Colombia is one of the most attractive economies in Latin America for foreign investment, but its payroll laws are complex. So here are some hints and tips to help get you started:
Payroll governance
Businesses in Colombia are governed by the Labour Code, which oversees the relationship between employers and their employees and tends to be updated by incoming governments once every four years. It controls all of the procedures that surround employment contracts, working conditions, salaries, social security contributions, holidays and overtime payment.
Also bear in mind that employment contracts must be written by an attorney and spell out an employee’s terms of employment.
Setting up payroll
Once a company is incorporated in Colombia, it receives a tax identification number, which it uses to enrol with social security organisations such as health insurance, pension, unemployment, welfare and labour risk funds. This process can take up to a month, but organisations are unable to hire employees, or set up payroll, until it is complete.
The payroll process is a very complex one, which means it is important to have a local person on the ground to help you get it right. It is necessary to follow both the Labour Code and appropriate statutory laws to do so.
Paying employees
The 2018 minimum wage is 781,242 pesos (US$265) per month. Companies and some employees, such as managers or directors, can agree to an integral pay of at least 13 minimum wage salaries.
Employees are paid once or twice a month. Payslips can either be accessed by a digital employee self-service system, or can be sent straight to each worker’s email box in order to keep the information confidential.
Here are the rules regarding employee overtime:
- Night work is paid at a rate of at least 35% more than normal wage levels;
- Overtime payments during daytime working hours are at least 25% above normal salary levels, while overtime at night is paid at least 75% above the norm;
- Overtime hours cannot exceed two hours per day or 12 hours per week;
- If employees work on a Sunday or during a public holiday, they are entitled to extra pay of 75% above their normal rates of compensation.
Statutory bonuses
Employees who earn a regular salary are also entitled to receive a 13th payment, which is paid twice a year: 50% in June, and the other half in December.
Unemployment allowance
Workers who earn regular salaries are entitled to receive an allowance if they become unemployed. Their employer deposits this allowance annually (no later than 14 February) into an unemployment fund of the employee’s choice.
Holiday and sick leave
Staff members are entitled to take 15 business days of holiday leave each year. But it is up to each employer to set up an additional policy if they wish to give their workers more time off.
Employees are also entitled to claim 18 weeks of paid maternity leave, eight days of paid paternity leave and five days of paid bereavement leave.
In terms of sick leave, companies are obliged to report the length of time workers are absent to the social security authorities, but they are not required to pay their employees’ labour risk contributions during this time.
Termination of employment contracts
Employees who are dismissed without lawful cause are entitled to a severance payment, the amount of which varies depending on their salary and length of service. Staff members earning a salary that is less than 10 legal monthly minimum wages are entitled to:
- Thirty days-worth of salary, if they have provided less than a year’s service;
- A severance payment of 30 days’ salary for the first year and 20 days’ salary for each consequent year, if they have worked for their employer for more than one year.
Workers who earn salaries that are equal to, or higher than, 10 legal monthly minimum wages are entitled to:
- Twenty days-worth of salary, if they have provided less than a year’s service;
- A severance payment of 20 days’ salary for the first year of employment and 15 days for consequent years, if they have given their employer more than a year of continuous service.
Mauricio Bermudez, HR planning manager at TMF Colombia, has more than 20 years’ experience in finance, payroll and corporate services, having worked for national and multinational companies such as Ernst & Young, Coopers & Lybrand and Grupo Devinil Ltda. He has a degree in Industrial Engineering and specialised in labour law, social security, private financing and marketing.
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Colombia is one of the most attractive economies in Latin America for foreign investment, but its payroll laws are complex. So here are some hints and tips to help get you started:
Payroll governance
Businesses in Colombia are governed by the Labour Code, which oversees the relationship between employers and their employees and tends to be updated by incoming governments once every four years. It controls all of the procedures that surround employment contracts, working conditions, salaries, social security contributions, holidays and overtime payment.
Also bear in mind that employment contracts must be written by an attorney and spell out an employee’s terms of employment.
Setting up payroll
Once a company is incorporated in Colombia, it receives a tax identification number, which it uses to enrol with social security organisations such as health insurance, pension, unemployment, welfare and labour risk funds. This process can take up to a month, but organisations are unable to hire employees, or set up payroll, until it is complete.
The payroll process is a very complex one, which means it is important to have a local person on the ground to help you get it right. It is necessary to follow both the Labour Code and appropriate statutory laws to do so.
Paying employees
The 2018 minimum wage is 781,242 pesos (US$265) per month. Companies and some employees, such as managers or directors, can agree to an integral pay of at least 13 minimum wage salaries.
Employees are paid once or twice a month. Payslips can either be accessed by a digital employee self-service system, or can be sent straight to each worker’s email box in order to keep the information confidential.
Here are the rules regarding employee overtime:
- Night work is paid at a rate of at least 35% more than normal wage levels;
- Overtime payments during daytime working hours are at least 25% above normal salary levels, while overtime at night is paid at least 75% above the norm;
- Overtime hours cannot exceed two hours per day or 12 hours per week;
- If employees work on a Sunday or during a public holiday, they are entitled to extra pay of 75% above their normal rates of compensation.
Statutory bonuses
Employees who earn a regular salary are also entitled to receive a 13th payment, which is paid twice a year: 50% in June, and the other half in December.
Unemployment allowance
Workers who earn regular salaries are entitled to receive an allowance if they become unemployed. Their employer deposits this allowance annually (no later than 14 February) into an unemployment fund of the employee’s choice.
Holiday and sick leave
Staff members are entitled to take 15 business days of holiday leave each year. But it is up to each employer to set up an additional policy if they wish to give their workers more time off.
Employees are also entitled to claim 18 weeks of paid maternity leave, eight days of paid paternity leave and five days of paid bereavement leave.
In terms of sick leave, companies are obliged to report the length of time workers are absent to the social security authorities, but they are not required to pay their employees’ labour risk contributions during this time.
Termination of employment contracts
Employees who are dismissed without lawful cause are entitled to a severance payment, the amount of which varies depending on their salary and length of service. Staff members earning a salary that is less than 10 legal monthly minimum wages are entitled to:
- Thirty days-worth of salary, if they have provided less than a year’s service;
- A severance payment of 30 days’ salary for the first year and 20 days’ salary for each consequent year, if they have worked for their employer for more than one year.
Workers who earn salaries that are equal to, or higher than, 10 legal monthly minimum wages are entitled to:
- Twenty days-worth of salary, if they have provided less than a year’s service;
- A severance payment of 20 days’ salary for the first year of employment and 15 days for consequent years, if they have given their employer more than a year of continuous service.
Mauricio Bermudez, HR planning manager at TMF Colombia, has more than 20 years’ experience in finance, payroll and corporate services, having worked for national and multinational companies such as Ernst & Young, Coopers & Lybrand and Grupo Devinil Ltda. He has a degree in Industrial Engineering and specialised in labour law, social security, private financing and marketing.
OTHER ARTICLES THAT MAY INTEREST YOU
A brief guide to Colombia's labour laws
Minding your manners in Latin America
Latin America moves towards digitising payroll
