Recommended)

Hire with Columbus becomes the legal employer in Colombia while you manage the day-to-day work. We handle employment contracts, payroll, tax compliance, benefits, and legal requirements. You focus on managing performance and growing your team.

Cost breakdown: $179/month per employee. For 5 employees, that's $895/month versus €25,000+ to set up your own entity. You're cash-flow positive from month one instead of burning through setup costs.

Timeline: 2-3 days from signed agreement to compliant employment contract. No business registration, no tax setup, no payroll infrastructure needed.

This works perfectly for 1-50 employees, testing new markets, or building multi-country teams without the entity management headache.

Employment contract types in Colombia

Once you've decided how to hire, you need the right contract type. Colombia recognizes four main employment contracts, each with specific rules and restrictions.

Indefinite-term contracts (Permanent)

This is your standard full-time employment contract with no end date. It's what 78% of Colombian employees have and what you'll use for core team members.

Benefits: Maximum job security for employees, easier to build long-term teams, no renewal paperwork. You can terminate with proper notice and severance, but employees get strong protections against unfair dismissal.

Use this for any role you expect to last over a year. Sales managers, developers, customer success - anyone central to your business operations.

Fixed-term contracts

These contracts have a specific end date and can run 1-3 years maximum. You can renew once, but after that, the contract automatically converts to indefinite-term.

The catch: You can't terminate early without paying the remaining salary unless you have just cause (serious misconduct, performance issues with proper documentation). This makes them riskier than they appear.

Use fixed-term contracts for genuine temporary needs - covering maternity leave, seasonal work, or specific project timelines. Don't use them to avoid permanent employee protections; it'll backfire.

Part-time contracts

Part-time employees work less than 48 hours per week (Colombia's full-time standard) but get the same hourly protections as full-time workers. They earn prorated salary, vacation, and benefits.

Popular for customer support roles covering specific time zones or specialized consultants who don't need full-time hours. You'll pay the same hourly rate plus proportional benefits and social security contributions.

Occasional work contracts

These cover work lasting less than one month. Think event support, short-term consulting, or emergency coverage. Limited to 30 days maximum and can't be renewed.

Useful for genuine one-off needs, but don't try to chain these together for ongoing work. Labor authorities will reclassify them as permanent contracts with penalties.

How Hire with Columbus handles contracts

We draft compliant contracts for any employment type you need. Our legal team stays current on Colombia's frequent labor law changes, so your contracts always meet current requirements.

For permanent roles, we include all required clauses around working hours, vacation entitlements, and termination procedures. For fixed-term contracts, we ensure proper justification and end-date clarity to avoid automatic conversion issues.

We also handle compliant contractor agreements if you have genuine freelance needs, plus payment processing in Colombian pesos to keep everyone happy with local banking.

The result: You get the right contract type for each role without legal risk or compliance headaches.

How does payroll and taxation work?

Your €60,000 employee in Colombia actually costs €82,200 per year once you add employer contributions and mandatory benefits. Colombian payroll isn't just about the monthly salary – you're looking at 14 monthly payments plus substantial social security contributions.

Colombian tax brackets

Colombian income tax uses a progressive system with rates that increased in 2025. Your employees will pay these rates:

Employees also pay a 4% surtax on income above €20,518 annually. This gets deducted from their gross salary along with their social security contributions.

Social security breakdown

Colombian social security contributions are split between employer and employee. The employer portion adds serious cost to your budget:

*Professional Risk rate depends on company risk classification

Your total employer social security contributions range from 30.022% to 36.46% of gross salary. Most office-based companies pay around 30.5%.

Payment schedule and mandatory bonuses

Colombian employees expect their salary on the same date each month. Most companies pay on the 30th or last working day. But you're paying for 14 months, not 12.

Mandatory additional payments:

• 13th month bonus (Prima): Half paid in June, half in December
• 14th month bonus (Cesantías): Full month's salary paid in February for the previous year
• Vacation bonus: 15 working days paid at full salary when taken
• Interest on Cesantías: 12% annual interest on the 14th month bonus, paid in January

These aren't optional bonuses. They're legal requirements that add roughly 37% to your base salary cost.

Total employment cost example

What a €60,000 annual salary actually costs you:

Payroll cycle and deadlines

Colombian payroll runs on strict monthly cycles with zero tolerance for late payments or filings:

Monthly deadlines:

• Employee payments: Last working day of the month
• Income tax withholdings: 11th of following month
• Social security contributions: 10th of following month (varies by company tax ID)
• Parafiscal contributions: 10th of following month

Annual deadlines:

• Cesantías deposit: February 14th
• Interest on Cesantías: January 31st
• Annual tax returns: Varies by company size (April-October 2025)

Miss any deadline and penalties start at 5% of the amount due, plus daily interest. The tax authority (DIAN) doesn't send reminders.

Common payroll mistakes

Most companies mess up Colombian payroll in predictable ways:

Wrong vacation calculations: Colombian vacation is 15 working days (not calendar days) per year, paid at full salary plus a vacation bonus. Many companies calculate this wrong and face labor ministry fines.

Missed Cesantías deposits: You must deposit the 14th month bonus into an approved fund by February 14th. Pay it directly to employees and you're violating labor law.

Incorrect social security bases: Contributions calculate on total monthly income including bonuses and commissions, not just base salary. Underpaying triggers audits and penalties.

Late parafiscal payments: SENA, ICBF, and family compensation fund payments often get forgotten since they're employer-only contributions. Late fees compound quickly.

When you run payroll through Hire with Columbus, we handle all calculations, deadlines, and deposits automatically. Your employees get paid correctly and on time, while you avoid the complexity of Colombian tax compliance entirely. At $179/month per employee, it's much cheaper than setting up your own payroll operation and eliminates the risk of costly mistakes.

What benefits and leave are required?

Colombia employees get 15 working days minimum vacation annually, and you must pay it out if they don't use it. But vacation is just the start - you'll also handle sick leave, parental benefits, and 18 public holidays that can trigger double-pay requirements.

Beyond salary, benefits in Colombia add roughly 25-30% to your employment costs through mandatory social security contributions. Here's what you're legally required to provide and what competitive companies offer beyond the minimums.

Annual vacation

Colombian employees earn 15 working days of vacation per year after completing one full year of service. During their first year, vacation accrues proportionally - so someone working six months gets 7.5 days.

Vacation doesn't carry over to the next year. If employees don't use their full allocation, you must pay them the cash equivalent at their current salary rate. This "vacation premium" catches many international companies off guard during year-end calculations.

You can schedule when employees take vacation, but you need their agreement. Most companies block vacation during peak business periods and require advance notice for approval.

Sick leave

Employees can take up to three days of sick leave without a doctor's note - you pay 100% of their salary during this period. From day four onward, they need medical certification and social security (EPS) covers 66.7% of their salary while you pay nothing.

For workplace injuries or occupational illnesses, the ARL (occupational risk insurance) covers 100% of salary from day one. These cases require immediate reporting to your ARL provider and proper documentation.

Sick leave abuse is relatively uncommon in Colombia, but you can require medical certificates from day one if you have legitimate concerns about specific employees.

Parental leave

Maternity leave is 18 weeks at 100% salary, paid by social security (EPS). Mothers can take this leave entirely after birth or split it (taking up to one week before the due date and the remainder after).

Fathers get eight days of paternity leave at 100% pay, also covered by EPS. This applies for biological children, adoptions, and when the father is the primary caregiver.

For adoptions, the adopting parent gets the same 18 weeks if the child is under seven years old. The leave reduces proportionally for older children.

Public holidays in Colombia (2025)

Colombia has 18 public holidays in 2025 - more than most countries. Some fall on specific dates while others move to the nearest Monday to create long weekends.

If employees work on public holidays, you pay double their regular daily wage. Most companies simply give these days off rather than manage the overtime calculations.

Mandatory benefits breakdown

You'll contribute to three social security systems beyond salary:

Health insurance (EPS): 12.5% of salary total - you pay 8.5%, employee pays 4%. This covers medical care, maternity/paternity leave payments, and sick leave after day three.

Pension: 16% of salary total - you pay 12%, employee pays 4%. Workers choose between the public system (Colpensiones) or private pension funds (AFP).

Occupational risk insurance (ARL): 0.52% to 6.96% of salary depending on risk level, paid entirely by you. Office workers typically fall in the lowest category (0.52%).

You'll also pay into SENA (2% for training programs), ICBF (3% for family welfare), and compensation fund (4%) if you have more than one employee.

Thirteenth and fourteenth salary payments

Colombia requires two extra salary payments annually - this isn't optional. The thirteenth salary (Christmas bonus) equals one month's salary, paid in two installments: half in June and half by December 20th.

The fourteenth salary applies only to employees earning less than two minimum wages (about COP $2.6 million monthly in 2025). This equals 15 days of salary, paid by June 30th each year.

These payments are based on time worked, so new employees get proportional amounts. Someone starting in July gets half the thirteenth salary payment in December.

Optional competitive benefits

Beyond legal requirements, competitive Colombian companies offer:

• Private health insurance (medicina prepagada) to supplement EPS coverage
• Life insurance beyond the basic ARL coverage
• Meal vouchers or cafeteria subsidies
• Transportation allowances for commuting
• Flexible work arrangements and remote work options
• Professional development budgets and English classes
• Gym memberships or wellness programs

Tech companies often provide equipment allowances, coworking space memberships, and additional vacation days beyond the 15-day minimum.

Common benefit mistakes and penalties

The biggest mistake is miscalculating social security contributions. Underpayments trigger penalties of 20% plus interest, and the Ministry of Labor can audit payroll records going back three years.

Missing thirteenth or fourteenth salary payments results in fines equal to the unpaid amount plus 100% penalty. Employees can also file labor complaints that typically favor the worker.

Not providing proper vacation time or payment leads to fines starting at 10 minimum wages (about COP $14 million in 2025) per affected employee. The labor ministry takes vacation violations seriously.

Administering these benefits correctly requires local HR expertise (USD $15,000+ annual salary), benefits software ($200+/month), legal review ($5,000/year), and carries risk of calculation errors that can cost thousands in penalties.

Hire with Columbus handles all benefit administration, social security contributions, and compliance requirements for $179/month per employee. We calculate thirteenth/fourteenth salaries automatically, manage vacation accruals, and ensure all contributions are paid correctly and on time.

What are the compliance requirements?

You need written contracts in Colombia. Period. Verbal agreements don't exist legally and will bite you later. Colombian Labor Code says you've got 15 days from the employee's start date to get that contract signed, or you're looking at fines starting at $2,500.

Employment contract requirements

Every employment contract in Colombia needs specific mandatory clauses. Miss even one and the whole thing gets voided. Then you're stuck paying back wages and penalties like the contract never existed.

Your contract must include:

• Employee's full name, nationality, and civil status
• Nature and location of work
• Salary amount and payment frequency
• Working hours and schedule
• Contract duration (if fixed-term)
• Probation period terms

The contract has to be in Spanish. If your employee doesn't speak Spanish fluently, you'll need a translated version for them. But the Spanish contract is what counts legally.

You don't register contracts with the government, but you need to keep signed copies for 20 years. Labor inspectors can ask for these during audits. Missing contracts cost you $5,000 per employee.

Probation periods

Colombia allows probation periods up to two months for most jobs. For management roles or positions requiring specialized skills, you can stretch this to five months. But you need explicit justification in the contract.

During probation, either party can end the employment without cause or notice. Once probation ends, full employment protections kick in immediately.

You can't extend or renew probation periods. Once that initial period expires, the employee gets full job security rights under Colombian law.

Working time regulations

Standard working hours are 48 hours per week, usually spread across six days. Maximum daily limit is eight hours for regular shifts.

Overtime rules are strict:

• Daytime overtime (6 AM - 10 PM): 125% of regular hourly rate
• Nighttime overtime (10 PM - 6 AM): 175% of regular hourly rate
• Sunday and holiday work: 175% of regular hourly rate

You must track all working hours and keep records for five years. Mess this up and you'll pay $3,000 per employee in fines. Plus, Colombian courts will assume overtime claims are valid if you don't have proper records.

Employees get a 30-minute unpaid lunch break for shifts over six hours. This break time doesn't count toward the 48-hour weekly limit.

Notice periods

Notice requirements depend on how long the employee worked and who's ending the relationship:

You can pay salary instead of notice, but the employee has to agree in writing. Without this agreement, you're required to provide working notice.

Termination process

Firing employees in Colombia requires just cause or proper notice plus severance. You can't fire someone for poor performance without following a formal improvement process first.

Valid termination causes include:

• Serious misconduct or criminal behavior
• Repeated violations of company policies
• Inability to perform essential job functions
• Economic necessity (with government approval)

For economic dismissals affecting 10 or more employees, you need Ministry of Labor approval. This process takes 60-90 days and requires proving financial necessity.

Wrongful termination claims are common and expensive. Colombian courts favor employees, and reinstatement orders are possible for discriminatory dismissals.

Severance pay requirements

Colombia requires severance payments for most terminations. The amount depends on the employee's tenure and salary:

Severance calculations use the employee's average monthly salary over the last year, including bonuses and commissions. You have 60 days to pay severance after termination.

Additional payments due at termination include:

• Unused vacation days (pro-rated)
• 13th month bonus (pro-rated)
• Outstanding overtime or commissions

Data protection requirements

Colombia follows strict data protection rules similar to GDPR. Employee data mishandling can result in fines up to $500,000 or suspension of data processing activities.

You must:

• Get written consent before collecting employee data
• Limit data collection to job-related purposes only
• Secure employee data with appropriate technical measures
• Let employees access and correct their personal data
• Delete employee data within two years of employment ending

Cross-border data transfers need additional safeguards. If you're storing employee data outside Colombia, you need explicit consent and adequate protection measures.

The Colombian Data Protection Authority conducts regular audits. Companies without proper data handling procedures face immediate fines and potential criminal liability for executives.

Common compliance mistakes

Invalid employment contracts are the most expensive mistake. Colombian courts will void contracts missing mandatory clauses. Then you're liable for all employment benefits as if no contract existed.

Wrong termination processes cost even more. Fire someone without proper cause or notice and you could face:

• Full reinstatement with back pay
• Double severance payments
• Legal fees (often $15,000-$30,000)
• Discrimination claims if protected characteristics are involved

Missing mandatory contract clauses creates automatic liability. If your contract doesn't specify working hours, Colombian law assumes the employee worked maximum hours for severance calculations.

Improper probation periods void the entire arrangement. Extend probation beyond legal limits and the employee had full job protection from day one.

Penalties for violations

Common compliance failures in Colombia carry specific penalties:

• Invalid employment contract: $2,500 fine + contract void + back payments owed
• Wrong termination process: $5,000-$15,000 severance + legal fees + potential reinstatement order
• Missing mandatory clauses: Contract deemed invalid, full benefits owed retroactively
• Improper dismissal: $10,000-$50,000 in compensation + reinstatement + legal costs
• Data protection violations: Up to $500,000 fine + criminal liability for executives
• Working time violations: $3,000 per employee + overtime back payments

Labor inspections are increasing in Colombia. The government collected over $45 million in employment law fines in 2025. Most penalties targeted foreign companies unfamiliar with local requirements.

Hire with Columbus ensures every contract and termination follows Colombian law exactly. Our legal team handles all compliance requirements, from contract drafting to termination procedures. This eliminates your risk of costly violations. At $179/month per employee, it's much cheaper than facing even one wrongful termination claim.

What has changed recently?

Colombia's been busy updating its employment laws this year, and some of these changes will definitely affect your hiring plans. The most impactful shift is the new digital nomad visa that launched in March 2025, which creates a whole new category of workers you need to understand.

Digital nomad visa creates new employment category

Colombia introduced the "Visa V Digital Nomad" in March 2025, valid for up to two years. Here's what's tricky: digital nomads can work for foreign companies while living in Colombia, but if they stay longer than 183 days in a calendar year, they become Colombian tax residents.

This means you could hire someone as a contractor who then becomes subject to Colombian income tax on their worldwide income. The tax authorities are being pretty aggressive about tracking this - they're cross-referencing visa records with bank transactions.

If you're hiring remote workers in Colombia, you need to know their visa status upfront. Digital nomads working for you might need to transition to proper employment contracts if they're staying long-term.

Minimum wage increased to $1,600,000 COP monthly

Colombia's 2025 minimum wage jumped to $1,600,000 COP per month (about $380 USD), up 9.5% from 2024. This affects more than just entry-level positions - many benefit calculations and overtime thresholds are tied to minimum wage multiples.

The transportation allowance also increased to $162,000 COP monthly for employees earning up to twice the minimum wage. If you're hiring in Bogotá or Medellín, factor this into your total compensation costs.

Parental leave got more generous

Starting January 2025, Colombia extended paternity leave from 2 weeks to 4 weeks for all employees. Adoptive parents now get the same leave entitlements as biological parents, which wasn't always the case before.

The bigger change is for premature births - parents now get additional leave equal to the time their baby spends in NICU care, up to an extra 8 weeks. This creates some payroll complexity since you'll need medical documentation to calculate the exact entitlement.

Remote work rules got stricter

Colombia updated its remote work law (Law 2088) in February 2025 with more specific requirements. Companies must now provide a monthly technology allowance of at least 15% of the employee's salary for home office expenses.

You're also required to conduct virtual workplace safety inspections within 60 days of hiring remote employees. The Ministry of Labor is actually following up on this - they've issued fines starting at $2,500,000 COP for non-compliance.

Data protection penalties went way up

Colombia's data protection authority (SIC) cranked up penalties big time in 2025. Maximum fines are now up to $47 billion COP (about $11 million USD) for serious violations. They're particularly focused on employee data handling and cross-border transfers.

If you're processing Colombian employee data outside the country - which most international companies do - you need updated data transfer agreements that comply with the new 2025 requirements.

Tax changes hit employer contributions

The 2025 tax reform adjusted several employer contribution rates. The most notable change is the SENA contribution, which increased from 2% to 2.5% of payroll for companies with more than 50 employees.

There's also a new "digital economy tax" of 0.5% on payroll for companies that derive more than 30% of their revenue from digital services. This catches a lot of international tech companies off guard.

Termination process got faster but pricier

Colombia streamlined its termination process in 2025, but made it more employee-friendly. You now have 15 days (instead of 30) to provide written termination notice, but employees get an additional 2 weeks of severance pay as compensation for the shorter notice period.

The labor ministry also created an online termination registry that employers must complete within 5 business days of any termination. Missing this deadline triggers automatic labor inspections.

Union rules moved faster too

Companies with more than 25 employees in Colombia must now respond to unionization requests within 30 days, down from 60 days previously. The process is faster, but the penalties for interference increased substantially.

Even if you're hiring through an EOR, you need to understand these dynamics since union activity can affect your workforce planning and costs.