Hire in Colombia: A Comprehensive Guide for 2026

Introduction

Employment in Colombia is governed by the Código Sustantivo del Trabajo, which Law 2466 of 2025 amended to make indefinite-term contracts the default form of engagement and to cap fixed-term contracts at four years. Companies that hire in Colombia withhold employee social security contributions and income tax at source, then pay employer contributions on top.

The size of those employer contributions turns on a single line. They run near 17% of the contributory base below ten minimum monthly wages and near 30% above it, so two offers a short distance apart carry very different loadings. Three further payments fall outside the monthly run, and severance accrues from the first day of employment.

Working through an Employer of Record (EOR) for employees, or an Agent of Record (AOR) for contractors, changes who carries those filings and whether an entity is needed at all. This guide covers entity setup, both routes, contract types, payroll and tax rates, telework obligations, and the full cost of a Colombian hire.

How to hire remote employees in Colombia?

Colombia gives you three routes: register your own entity, use an Employer of Record (EOR), or engage contractors. The choice decides who signs the contract, who carries payroll and social security, and how exposed you are if the arrangement is challenged.

How to hire in Colombia by setting up a local entity?

This involves setting up a legal entity or subsidiary in Colombia, registering with authorities, and complying with local regulations.

The form built for this is the simplified stock company (Sociedad por Acciones Simplificada, or SAS). It can be incorporated by a sole shareholder, and there are no residency requirements; there is no minimum capital amount required, though subscribed capital must be paid within two years following the incorporation.

Two requirements shape the timeline:

• Your company must have at least one legal representative, which means finding someone willing to carry personal accountability in Colombia before you can register.
• Documents evidencing a foreign shareholder's existence also must be duly notarised and apostilled, which is usually the slowest part.

Once filed, the Chamber of Commerce normally takes five business days to issue evidence of incorporation. Whichever way you register, the Colombian entity signs the employment contracts and carries payroll, social security, and labor compliance in-house.

How to hire employees through EOR in Colombia?

An EOR lets you hire in Colombia without establishing an entity. It acts as the legal employer and assumes responsibility for onboarding, payroll, social security and parafiscal contributions, statutory benefits, and compliance with Colombian labor law. You keep day-to-day direction of the work and the decisions on pay, scope, and headcount.

Registration is the short part. The payroll, social security, and parafiscal filings it creates run every month for as long as the entity exists.

Skuad helps remove that dependency. Skuad acts as the legal employer across 160+ countries, so your company can hire, onboard, and pay employees without registering a local entity or standing up in-house payroll and compliance infrastructure.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Payroll processing in 70+ currencies, with tax withholding and statutory deductions applied at the point of payment
• Statutory benefits and paid leave administration in line with local requirements across supported markets
• Termination and offboarding support, including notice periods and severance calculations as required locally
• Background verification covering identity, employment history, and criminal records before onboarding

See Skuad's Colombia hiring guide for the full breakdown of local rules before you hire.

How to hire contractors through AOR in Colombia?

Companies can engage talent as independent contractors or freelancers.

Any individual will be considered an employee if they render personal services, receive orders or are subordinated, meaning the employer determines how, when and where the work is performed, and receive wages for personal services. Setting a fixed schedule and supervising the work directly are exactly the facts that satisfy the second element.

A second exposure applies even when the classification holds. If the services rendered by the independent contractor are similar to those that the company considers as its core business activities, the company will be jointly and severally liable for all salaries, fringe benefits, and severance to which the independent contractor's employees are entitled.

Both exposures turn on how the engagement is documented, which is where Skuad supports contractor engagement across supported markets.

Here is what Skuad helps with:

• Contractor onboarding with locally compliant agreements
• Worker classification checks that help flag engagement risk before an agreement is signed
• Invoice generation, approval workflows, and contractor payouts in 70+ currencies
• Contractor records, agreements, and payment history in one dashboard alongside full-time employees
• Conversion from contractor to full-time employee through EOR across 160+ countries

Compare EOR and contractor pricing for your Colombian hires.

What type of employment contract do you need in Colombia?

The 2025 labor reform changed the default. Colombian law now prioritizes indefinite-term contracts for core business activities, and open-ended contracts are the general rule. If the role is ongoing, this is the contract to use, and no duration rules apply to it.

Fixed-term and work-specific contracts remain available, with harder limits. They are now limited to a maximum of four years before transitioning into indefinite contracts, so successive renewals no longer extend the arrangement indefinitely.

Project-based contracts also carry stricter requirements, with reclassification risks if those requirements are not met, which means a loosely worded scope converts the relationship to indefinite rather than simply being unenforceable.

The practical read for a distributed team: use an indefinite contract unless the work is genuinely temporary, and if you use a fixed-term contract, put the temporary need in writing.

What are the employment laws in Colombia?

Colombia rewrote several of the employment rules in 2025, and the working week finished a four-year phase-down in July 2026. The figures below reflect the position now.

How many hours is a full-time work week in Colombia?

Forty-two hours, and that figure is the last step of a phased reduction that ran from 48 hours, moving to 44 hours on 15 July 2025 and to 42 hours on 15 July 2026. The cut came without any reduction in salaries or benefits, so the hourly cost of the same salary rose with each step.

How is overtime paid in Colombia?

Employers are no longer required to obtain prior authorization from the Ministry of Labor to schedule overtime work, but they must continue to maintain accurate daily records of all overtime hours worked by each employee.

What are the probation and termination rules in Colombia?

For fixed-term contracts, the probation period in Colombia is one-fifth of the contract's entire duration, which should not exceed two months. For indefinite-term contracts, the probation period in Colombia is two months. It has to be agreed in writing, and with successive contracts you only get one, since the parties cannot agree to trial periods but for the first contract.

After probation, Colombia is more flexible than most Latin American markets on the decision and stricter on the process. An employer may unilaterally end an employment contract at any time, even in the absence of fair cause, with the employee then entitled to statutory compensation.

Dismissing for fair cause avoids that payment, but only if you allow the employee the opportunity to provide explanations about the facts before terminating.

Three things catch foreign employers out:

• Some people cannot be dismissed without cause at all. Pregnant employees, employees with health conditions, union-immune employees, and employees within the last three years of pension eligibility can only be terminated with proven fair cause, and some require Ministry of Labour verification.
• Pay instead of notice is not an applicable figure in Colombia, so you cannot buy your way out of a notice obligation.
• Post-termination non-compete agreements will be considered void. Restrict competition during employment and use a confidentiality agreement for the period after.

Employers with an established fixed-term agreement with their employees must provide a written notice at least 30 days before the contract expires. Miss that window and the contract will be renewed for the same term as the initially agreed, which is how companies end up carrying a headcount they meant to release.

What telework obligations apply in Colombia?

Hiring people to work from home in Colombia brings two obligations that office hiring does not.

• You owe a mandatory connectivity allowance for teleworking employees with a monthly salary up to two times the monthly legal minimum wage. For remote workers, this replaces the mandatory transport allowance and is set at an equivalent amount.
• You also have to provide training for teleworkers covering telework policies, health and safety requirements, the use of remote work tools, and employee rights and obligations.

What are the payroll and tax rules in Colombia?

The payroll frequency in Colombia is monthly, which is usually the last working day of the month. You withhold the employee's social security contributions and income tax at source, then pay your own contributions on top. One threshold does most of the work below: ten minimum monthly wages, which switches two parts of the employer cost on.

What is the minimum wage in Colombia?

The minimum legal monthly salary is COP 1,750,905 (Colombian Peso) in 2026. It is reset by decree every January, and the 2026 increase was one of the largest in recent Colombian history, so any multi-year cost model needs rebuilding each year rather than indexing to inflation.

Contributions are calculated on a base that may not be less than the minimum legal monthly salary and may not exceed 25 minimum legal monthly salaries, or COP 43,772,625 in 2026.

What are the social security contribution rates in Colombia?

Total contributions run to 28.5% of monthly salary, with approximately 20.5% borne by the employer and 8% by the employee. Here is how that splits.

The ten-minimum-wage line is the number to model against. Below COP 17,509,050 a month, the employer's 8.5% health contribution does not apply, and neither does the 9% payroll tax. Above that threshold, roughly 17 percentage points are added to employer costs, so salary bands immediately below and above it should be reviewed before offers are set.

How much income tax is withheld in Colombia?

A progressive tax rate of 0% to 39% is levied on employment income. However, employment income that is less than 1,090 UVT is exempted from the income tax.

One Tax Value Unit (UVT) is COP 52,347 for fiscal year 2026, and the top 39% band starts above 31,000 UVT, so most salaried hires land in the lower bands. The tax comes out of the employee's pay rather than adding to your cost, but the withholding and filing are yours to run.

Skuad supports global payroll processing in 70+ currencies, with tax withholding and statutory deductions applied at the point of payment, alongside statutory contribution workflows across supported markets.

What is the cost of hiring remote employees in Colombia?

Gross salary is roughly half the answer in Colombia. Employer contributions, three mandatory annual payments outside the monthly payroll, and a monthly allowance add to this cost, while severance accrues from the first day.

What does an employee cost on top of gross salary?

Employers' contributions to the social security system average 30% of the employee's contributory base income. Most foreign employers pay well below that.

The reason is an exoneration. Employers who declare income tax in Colombia are entitled to an exoneration of their obligation to contribute to the social security subsystem in healthcare, family allowance, and some other specific contributions, for their employees who earn up to 10 times the minimum wage, which may lead to an employer's final contribution to the social security system as 17% of the employee's contributory base income.

Model against 17% for salaries under the ten-wage line and 30% above it. Roles priced near that threshold are worth checking before you make an offer.

What mandatory payments come on top of salary in Colombia?

Two months carry a double hit. June and December each take a prima installment on top of ordinary payroll, and the interest on cesantías falls due early in the following year. A model built on twelve equal months will be short in both.

Who pays when an employee is off work in Colombia?

Sick leave starts with you. During the first 2 days of sick leave, the employer must assume and pay 100% of the employee's salary. After that, the health system carries the cost, though not the cash. Work incapacities between day 3 and day 180 must be paid by the employer, who then claims reimbursement from the social security system. A long absence means fronting up to six months of pay and waiting to be repaid, which is a working capital line rather than a cost line.

Parental leave is the opposite. Maternity pay is entirely under the charge of the Healthcare subsystem, and paternity leave is also entirely under the charge of the Healthcare subsystem. Neither hits your payroll, which is worth knowing if you are comparing Colombia against markets where the employer funds parental leave directly.

What does it cost to end an employment relationship in Colombia?

Dismissal without fair cause is permitted, and priced. For an indefinite-term contract:

Fixed-term contracts work differently and can cost more. Ending one early without fair cause means the salary days pending until the end of the contract, so a two-year contract cancelled in month three carries twenty-one months of salary. Carry an accrual for indefinite-term severance from the first day of employment rather than treating it as an exit event.

The Skuad employee cost calculator helps you model total employment cost before an offer goes out, using the market and the salary figure you enter. Treat the output as a budgeting estimate.

Estimate the total cost of a Colombia hire before you make the offer.

What are the challenges of hiring in Colombia?

Colombia is easy to hire into. The exposure shows up in four places: how contractors are classified, how far the annual minimum wage reset drags everything else with it, how hard some employment relationships are to end, and a new category of paid leave the law left open-ended.

Three of the four carry a number you can plan against, and the fourth is worth a policy precisely because it does not.

1. Misclassification exposure

This is the expensive one, and it compounds. Sanctions from the Ministry of Labor could amount to the equivalent of 5,000 monthly minimum statutory salaries.

Separately, the company would automatically be deemed to be breaching social security obligations and may be ordered to pay contributions for the entire period of the employee's work, and since pension rights are not subject to the statute of limitations, that window never closes.

On the litigation side, there is no maximum penalty from an employment perspective on a claim before the labor courts.

2. The annual minimum wage reset

The wage is updated annually as of January 1, either through agreement within the Permanent Commission for Wage and Labour Policy Consultation or, in the absence of consensus, by government decree, and the 2026 figure of COP 1,750,905 came from one of the largest increases in recent Colombian history.

What makes this a planning problem rather than a payroll one is the reach: an increase hits all obligations indexed to the minimum wage, including social security contributions, statutory benefits, and certain labour surcharges. The misclassification ceiling above is expressed in minimum wages, so it moves too. Rebuild the Colombian cost model every January rather than indexing it to inflation.

3. Ending an employment relationship

Ordinary dismissals are manageable on payment of the statutory indemnity, but protected employees are not. Where fair cause requirements are not met, a judge may decide on their reinstatement through a constitutional action, which no payment resolves.

Scaling down brings a second trap, because dismissing without fair cause 30% of employees within a period of six months at a company of ten to 49 employees counts as a collective redundancy, and prior authorisation must be requested from the Colombian Ministry of Labour. A twelve-person Colombian team releasing four people in a quarter is already inside that rule.

4. Uncapped new paid leaves

The 2025 reform added mandatory paid leave for emergency or specialist medical appointments, serious personal or family emergencies, school appointments as a guardian, and judicial or administrative summonses.

The exposure is the drafting: the Law does not establish a fixed or maximum number of hours or days for these leave types, nor does it specify whether such limits will be defined in future regulations.

Absent a cap, what counts as reasonable is decided case by case, and refusing a request you consider excessive is a dispute you would be having on unsettled ground. Set an internal policy defining reasonable durations before the first request arrives.

Three of these four shift on rules you do not set, which makes tracking them a standing job.

Skuad helps with that tracking layer. Skuad Shield supports compliance monitoring across supported markets, so your team is not following regulatory change on its own.

Here is what Skuad helps with:

• Compliance monitoring across supported markets, with updates as local employment requirements change
• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Termination and offboarding support, including notice periods, documentation, and severance calculations as required locally
• Statutory benefit and leave administration in line with local requirements across supported markets
• Worker classification checks that help flag engagement risk before an agreement is signed

Hire in Colombia without setting up an entity

Most hiring mistakes in Colombia can be fixed with a payment, except two mistakes. Misclassification carries pension liability that never expires, and a labor court claim has no maximum penalty attached to it. A protected employee dismissed without proven cause can be ordered reinstated by a judge, and no severance figure changes that.

Both outcomes are decided by how the relationship was papered, before anyone does a day of work. An entity puts every classification call, filing, and dismissal decision on your own team from the first hire. An EOR holds the employment relationship for full-time employees, and an AOR does the same for contractors, so the paperwork is built to local requirements from the start.

Skuad acts as the legal employer across 160+ countries and supports contract generation, worker classification checks, payroll in 70+ currencies, and compliance monitoring from a single platform.

Book a demo to see how quickly Skuad can onboard your first Colombia hire.

FAQs

1. What does it mean to hire in Colombia through an EOR?

To hire in Colombia through an Employer of Record means the provider acts as the legal employer under Colombian labor law, without you registering a local entity. It signs the contract, processes payroll, and processes social security and parafiscal contributions, while you direct the employee's day-to-day work.

2. Can a foreign company hire in Colombia without a local entity?

A foreign company can hire in Colombia through an EOR for employees or an AOR for contractors, since both hold the legal employer relationship. Setting up directly usually means incorporating a SAS, which needs a legal representative and apostilled shareholder documents, and the Chamber of Commerce typically issues incorporation evidence in around five business days.

3. How much does it cost to hire in Colombia beyond gross salary?

Employer social contributions generally run around 30% of the contributory base, though employers who declare income tax in Colombia often qualify for an exoneration that lowers it to roughly 17% for salaries under ten minimum wages. The prima, cesantías, and interest on cesantías come on top of that.

4. What are the misclassification risks when you hire contractors in Colombia?

A contractor can be deemed an employee where they render personal services, are subordinated, and receive wages. Reclassification exposes you to back social security contributions, and because pension rights are not subject to a statute of limitations, that window never closes, making it one of the costlier exposures.

5. What paid leave and mandatory payments apply when you hire in Colombia?

Beyond salary, employers fund the prima de servicios (30 days annually, split June and December), cesantías (30 days saved through a fund), and 12% interest on cesantías. The 2025 reform also added open-ended paid leaves for medical, family, and legal matters, which carry no statutory cap.

6. What does it cost to dismiss an employee when you hire in Colombia?

Dismissal without fair cause on an indefinite contract generally costs 30 days' salary for the first year plus 20 days per additional year, or less for higher earners. Protected employees, such as pregnant workers, cannot be dismissed without proven cause, and a judge may order reinstatement instead.