Hiring in Colombia? The fourth largest country in South America is home to a diverse workforce of expats and talented locals alike. It's no wonder foreign employers are looking for ways to hire employees in Colombia—but doing so will require either establishing a legal entity or hiring through an EOR.
Establishing a legal entity (in Colombia or anywhere) can take months. It also requires your company to understand Colombia's complex labor and employment laws and shoulder all the liability for compliance alone. Missteps can be costly, incurring government fines and other penalties.
Your other option is to use an "Employer of Record" (EOR), a third-party service that handles Colombian payroll, tax, and compliance considerations on your behalf.
Wondering whether your own entity or an EOR is right for you? Follow our step-by-step guide for hiring through an EOR in Colombia to help you get started.
Step by step: How to hire through an Employer of Record in Colombia
Step #1: Decide between a Colombian EOR and a legal entity
When you decide to expand your business operations into Colombia or hire employees there, the first thing you need to decide is whether to set up your own legal entity or hire Colombian employees through an Employer of Record service. The path you take will depend on your company's size, resources, and future plans to scale.
- Legal entity in Colombia. Setting up a local entity from scratch is a complex process that often requires translating documents into Spanish, registering with local authorities, opening a local bank account, and consulting with experts to make sure you stay compliant with the Colombian Labor Code and other relevant laws.
- Colombian EOR. An EOR is a third-party service that acts as an employer in a country on your behalf—meaning you avoid the hassle of setting up a separate entity to hire full-time Colombian employees. EORs handle all the legal requirements for complying with local payroll, contract, tax, and labor laws. They can also help with some of the administrative work like calculating and withholding tax, onboarding and managing employees, and running payroll.
Pros and cons of EORs vs. setting up a legal entity
Cost & Implementation
✔ Faster to set up.
✔ Start hiring in days instead of months.
✘ Costs increase as you hire more.
✘ Time-consuming and expensive to set up.
✔ More cost-effective if you plan to scale and hire more employees in a specific country.
✔ Set up new hires within one to 14 days, depending on the provider.
✔ Expand into a new market with no scale limitations.
✔ Takes on compliance liability for you and manages localizing employment contracts and other legal documents.
✘ Less customizable—can't tailor certain policies and HR/legal processes to your business' needs.
✘ Leaves your company liable for all legal and compliance infractions—requires knowledge of local laws, tax regulations, etc.
✔ More customizable with tailored processes to meet your business' needs.
Payroll & Benefits
✔ Quickly pays and insures employees around the world.
✔ Files taxes for you.
✘ Requires you to manually track deductions and entitlements for all employees.
Step #2: How to choose the best EOR for your business
Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.
- Is the EOR active in the countries in which you need to hire? This is the first step in selecting an EOR.
- Does the EOR own its own entities in the countries it services? If the EOR provider doesn’t own the entities, they’re likely partnering with a local or third-party provider.
- How does the EOR protect your sensitive and confidential information? It’s crucial that your EOR has the proper data protections in place, along with secure technology that eliminates the risk of private information being disclosed.
- Does the EOR offer automated solutions? You may want to look for an EOR that automates the busy work like onboarding and benefits enrollment and other common HR and IT tasks.
- What is the EOR’s support model? Make sure your EOR has support staff available that are easy to reach and experts in the regulations of the country in which you’re hiring.
Get the full checklist in our guide: What is an EOR?
Rippling has everything you need to run a global workforce
With Rippling, you can manage your global team in one system, easily localize onboarding flows, and manage compliance policies for your international employees. See Rippling.
Step #3: How to hire and onboard your Colombian employees
Once you’ve picked an EOR service that works in Colombia, it's time for the next step in the hiring process: onboarding your new employees. To do so, you'll need to collect some personal information from them:
- Date of birth
- Bank account information
- Social Security system registration
- Enrollment in public health insurance
- Enrollment in a severance fund
- Insurance or professional risk under their employment contract
You'll also need to send your new employee an employment agreement that outlines their role and key working conditions. In Colombia, a written employment agreement isn't required, but it's still a best practice—and certain working conditions and stipulations must be in writing, including:
- Probation periods
- Fixed-term contracts
- Integral salary (benefits that are included in the salary)
- Non-salary payments
An EOR can automatically localize and distribute employment agreements that comply with local laws and regulations, ensuring that every employee you hire in Colombia will have a legally compliant contract to cover statutory requirements like probationary periods, working hours, working days, minimum wage, benefits, annual leave, maternity and paternity leave, and termination policies like notice periods and severance pay.
You can onboard new hires anywhere, end to end, with Rippling. Request a demo today.
Step #4: Run payroll
Once you've collected the right payroll information and you and your new hire have both signed the employment agreement, it’s time to set up payroll. An EOR will pay your Colombian employees in Colombian pesos (COP), while withholding legally required taxes so you stay in compliance with local tax and employment laws. This includes contributions to:
- The pension fund
- Medical plans
- Labor Risk
- Family compensation funds
Frequently asked questions about hiring through an EOR in Colombia
How much does an EOR cost?
There are two common pricing structures for an EOR:
- You pay a fixed monthly fee per employee.
- You pay a percentage of payroll plus applicable taxes.
With either pricing structure, you may also be charged administrative fees, onboarding charges, costs for supplemental features, and other fees. If you’re mindful about pricing, keep in mind that you don't need to use an EOR for your entire workforce—you can choose to use it for a portion of your workforce, and you'll only be charged for the employees you employ through the EOR.
What is the difference between an EOR and PEO?
With the rise in global (and remote) employment, we've seen the emergence of many different types of tools for international payroll, human resources, benefits administration, and workforce management.
One of which is a Professional Employer Organization (PEO). A PEO acts as a co-employer for your international employees, providing some administrative services like running payroll, filing taxes, and handling compliance. But a PEO doesn't allow you to hire employees in a country where you haven't set up your own entity. And when you use one, your company and the PEO are jointly responsible for your workforce and liable for compliance issues.
On the other hand, an EOR allows you to hire employees without setting up your own entity, and it assumes all the compliance liability on your behalf as the sole employer of the portion of your workforce employed through it.
Does an EOR protect your sensitive and confidential information?
Using an EOR to hire employees in another country can help you save time and protect you from compliance liability. But if your EOR uses third-party vendors, sharing your data with it could leave you exposed to breaches from manual uploads.
That's why it's important to seek out an EOR that prioritizes data protection. Some green flags to look out for are:
- Compliance with industry-standard privacy regulations in different countries
- Secure infrastructure with 24/7 maintenance
- Well-vetted personnel
Does an EOR help with Colombian tax filings?
An EOR is one way to streamline tax filing in Colombia—some EOR services can automatically calculate and file taxes for you.
What are the mandatory benefits for Colombian employees?
In Colombia, employees are entitled to certain benefits under labor and employment laws. These include:
- Survivors’ benefits
- Short- and long-term disability
- Paid leave, including vacation, maternity leave, sick leave, bereavement leave, and more
- 13th month salary, paid in two installments totaling the employee's monthly wage
- 18 public holidays, including:
- New Year's Day
- St. Joseph's Day
- Holy Thursday
- Good Friday
- Labor Day
- Ascension of Jesus
- Corpus Christi
- Sacred Heart
- St. Peter and St. Paul
- Independence Day
- Battle of Boyacá
- Assumption of Mary
- Columbus Day
- All Saints' Day
- Independence of Cartagena
- Feast of the Immaculate Conception
What are the employer costs for full-time employees in Colombia?
Employers must deduct certain contributions from their full-time employees' paychecks. See the full details below:
Family Compensation Funds
Family Welfare (ICBF)
National Apprenticeship Service (SENA) (applied only on integral salary)
Rippling helps you hire, pay, and manage people worldwide. Request a demo today.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.