Employer of Record in Colombia

**Employment Contract Requirements**: Employment contracts in Colombia must be in Spanish. The contract must specify: job title, duties, salary, benefits, work schedule (noting the phased reduction from 48 to 42 hours by 2026), leave policies, and severance terms. **Prima (Semiannual Bonus)**: Employees receive one month salary as a bonus: half payable by June 30 and half by December 31. If employment is less than 12 months, it's prorated. For a new hire in March earning $3,000/month, they receive: 4 months ÷ 12 × $3,000 ÷ 2 = $500 in June and $500 in December. The EOR calculates and manages all Prima payments. **Cesantías (Severance Fund)**: Every year, the employer must deposit one month base salary into the employee's Cesantías account (managed by a third-party fund administrator). This is separate from regular payroll and must be deposited by March 15 each year. The employee owns this balance and can withdraw it upon separation. For a $3,000/month employee, annual Cesantías deposit is $3,000. **Intereses sobre Cesantías**: 12% annual interest is calculated on the accumulated Cesantías balance and paid separately. For example, if an employee has accumulated $15,000 in Cesantías, the interest owed is $1,800/year. This is separate from the annual Cesantías deposit. **Workweek Reduction**: The workweek is reducing from 48 hours (pre-2023) to 42 hours by 2026: 47.5 hours (2023-2024), 45.5 hours (2025), 42 hours (2026+). Overtime beyond the weekly limit is paid at 1.25x (ordinary) or 1.75x (weekends/nights). Employees have the right to request the 42-hour week as of 2026, even if the law allows gradual transition. **Health Insurance**: Employer contributes 8-10% to the Colombian health system (SURA, CAJA, FAMISANAR, etc.). The contribution is withheld from payroll and submitted monthly to the selected provider. **Pension Contributions**: Employer contributes 12% to the Colombian pension system. Additionally, SENA (vocational training fund) receives 2% and ICBF (family welfare fund) receives 3% of payroll. Total employer contributions = 12% + 2% + 3% + 8-10% health = approximately 25-27%. **Vacation (Vacaciones)**: Employees accrue minimum 15 days per year (growing to 17 as workweek reduces). Vacation is earned after 12 months of service. Unused vacation must be paid out at separation. Some vacation can be carried over to the following year, depending on agreement. **Severance**: Termination without just cause requires: one month notice + salary during notice + one month severance per year of service + all accumulated Cesantías + accrued Intereses + unused vacation. For a long-term employee, this can be substantial. **Contractor Classification Risk**: "Prestación de servicios" (service contract) arrangements are increasingly scrutinized by Colombian labor authorities. If a contractor: (1) Has fixed working hours, (2) Uses your equipment, (3) Reports to a supervisor, (4) Performs work integral to your business, courts will reclassify as employment. This triggers back payments of Prima, Cesantías, Intereses (typically 2-5 years), plus penalties of 50-100% of owed amounts. Using an EOR eliminates this risk entirely. **Payroll Timing**: Salaries must be paid by the last business day of the month. Prima payments, Cesantías deposits, and other contributions have specific deadlines (noted above). The EOR ensures compliance with all deadlines. **Time Tracking**: For payroll accuracy and overtime management, maintain clear time records showing hours worked daily. This becomes critical as the workweek reduction takes effect.