Colombia

Colombia is a democracy and the fourth largest economy in South America. The country’s GDP is expected to hit 350 USD Billion in 2022. This is tied to its continued reform, investments, and main exports of oil, coal, coffee, and emeralds.

Major Economic Hubs:

Bogotáa, Medellin, Cali, Barranquilla, And Cartagena

Skills in Demand:

ICT Roles, Warehouse Occupations, Customer Service Roles, Technical Support Occupations, Education/Teaching Occupations, Business Advisors, And Digital Services

Colombia offers many advantages to companies looking to hire new employees. The country has a large pool of highly-skilled workers, and the cost of living is relatively low.

However, there are a few things to keep in mind when hiring in Colombia. In this section we’ll provide you with the basics of what to prepare when onboarding talents in Colombia.

Employee Contract

Both verbal and written contracts are accepted in Colombia. There is no requirement that the contract should be written in a specific language, and employers can choose between Spanish or English.

General Components of Salary Package in Colombia 

Salaries are one way companies recognize and reward their employees for working hard. Salaries may include both monetary benefits like pay rates, bonuses or profit sharing agreements as well as non-monetary rewards such as health care plans with no deductibles that come straight out of your paycheck every month.

In Columbia, the following items are included in their employees’ remuneration package:

Resident Tax Information

Any person who spends more than 180 days in Colombia during a year will be considered a fiscal resident of the country. The following are some of the criteria that will make an individual a fiscal resident in Colombia:

Spouses or dependents of the individual stayed in the country for 183 days  

(continuously or not) within a period of 365 consecutive days.

50% or more of one's income is sourced directly or indirectly from Colombia.

50% or more of one's property/assets are managed in Colombia.

50% or more of one's assets are 'physically' located in Colombia.

The tax authority (DIAN) requests proof of fiscal residency in another country and  says the proof is not provided to the DIAN.

The person has a fiscal residence in a place considered a tax haven by the  Colombian government.

Fiscal resident will be entitled to observe the income tax levy below -

Social Security

olombia’s social security scheme covers a lot of benefits for its employees”

1. Old age pension
2. Worker’s Medical benefit
3. Funeral grant
4. Family allowance benefit
5. Disability pension and settlement
6. Unemployment benefit
7. Cash Sickness benefit
8. Invalidity benefit
9. Survivors benefits, and settlement
10. Severance benefit
11. Cash Maternity benefit
    

The contribution for Colombia’s social security system is as follows -

Statutory Benefits

Statutory Benefits in Colombia must be equally provided by employers to their employees.  

Below are the mandatory employee benefits —

Social security contributions

Colombia's social security system is very comprehensive and requires employers to effectively manage payrolls in order for employees to receive their benefits.

Statutory leaves

Employers in Colombia are required to make sure that social security contributions are deducted each payroll period. When an employee avails himself or herself of these benefits, employers must be on top of processing and making certain they receive their entitled amounts too!

Bonuses

The Colombian government has a policy of giving employees one month’s salary as service bonuses twice per year. It is given in June and December, which means that there are more opportunities for contractors to receive this reward!

Fringe Benefits

On top of the benefits mandated by the labor laws, additional compensation called Fringe benefit, may be offered by employers to their employees. The following are some of the fringe benefits offered in Colombia –

• Company cars
• Personal
• Loans
• Private Life
• Insurance
• Medical Insurance

Exempt Benefits

All monetary benefits are taxable and subject to withholding of taxes. However, the  

exempt benefits include –

• Pension, health, and social security contributions
• Special savings account for housing

Long-term Incentives

The best way for an employer to show their appreciation of hard work and dedication is through long-term benefits. Employees will often be rewarded with company specific goals, such as stock options or other forms of equity ownership that provide incentives over time horizons greater than one year when they achieve certain performance milestones within the business unit/organization where employed.

The following are some of the long-term incentives offered in Colombia

• Pay for Performance
• Employee Stock Purchase Plan
• Pension and Retirement Savings
• These incentives must be explained and specified in the employment contract.

Termination Process

Employment contracts in Colombia may be canceledcancelled at any time with immediate effect. The organization must disclose the rationale or grounds for termination, which must be communicated in writing. Once the termination contract has been authenticated and acknowledged by both parties, it must be delivered to the appropriate governmental authorities.

Notice Period

No specific notification period is required. However, if sufficient cause for dismissal is presented (e.g due to gross misconduct, low performance, etc.) a 15 days notice is required.

Severance Pay

Severance pay in Colombia is mandatory and determined by the employee's length of service and the rate of earnings.

However, if the employee is dismissed with justified reason “justa causa” (e.g poor performance, employee misconduct etc), there is no severance pay.