Introduction to Payroll in Colombia
Payroll practices can be standardized by using teams that keep track of changes in labor laws, monitor employee count and hours worked, and stay on top of rules and regulations involving deductions and benefits. With in-country expertise and support, Skuad can keep track of:
- Employee compensation
- Benefits like healthcare and unemployment
- Taxes, contributions, and withholding
- Holiday and vacation leave
- Other Colombia payroll requirements
If you are building a remote team in Colombia, you can get help from Skuad, a trusted Colombia payroll company, to stay compliant with laws involving labor regulations, local tax codes, benefits, and other legislation.
Payroll Process in Colombia
Payroll staff needs to keep accurate records of employee hours worked. They also need to be observant of changes in legislation and rules involving deductions to stay compliant. The payroll process in Colombia includes three main phases: pre-payroll, payroll calculations, and post-payroll.
During the pre-payroll period, you'll need to focus on gathering documentation, confirming HR policies, and ensuring your business is ready to pay employees while staying compliant.
Setting up the organization
When you set up your organization to be able to pay remote employees, you need to set policies in place, such as leave policies, pay frequency, and attendance.
Your company should have a registered business number associated with your PAN and TAN, which will be needed to send out things like tax forms and payslips.
Even if the locations are all in the same country, requirements can differ locally or regionally. Each workplace should have its own set of policies.
Make clear policies about leave. Employees are legally entitled to some categories of leave in Colombia, including parental leave, sick leave, and paid holidays. Every employee in Colombia is entitled to 15 paid days off per year for all employees who have worked at least a year at the company, in addition to public holidays. Colombia has 18 public holidays for which employees must be paid and take off.
For attendance, you'll need to document timesheets, doctor’s notices for sick leave, or supervisor permission for requested time off. Biometric devices can help keep track of hours worked.
Account for all statutory payroll components such as income tax deductions, contributions to social insurance, benefits, or other perks, and everything you need to pay or provide your employees by law.
When structuring compensation packages, make sure to be compliant with Colombian labor laws, such as minimum wage. Flexible benefits plans can be offered based on a policy that you set. A payroll provider in Colombia such as Skuad can ensure compliance.
The payroll frequency in Colombia is typically monthly, with payments on the last day of the month. Some companies elect to pay bi-weekly. Employers must pay Colombian employees a 13th month salary, with the first half paid by June 15th and the second half paid by December 20th. Make sure the date of every payday is clearly communicated to employees so they know when they'll get paid and can plan accordingly.
Gather information like employees’ DOJ, designation, department, job titles, and how they’ll receive their pay.
Payroll Calculation Phase
The main component of the process is the Colombia payroll calculation phase. Data from the pre-payroll phase is not input into a system to calculate each employee's paycheck. The result is the salary paid after considering deductions, withholding, and taxes. Partnering with a payroll provider in Colombia with an automated system can facilitate this process.
Once payroll calculation is complete, you can send your bank advice to your corporate bank for salary disbursements. You may have a system in place for direct deposits. This is when employees will be paid.
After payments have been sent out, make sure to balance the accounts and keep track of the total expenditure of payroll funds.
Payroll reporting and compliance
Deductions such as employee and employer contributions to social security must be withdrawn and remitted to the respective government agency. Due dates may vary depending on the agency. To ensure full compliance with laws and that your payroll is taken care of, get a Skuad demo today.
Payroll Management in Colombia
Payroll management means keeping accurate financial records for payroll, paying employees, generating payslips, and obeying labor laws. A payroll provider in Colombia like Skuad can automate payroll to ensure timely payment to employees, as well as automatic deductions like social security and remittance to the relevant government agency. This way, your company will be fully compliant.
Payroll Compliance in Colombia
Part of the process of managing payroll is making sure you are compliant with labor laws and benefits regulations such as taxes, minimum wage, leave entitlements, and other laws. If you partner with a payroll company in Colombia like Skuad, all of the compliance is taken care of to make sure you are 100% in line with all laws both foreign and domestic.
Payroll Processing Company in Colombia
If you’re looking to payroll outsource in Colombia, contact Skuad to access our services and make payroll processing easier for you.
Payroll Components in Colombia
If you partner with payroll outsourcing in Colombia, you can be sure all components will be handled by one of the Colombia payroll providers.
The minimum wage in Colombia as of 2022 is 1 million Colombian pesos (COP), or about $250. The yearly increase has been about 10%. Note about the current currency exchange rate: as of May 2022, 1 United States dollar is .00025 Colombian pesos.
The working week in Colombia is no more than 48 hours with at least one paid day off every six days, generally Sunday. Hours are often bundled across five days to also have Saturday off. The Colombian Congress passed a law that will reduce the weekly hours to 42 hours over the next five years.
Any time which an employee works beyond the normal weekly hours must be paid overtime of 1.25x their regular pay rate, up to 1.75x regular pay for nighttime hours and Sunday or holiday work. Work done between 10:00 p.m. and 6:00 a.m. must be paid 35% more than regular daytime pay. Employees in trust positions or those who work more than 10 times the minimum wage are not guaranteed overtime.
Colombia Payroll Taxes
Taxes are a big part of Colombia payroll requirements. Some taxes are deducted from employee pay, such as income tax, while others are paid by both the employee and the company, such as social security.
The income tax rate in Colombia is a progressive rate based on income. 1 UVT, or tax value unit, is COP 38,004 for 2022.
- Up to 1,090 UVT: 0%
- 1,091 UVT to 1,700 UVT: 19%
- 1,701 UVT to 4,100 UVT: 28%
- 4,101 UVT to 8,670 UVT: 33%
- 8,671 UVT to 18,970 UVT: 35%
- 18,971 UVT to 31,000 UVT: 37%
- Over 31,000 UVT: 39%
Employer contributions to social security average 30% of the employee’s contributory base income. This can vary based on the level of risk the employee faces as defined by law. Employers who declare income tax in Colombia are exempt from paying into certain parts of social security such as healthcare and family allowance for employees who make more than 10 times the minimum wage, leading to a contribution of 17% of the employee’s base contributory income.
Employees in Colombia are entitled to paid sick leave for the first two days at two-thirds of their regular pay rate, provided they have a competent doctor’s note.
Maternity leave is 18 weeks at full pay. After the employer pays the maternity leave it will be reimbursed by social security. Law 2114 of 2021 extended paternity leave to two weeks. Paternity leave is also reimbursed by social security.
Parents may distribute the last six weeks of maternity leave, provided they both sign a written document detailing the plan to distribute the leave and give the document to the employer 30 days before childbirth.
- In the event of the death of an immediate family member, an employee is entitled to five days’ leave.
- When an employee gets married, a leave of five days must be granted.
- During elections, one day of leave is required to be granted for voting.
- Workers are allowed to take off to help bury their co-workers.
There are 18 national public holidays in a year in Colombia:
- New Year's Day
- Epiphany Holiday
- St Joseph's Day
- Maundy Thursday
- Good Friday
- Labor Day
- Ascension Day Holiday
- Corpus Christi Holiday
- Sacred Heart Day
- Feast of St Peter and St Paul
- Independence Day
- Battle of Boyacá Day
- Assumption Day Holiday
- Columbus Day Holiday
- All Saints' Day Holiday
- Independence of Cartagena Holiday
- Immaculate Conception
- Christmas Day
A notice of eight days must be given to terminated employees who are paid weekly. For employees paid at a rate less often than weekly or who have been at the company longer than a year, a notice of 30 days must be given. A probation period is usually two months.
In Colombia, severance pay is mandatory and based on length of service as well as pay range.
- If the employee earns less than 10 times the monthly minimum wage, severance pay is 30 days for the first year of employment and an additional 20 days for each year after that.
- If the employee earns more than 10 times the monthly minimum wage, severance is 2 days of pay for the first year and 15 days of pay for each additional year at the company.
Using a payroll company in Colombia can help you with all of these payroll components.
Start Your Payroll Services in Colombia
Paying independent contractors and employees in Colombia can be easy with the right management system. If you are ready to hire someone and pay them with one-click payroll services in Colombia, stay compliant, and save time and money, contact Skuad and ask for a demo today.