Hiring Employees in Colombia: A Comprehensive Guide

Colombia is the perfect country providing a perfect blend of exploration and business opportunities. It is the fourth largest economy in South America, with a $940.589 billion GDP (PPP) in 2022. The GDP of Colombia increased by 10.6% in 2021 and is projected to keep growing even further in the next five years.

The country has a predominantly young population, giving a significant boost to the country’s workforce and domestic market. With a literacy rate of 95% and the availability of business centers catering to various sectors, Colombia is the perfect destination for companies to spread their wings. In addition to establishing a company, several factors are associated with hiring employees in Colombia since the country has its own rules and regulations. 

To understand how to hire people in Colombia, refer to this guide discussing essential requirements, hiring costs, and hiring procedures.

Things To Know Before Hiring in Colombia

Like any other country, even Colombia has its own rules, regulations, and norms regarding the hiring process. Therefore, for ease of operations, it is best for any employer to thoroughly understand these essential facts before they start recruitment and selection in Colombia. 

• Local language and culture: Colombia has a diverse population and a vast cultural array with over 100 languages spoken. However, the official language of Colombia is Spanish, with over 99% of the population speaking it. A small proportion of Colombians speak English as well. Still, it would be best for companies that operate in English to hire a translator to avoid any communication gap on a day-to-day basis.  
• Taxes: The Colombian payroll tax structure is designed and differentiated into units and salary ranges. The UVT or Colombian Tax Value Unit is COL$ 38,004. Additionally, the income code has different categories based on units. Below is a summary of the tax categories:

• Social security: Both employees and employers must pay towards the Colombian social security scheme, which is as follows:

• Employment contract: Colombian law does not mandate written employment contracts. However, specific terms and conditions are required to be agreed upon during the hiring process in Colombia, which are as follows:

1. 1. Name of the employee and employer
   2. Start date of the employment
   3. Job title and description
   4. Working hours
   5. Probation period 
   6. Integral salary 
   7. Non-salary payments such as benefits and entitlements

• Working hours: 

1. 1. Typically, Colombia has a 48-hour working week. 
   2. Companies either operate from Monday to Friday for 9.6 hours or Monday to Saturday for 8 hours a day. 

• Overtime: 

1. 1. Overtime is capped at 2 hours per day or 12 hours per week. 
   2. Overtime during the day has a compensation rate of 25%, which needs to be paid in addition to the employee’s salary. 
   3. At night, the concerned employees should get 75% in addition to their hourly rate. Furthermore, the employees whose work hours are between 9:00 pm to 6:00 pm should be paid 35% in addition to their hourly rates. 

• Leave entitlements: There are different forms of leave entitlement in Colombia. The important ones are discussed here:
• Annual leave: Employees get 15 paid leaves every year.
• Sick leave: For the first two days missed due to sickness, employees get 2/3rd of their salaries. Subsequently, for up to 180 days, they get the same amount from the Colombian Social Security System.
• Maternity leave: Paid maternity leave is available for 14 weeks, two weeks before the birth and 12 weeks after. 
• Paternity leave: Fathers benefit from paid paternity leave for eight working days. 
• Annual holidays: In total, Colombia has 18 national public holidays. They are listed below:

• Termination and notice period: 

1. 1. Per Colombian law, both the employee and the employer have the right to terminate their respective work agreement. 
   2. In the case of fixed-term contracts, there should be a 30 days notice period before termination. 
   3. If the termination is based on poor performance, the notice period is 15 days.

• Severance pay: 

1. 1. Employees have the right to severance pay unless there is any valid cause for termination. 
   2. The severance pay is calculated based on the agreement term, years of service, and salary. 

The Cost of Hiring an Employee in Colombia

Recruitment and selection in Colombia come with their expenses, which vary depending upon the company policies. Suppose you are looking to hire the best for your workplace in the country and operate smoothly. In that case, you might want to set aside a dedicated budget for the following factors:

• Establishing your business: First expense that a company has to bear is the company establishing and registering expenses. It includes registration fees, logistics, operational costs, and third-party professional employers (optional).
• Posting job advertisements: To hire staff in Colombia, you might have to post for vacancies online on job boards such as Jobomas, La Red, and Computrabajo or in newspapers. 
• Hiring legal assistance: To navigate Colombian labor laws easily, a  company must hire legal assistance. 
• Running background checks: Conducting a pre-employment background check is essential in hiring staff in Colombia. It ensures companies hire suitable candidates who fulfill the job needs and pose no legal liability to the company.
• Traveling costs: If you are a foreign company planning to hire employees successfully and start operating in Colombia, you will have to set aside money to travel to the location to take interviews. 
• Translator: Most Colombians speak Spanish. Hence, you might have to hire a translator to facilitate communications and business in your office space. 

What Does a Company Need to Hire Employees in Colombia?

Before you start your recruitment and selection in Colombia, there are a few legal steps you will have to follow. Altogether, these steps can take months to execute and complete: 

• Established business structure: Before hiring, you must legally establish a business presence in Colombia. Decide on a suitable business structure that fits into the company’s requirements. That could be a corporation, a shares company, an international branch, etc. Since each type of business structure comes with its own legal requirements, it is essential to execute this step accurately. 
• Valid legal documents: Once your business structure is decided, get all the valid legal documents associated with it. For instance, to establish a branch of your company in Colombia, you must get a resolution from your company’s headquarters authorizing that brand and a certificate of incorporation. You should also have your company’s bylaws and documents about your power of attorney. 
• Chamber of commerce registration: In Colombia, every company must be registered under the Chamber of Commerce to operate legally in the country. 
• Tax ID number: The National Directorate of Taxes and Customs issues a Tax ID Number or NIT, which is also mandatory for operating a company and hiring employees in Colombia.
• Social Security registration: Companies must also have social security registrations with the Health Insurance Entity, Welfare Entity, Pension Fund Entity, and Administrator of Professional Risks. 

Various Options For Hiring Employees in Colombia

Primarily, there are two options through which employers can initiate the hiring process in Colombia, which are as follows: 

• Through a Colombian entity: Companies looking to establish in Colombia permanently can get their recruitment and selection in Colombia done by forming a dedicated HR team. The experienced team will work towards hiring employees in Colombia and pay them through their Colombian payroll provider. 
• Through an employer of record (EOR): An EOR or employer of record takes over hiring employees and all its associated challenges and legalities. Companies can use it to hire employees in Colombia and smoothen the process with as little complexity as possible. 

The Steps to Hiring in Colombia

Once all the above formalities are carried out, you must follow a few basic steps to hiring employees in Colombia. These steps are given below: 

Step 1: Advertise efficiently 

• To maximize your applicant pool, you must ensure that you are advertising the vacancies in your company efficiently. 
• To do so, advertise the jobs in newspapers and job boards and spread the word using connections. Once you hire a few employees, you can incentivize them to hire more potential candidates. 

Step 2: Pick the best applicants 

• Once you have enough applicants, pick the ones who seem to be the best fit for your company and the advertised job profile. 
• This is also the time to conduct background checks. 

Step 3: Conduct interviews

• Make sure to conduct manageable and professional interviews. 
• This would be the perfect time to understand your applicants better and assess their suitability for your company. 

Step 4: Extend job offers 

• After picking your best candidates, extend them a job offer. 

• While written contracts aren’t mandatory in Colombia, having one that includes all terms, conditions, and policies would be best. 

Step 5: Onboard new employees 

• The final step is onboarding all new employees. 
• Additionally, social security registrations should be done in this step. 

Let Multiplier be Your EOR Platform in Colombia

Hiring employees in a foreign country requires compliance the local rules and regulations. This is why many companies nowadays prefer an EOR platform like Multiplier to sort all their hiring and employee needs. With our trained and experienced experts, we can offer the perfect infrastructure to employ the right people in Colombia without starting any subsidiary. Furthermore, our SaaS-based EOR solutions help save money and resources and make it easier for employers to obtain work permits. Hence, to make hiring simple, contact Multiplier.