Colombia is one of the most attractive economies in Latin America for foreign investment but there are some challenges when it comes to starting a business in the country, more specifically when paying your employees.
The payroll laws in Colombia are complex, which is why if you want to start a business in Colombia, having the local knowledge about payroll is necessary for success in the country.
Businesses in Colombia are governed by the Labour Code which oversees all employers and employees in Colombia. The Labour Code controls all the procedures that surround the conditions of employment and the contracts, the salaries that workers are given, social security contributions, holidays and paying of overtime. Contracts of employment must be written by an attorney and spell out the terms of employment for employees. The Labour Code may be updated by a new government once every four years.
Setting up payroll
After a company is incorporated in Colombia, they will receive a tax ID number which will be used to enrol in with social security entities, which are health insurance, pension, unemployment fund, welfare and labour risk. This process can take up until a month before the company is able to hire their first employee. Only after these enrolments occur can payroll be set up for employees.
The process of payroll in Colombia is very complex and having a local person to do the correct calculations is imperative to being compliant. The Labour Code must be followed along with the statutory laws which adds to the complexity.
The minimum wage in Colombia for 2018 is 781,242 pesos, or around $265 USD. Companies and some employees, like managers or directors can agree to integral pay of at least thirteen minimum wage salaries.
Employees are paid once a month or twice per month with the pay slips going straight to employee's email keeping the information confidential or through an ESS (employee self-services).
These are the rules regarding employee overtime:
Night work is payable at a rate of at least 35% more than normal wage levels; Overtime during daytime working hours is paid at a rate of at least 25% above normal salary levels, while overtime at night is at least 75% above the norm; Overtime hours cannot exceed 12 hours per week or two hours per day; If employees work on a Sunday or during a public holiday, they are entitled to extra pay of 75% above normal rates as compensation. Legal bonus