How to Hire Talent in Colombia From Anywhere: Webinar Recap

Global payroll and compliance provider, Deel, hosted a webinar with four experts to help businesses hire talent in Colombia.

Stefana Zaric
Written by Stefana Zaric
April 28, 2022
Contents
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Latin America saw a 286% increase in hiring from the region in 2021, and the trend is continuing in most LatAm countries.

Colombia is one of those countries: the labor market is improving and telecommunication professionals such as customer support agents are in high demand. Also, some experts have great faith in managerial talent from Colombia.

Many US-based companies have already recognized the benefits of hiring LatAm workers. Similar time zones and cost efficiency are great incentives for small businesses and startups to hire great talent from the region.

In this webinar, our experts discuss why and how to hire talent from Columbia, the fifth largest country in Latin America. Watch the webinar or read the recap to learn more.

 

Expert speakers

  • Sebastián Gallo, Head of Talent Solutions, Torre
  • Catalina Fonseca, Associate, C&R Law
  • Natalia Jiménez, Head of Expansion, Deel
  • Talin Terzakyan, Marketing Director, Deel

Country overview

  • Population: 50.88 million (2020)
  • Capital city: Bogotá
  • Currency: Colombian peso (COP)
  • GDP per Capita: 5,332.77 USD (2020)
  • Official language: Spanish
  • English proficiency: Low (EF EPI Score 81 out of 112 countries)
  • Payroll cycle: Monthly
  • Time zone: Colombia Standard Time GMT-5

Why hire talent in Colombia?

In 2019, Colombia ranked as the third-largest workforce in Latin America, after Brazil and Mexico. Here are some reasons to search Columbia’s deep talent pool to fill your open roles.

1. Abundant and qualified talent

Columbia is home to many talented individuals, including highly trained and experienced tech professionals.

Colombia’s National Learning Service (SENA) offers free programs and training for new, marketable skills like finances, administration, web design, and software development. The program is well-known across the region but undiscovered by big tech companies. 

Also, two Colombian universities, Universidad Nacional de Colombia and Universidad de los Andes, rank among the top 15 universities on the continent.

2. Cost efficiency

The cost of living in Colombia is lower than in other countries, especially compared to the US, Canada, and most EU countries.

A company located outside of LatAm can hire a worker in Columbia for significantly less than the cost of a similar employee in the company’s home country. However, this opportunity may be temporary—the expansion of remote work will keep leveling the playing field for people worldwide, increasing compensation in historically underpaid parts of the world.

3. Working hours overlap

Colombia’s time zone makes it easy to collaborate with both the US and the EU.

Whether you’re on the west or east coast of the US, or even a western European country, you’ll have an overlap with your Colombian team. You won’t have to rely on asynchronous communication only, but can also schedule meetings during regular work hours.

4. Work habits

Colombians are known as hard workers, resourceful, creative, and committed to their jobs.

People in Colombia are used to working in demanding conditions and dealing with crises, so they can think on their feet. This country’s culture is also warm and friendly, so Colombians make good teammates and contribute to pleasant environments.

Why companies might not hire talent in Colombia

Before you start interviewing candidates from Colombia, you may want to consider a few reasons why you may want to look at other countries first.

Some people may want to leave Colombia

Many employees will certainly want to stay in Colombia for multiple reasons (low cost of living, proximity to their family). But some of them may want to live as nomads or move to another country.

The employee’s relocation may increase the cost of living and their compensation requirements. International travel can also create legal issues, like visa and residency complications.

Colombia's English knowledge is poor

If you work with English-speaking clients or require a specific level of English for day-to-day operations, you may have limited options in Colombia.

Colombia also ranks 17 out of 20 Latin American countries in terms of English, with a global score of “low.”

How much does it cost to hire talent in Colombia?

The cost of hiring talent in Colombia depends on their role and type of employment. Some of the most commonly sought out roles are in:

  • Tech (tech leaders, project managers, developers, UX/UI designers, data analysts)
  • Marketing (branding, growth, SEM, SEO)
  • Sales (sales development representatives, account managers)
  • Other (virtual assistants, HR specialists, customer service, accountants)

Candidates from Colombia job hunting in foreign companies typically seek competitive salaries. Even if they stay in Colombia, they expect globally competitive compensation. Salary requirements rise if the candidate is bilingual or fluent in English.

A few examples of annual salary ranges for jobs in high demand (in USD):

  • Software developers: around $1,000 monthly per year of experience and $60,000 per year for developers with 5+ years of experience
  • SEO & SEM specialists: $24,000 to $48,000 annually
  • SDRs: $12,000 to $24,000 annually (without commissions)
  • Data analysts: $30,000 to $54,000 annually
  • Growth marketers: $24,000 to $60,000 annually
  • Head of Sales: $80,000 to $100,000 annually

You can use Deel’s salary calculator to learn about approximate costs for other roles in Colombia.

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How to (legally) hire in Colombia

To hire employees in Colombia, you must create a compliant employment agreement.

To set up an employment agreement, you can either open a subsidiary or use employer of record (EOR) services.

1. Open a foreign subsidiary

A foreign subsidiary is a local legal entity, controlled by the parent company, established in a host country so you can legally hire and pay full-time employees.

Despite the flexible commercial law, you need to prepare a lot of paperwork and go through a time-consuming process to set up a subsidiary in Colombia. For tax and accounting purposes, your subsidiary acts as a separate legal entity. So you need to obtain a tax ID and register in the trade registry with Columbia’s Chamber of Commerce.

Also, legal representatives of the subsidiary must reside in Colombia. If they don’t have a Colombian ID, they must obtain the corresponding visa, whether they relocate or occasionally travel to Colombia.

2. Use an EOR

An employer of record (EOR) is an organization that hires and pays full-time employees in other countries on your behalf—no need to set up a subsidiary. EORs provide a quicker and simpler way to hire remote employees around the globe.

Employer of record services include:

If you’re not sure whether you should outsource hiring to an EOR, read our employer of records pros and cons guide to determine whether it’s the right business decision for you at the moment.

Labor law in Colombia

Like in all other countries, employers need to comply with specific labor laws that protect employees and provide certain benefits. In Colombia, these benefits and the employees’ rights are based on the type of salary they receive.

Written agreements

Written agreements aren’t legally required, but lawyers highly recommend companies to sign them with their employees for protection purposes. 

An EOR can help create compliant contracts in Columbia (or wherever you choose to hire). If you choose to hire without an EOR, we strongly recommend seeking legal counsel to help you create a compliant agreement.

Minimum wage 2022

Colombian employees can receive two types of wages: ordinary (benefits and contributions are paid separately) and integral (all-inclusive, with benefits included).

The minimum monthly ordinary wage in 2022 is around $260 (1,000,000 COP), while the minimum integral wage is around $3,380 (13,000,000 COP).

Mandatory benefits for employees with ordinary salary

Every employee in Columbia is guaranteed the following benefits by federal law:

  • Severance aid (1 month of salary per year of service)
  • Transportation allowance
  • Work clothes (three times per year)
  • Interest on severance aid fund (12% of the severance pay per year)
  • Service bonus (paid twice a year, equivalent to 15 days of salary, paid in June and December)
  • Vacation (15 days per year)

Non-mandatory benefits

Most employers supply their employees based in Columbia with additional perks and benefits to attract top talent and improve employee retention. Those non-mandatory benefits include:

  • Dental insurance
  • Savings and investment plans
  • Education budgets
  • Meal ticket stipends
  • Additional health insurance
  • Life insurance

Employer's social security costs

Employers with employees in Columbia must cover payroll taxes that fund social security programs in Columbia. Those costs (and the rate at which income is taxed) are as follows:

  • Pension (12%)
  • Healthcare (8%)
  • Labor risks (varies depending on the employee’s role, up to 8.7%)
  • Family Compensation Fund (4%)
  • Family Welfare (ICBF) (3%)
  • SENA (2%)

The Family Compensation Fund, Family Welfare, and SENA contribution percentages may depend on the employee’s salary and don’t apply to all employees (for example, employees with a salary lower than ten times the minimum wage). If the employee earns an integral salary, these contributions are paid based on 70% of the salary.

Working hours

Employees in Colombia can work up to 48 hours per week, but no more than eight hours a day. They must have at least one day off per week. This threshold is expected to decrease to 42 hours per week by 2026.

Employees who work between 9 p.m. and 6 a.m. receive an additional 35% of their hourly rate.

Employees who work overtime can work up to two hours overtime per day. Overtime hours between 9 p.m.and 6 a.m. are paid an additional 75% of the hourly rate.

Probation period

The probation period in Colombia can last up to two months, or ⅕ of the fixed term contract. During this period, either party may terminate the contract without prior notice or severance payment.

Parental leave

Employees are entitled to 18 weeks of maternity leave. One week of maternity leave is mandatory. Paternity leave is eight days. Congress recently approved six weeks of shared leave.

Learn more about parental leave policies around the world.

Sick leave

Employees need medical authorization to go on sick leave. The employer pays for the first and second day of the leave. Additional days off are reimbursed from the social security fund.

Termination requirements

To terminate an employment agreement, you need to have an objective cause. If you terminate an employee with objective cause, you don’t pay indemnification to the employee. If you fire an employee without an objective cause, they’re entitled to severance pay.

Some terminations are restricted, like for employees on maternity or paternity leave, pre-pensioners, or employees with health conditions. To terminate such employees, you must seek third-party approval (for example, a labor judge or the Ministry of Labor).

You need to issue a written notice at least 15 days before the termination if you terminate an employee due to poor performance. If the reason for dismissal is misconduct, you don’t need prior notice.

Hire independent contractors in Colombia to reduce legal complications

Hiring international employees is complex because of the legal protections, taxes, and benefits. To reduce legal complications of hiring employees in Colombia, you can opt to hire independent contractors instead. 

In Columbia, this kind of arrangement is called a “services agreement” (in contrast to an employment agreement). Services agreement refers to hiring contractors who have additional autonomy and receive compensation based on work delivered, not hours worked. This type of agreement is suitable for consultants or people with multiple engagements or clients.

Many foreign companies prefer hiring contractors because:

  • You don’t need to set up a Colombian entity
  • You have more currency flexibility (as it’s forbidden to pay employees in foreign currency)
  • Social security contributions fall on the contractor
  • Documentation for the agreement is minimal

The younger workforce typically prefers working as contractors for several reasons:

  • They prefer the flexibility services agreements afford them 
  • They prefer getting paid in US dollars or other foreign currencies, which is not legal for employees
  • They don’t need employment contracts as proof of income because they get loans from the bank less frequently
  • They use pension funds less frequently and prefer liquid cash

Independent contractor labor laws in Colombia

Independent contractors in Colombia have a similar status as in the US and most European countries. They organize their own work and schedule and have the skills and expertise necessary to perform the work.

Here’s what employers and clients should know to ensure compliance with the local law.

Misclassification risks

If you classify your worker as a contractor but treat them like an employee, you run the risk of worker misclassification and may face penalties.

To ensure you contractor is really a contractor, consider these factors:

  • Control over the contractor’s work (you can’t interfere with the way contractor executes the work outlined in the written contract)
  • Control over working hours (you can’t dictate a contractor’s working hours or lunch breaks)
  • Payment options (you pay contractors based on invoices they submit to you)

Note that clients are allowed to reimburse the contractor’s business expenses, maintain a long working relationship with them, and hire them for any type of business activity. These would all be concerns for misclassification in the US. But none of these factors will trigger employment status concerns according to Colombian law.

The Pension and Social Securities Unit of Colombia is extremely strict when it comes to foreign companies’ payroll obligations, so take classification matters seriously. In addition to facing legal and financial consequences, you may also get sued by your misclassified contractors.

Tax reporting

If your company has a subsidiary in Colombia, you must report payments made to local contractors to the DIAN (National Directorate of Taxes and Customs).

However, if your foreign company hires and pays contractors from Colombia without a local presence, you don’t have to report the payments to the DIAN.

Intellectual property

By default, independent contractors own any intellectual work they do for the client. This is different from the default law in the US. If your company wants to transfer the ownership of the intellectual property created by the contractor, you need to specify so in the written agreement.

How do I hire employees and contractors through Deel?

Creating a compliant worker contract is easy with Deel. Once you’ve partnered with us, you’ll gain access to the Deel online dashboard. From here, you take the following steps:

  1. Click “Create a contract”
  2. Select the contract type (e.g., fixed-rate, pay as you go, milestone, full-time employee)
  3. Add the independent contractor’s details (name, residence, job title, seniority level, scope of work, and start date)
  4. Define payment rate using Deel insights to gauge the appropriate pay for the contractor’s level of experience in their country
  5. Update the invoicing cycle to align the contractor’s first payment with the rest of the company’s invoicing
  6. Add termination dates, notice period, and optional stock options
  7. Attach any additional documents that may be necessary for Colombian hires
  8. Include special clauses (we recommend using Deel’s contract as it includes locally approved and legally reviewed clauses regarding tax obligations)
  9. You can upgrade to Deel premium if you want extra legal coverage in the case of worker misclassification
  10. Review and sign
  11. Finally, invite the contractors to upload their compliance documentation and sign the contract (simply add the new prospect’s email address, include a short message, and hit “send”)

That’s it! You have yourself an official reviewed and approved contract for hiring in Colombia.

How do I pay contractors and employees with Deel?

Deel enables you to pay international workers effortlessly:

  1. Deel automatically generates an invoice (which contractors can use to fill out their NFS-e invoice document)
  2. You can then select the account you want to fund from
  3. Confirm the payment

Hire top talent in Colombia with Deel

Deel makes global hiring faster and easier than ever.

As you’ve seen in the webinar, it doesn’t take more than three minutes to create a contract compliant with both your employment laws and local labor laws if you want to hire in Colombia.

With an easy-to-navigate user interface, mass payments feature, tax filing automations, self-service options, and multiple payment options, Deel is your go-to ally in building a global team.

Book a demo to see us in action and learn more about hiring employees and contractors in Colombia.

Disclaimer: This post is provided for informational purposes and should not be considered legal advice. Talk to a legal professional such as an employment lawyer for more info.

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