An Investor’s Guide to Colombian Labor Laws
If you’re thinking about starting a business in Colombia, it’s essential to familiarize yourself with local labor laws. Following these regulations will ensure amenable working environments for your employees and keep your operation compliant.
Any investor in Colombia must be aware of the following key labor considerations.
Different types of contracts
There are five common types of contracts in Colombia:
- Indefinite: These contracts have no specified time limit and must be dissolved mutually or when either party breaks a stipulation for which termination is mandated or permitted. In the indefinite model, trial contracts cannot last for more than two months and the trial period must be stipulated in the contract.
- Fixed: Fixed contracts can have an end date of up to three years in the future. Contracts can be renewed, and those shorter than one year can only be renewed once for the same period as the initial contract. After the first renewal for less than one year, the contract has to be renewed for at least one year. In the fixed model, trial contracts cannot be made for more than two months or, in the case of a contract for less than one year, for more than one-fifth of the contract period. That is, if your company were to offer a five-month fixed contract to a new employee, the trial period could only be one month.
- Task-based: These contracts are valid for the time in which work will be performed on a certain project. The contract should clearly state the scope and time limit. A trial period on this type of contract must not exceed two months.
- Occasional, accidental, and transitory: These contracts are for the provision of work in a specialty area outside the operation’s traditional activities. This type of contract is generally used for short-term commitments.
- Service agreements: In this model, known as “prestaciones” contracts in Colombian Spanish, the business forms an agreement with an independent contractor. “Prestaciones” are often used for work that a contractor will perform on their own time, without needing administrative supervision from the company. Independent contractors do not have access to traditional employee benefits, like vacation time.
Hiring foreign workers
Your operation can hire foreign workers, so long as they are held to the applicable Colombian labor laws. Upholding the law implies securing a work visa for the employee if they do not already have one and ensuring that other immigration mandates, like reporting an employment contract to Migración Colombia through the SIRE platform, are met.
Workplace composition regulations
While your operation is welcome to hire foreign workers, Colombian law stipulates that, in companies with over 10 employees, foreign workers can only occupy 10% of general roles and 20% of specialized ones.
Minimum wage
The minimum wage (a monthly value known as the S.M.L.M.V in Colombia) is modified each year, and employers must pay workers at or above this amount. Benefits provided in addition to a person’s salary, like a grocery stipend, cannot be taken toward the minimum wage owed for work performed.
Companies are required to provide minimum wage workers (and anyone earning up to two times minimum wage) with clothing and shoes that allow them to perform their role safely and correctly, as well as transportation benefits.
Social security
Employers are required to make social security (pension, workplace risk, and healthcare) contributions on behalf of Colombian workers. Contributions are relative to each employee’s salary and must not exceed 25 times the S.M.L.M.V (minimum monthly wage). Contributions are based on the employee’s monthly salary and capped at 25 times the S.M.L.M.V. Employers must also pay unemployment benefits.
These social security regulations do not apply to foreign workers unless the company wishes to provide this benefit to a foreign worker not enrolled in social security benefits in another country.
Working hours
Colombia is in the process of shortening the work week. The gradual plan to reduce the 48-hour work week hit a maximum of 46 hours in July 2024 and will move to 44 hours in July 2025 and 42 hours in July 2026.
These hours can take place Monday through Friday or Monday through Saturday, and the distribution of daily hours may vary, ranging from 4 to 9 hours per day, though 8 hours is the maximum work period before entering overtime. Sundays are considered a “day of rest,” but employers and their employees can reach a mutual agreement on assigning an alternative rest day.
Overtime
Employees earn overtime at a rate of 25% above their salary during the day and 75% at night. Overtime laws do not apply to all employees, like those in management positions.
Vacation time
All employees are entitled to days off for national holidays. Employers must also provide employees with elective vacation time of up to 15 business days each year, and employees must take 6 of these days. Employees are eligible for vacation benefits only after completing their first year at a company.
Maternity, paternity, and bereavement leave
Colombian maternity leave is 18 weeks and can be distributed between the prepartum and postpartum periods. Paternity leave is 2 weeks.
Bereavement leave is offered to employees for 5 business days in the case of the death of a parent, grandparent, child, partner, in-law, or sibling.
Colombian law also stipulates other types of leave, on which employers should keep themselves up to date. These include voting leave, military service leave, and trade union leave.
Stay compliant with expert advising
Looking to invest in Colombia’s lucrative and growing real estate, tech, and energy industries?
Get expert advising and stay compliant with labor laws, tax obligations, and other local legal nuances, like anti-money laundering due diligence. The team at LaGrande Global can help you securely enter the Colombian market and maximize your investment.