Employee Benefits in Colombia are generally covered by the Labour Code and the Constitution. The Code was updated in 2021 with the latest version known as the Substantive Labour Code (Código Sustantivo del Trabajo). This is regularly updated and amended by additional Laws, Decrees and Amendments, rather than by entire new pieces of legislation. International companies hiring employees in Colombia must establish a legal entity in the country and then operate within this framework of legislation, which provides safeguards and guarantees for the workforce. Minimum guarantees include paid vacations, working hours, termination, severance and notice periods, sick leave, maternity allowances.
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship. This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years of experience as a Professional Employment Organisation (PEO) and Employer of Record (EOR).
Under Colombia’s employment laws, all employees are entitled to minimum rights. The legislation is governed mainly by the Colombian Labour Code (Código Sustantivo del Trabajo, CST), which dates from 1950 as the Constitution.
Colombia’s progressive income tax system is expressed in Tax Value Units (Unidad de Valor Tributario, UVT). For 2022 the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) set the UVT units at COP 38,004 (€9, US$9.60).
In some instances, rates will be given as pesos and in others as UVT figures.
National Minimum Wage (NMW): The government set the monthly legal national minimum wage for 2022 at one million pesos (€236, US$253), an increase of 10.07% over 2021. The legal transportation allowance was increased by the same percentage to COP 117,172 (€27, US$29) for employees earning less than twice the national minimum. For employers, the NMW also affects the rate of salaries due to social security, welfare and pension deductions from employees’ wages.
Sick Leave and Benefit: Claimants must have verification from a Colombian social security authority that they cannot work to receive paid sick leave for up to 180 days. Employees receive two-thirds of their salary for the first 90 days (the employer paying for the first two) and 50% of their salary for the remainder, with the employer reclaiming from the social security system. Where illness or injury is work-related, the employer must pay 100% of wages for the duration of incapacity.
Working Hours and Breaks: The Labour Code allows for a maximum of 48 hours a week over five or six days, but there must be at least one paid day off every seven. Regular working hours are between 6 am and 9 pm. The Colombian Congress has approved reducing the maximum working hours in stages by July 15 of the following years – 47 hours by 2023, 46 hours by 2024, 44 hours by 2025 and 42 hours by 2026. The changes cannot affect salaries and workers’ rights, and employers can introduce reduced hours ahead of the deadlines. Regular working hours should be split into two sections to give employees a guaranteed break; this is not considered work time.
Overtime: The Labour Code restricts overtime to two hours a day and 12 per week. Daytime overtime between 6 pm and 9 pm is compensated at a minimum of 25% above the regular hourly wage. Employees working nights between 9 pm and 6 am are paid at a minimum 35% above the standard rate; if they are asked to work overtime during these hours, the premium is 75%. Employees asked to work 10 hours a day cannot be required for overtime.
Paid Vacations: Employees are entitled to 15 days as a paid vacation after working for one year, with leave adjusted pro rata for those who have not been with the employer for 12 months.
Public Holidays: Mandatory public holiday entitlement is added to annual leave. Employers required to work on national holidays must be paid 150% above their regular pay or be given time off in lieu. When public holidays fall on a Sunday, they are moved to the following day.
* When these holidays do not fall on a Monday, they are moved to the following Monday.
Maternity / Paternity / Parental Leave and Benefit: Employees are entitled to 18 weeks of paid maternity leave, generally one week before the due date and 17 weeks after. If medically advised, the pregnant employer can take two weeks before the birth or have all the leave after the birth. Mothers adopting a child and fathers caring for the child due to the death or ill health of the mother are also entitled to leave. The employer pays the benefit and reimburses the social security system. Working fathers receive two weeks of paid paternity leave for children of the spouse, their permanent partner or as an adoptive father. Parental leave can be shared between parents for the last six weeks of maternity leave.
Discrimination: Labour Code legislation and the Constitution prohibit discrimination against employees or applicants based on ethnicity or race, gender or sexual orientation, health or disability, beliefs or opinions, marital status, union or other memberships or affiliations.
Termination / Severance / Redundancies: All employees are subject to termination laws, and employers can dismiss with legally justified cause without incurring liability, following a disciplinary process. Termination without cause is liable to incur severance obligations. Certain terminations, even with reason, must be authorized by the Ministry of Labour or a Labour Judge. This applies to maternity, paternity and health issues, union officials during collective agreement negotiations and employees within three years of retirement. Severance payments depend on seniority and earnings. They range from 30 days’ pay for the first year of service and 20 days for subsequent years; to 20 days’ pay for the first year and 15 days for the following years. The mandatory minimum is 15 days’ pay. Fixed-term employees are compensated for the income that would have been earned by completing the period or project. Redundancy regulations apply when the following occurs over six months:
Notice Periods: Employer or employee can terminate unilaterally without reason or giving notice, but the terminating party may be liable for repaying against resulting costs or loss of pay. Employers terminating with cause may be required to provide 15 days’ notice. Fixed-term employees should receive notification 30 days before the end of the contract to prevent automatic renewal.
Social welfare in Colombia is governed by the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, GSSSH). The regulatory and management authorities are the Ministry of Social Protection and the National Health Regulation Commission, while the National Health Authority is responsible for managing health facilities. The GSSSH is compulsory for everyone employed in the formal ‘legal’ economy, and the self-employed earn a stipulated minimum salary. The system is complemented by the Solidarity Guarantee Fund, which subsidizes benefits for older persons, the poor, and others not covered under the contributory scheme.
Members of both schemes are entitled to a primary health care package. Claimants of the subsidized plan are entitled to primary care and complete coverage for serious illness. Claimants of the subsidized program are entitled to primary care and complete coverage for serious illness. Members of the contributory scheme are allowed more comprehensive services, including inpatient and outpatient care, paid maternity leave and sick leave.
Contributions to the social security system covering pensions, solidarity pension fund and health and labour risks are based on the monthly salary earned by the employee. Contributions are capped at 25 times the national minimum wage, which in 2022 is COP 1,000,000 (€236, US$253) per month.
The percentage of contributions in health and pensions for employees for 2022 continues to be the same as for 2021. That is, 12.5% for health (8.5% paid by the employer – when applicable – and 4% paid by the employee) and 16% for pensions (12% paid by the employer and 4% paid by the employee).