Colombia at a Glance

Fixed-term contracts are obliged to be in writing to be considered as such. The labour code establishes that the fixed-term contract length is free for the parties to determine, but it cannot exceed three years. Additionally, there is no limitation for the possibility of successive fixed-term contracts or renewals.

However, in the case of fixed-term contracts agreed for an initial period of less than one year, the law establishes a limitation of three successive renewals of the initial contract, after which the period of the contract will be considered indefinite.

Under a fixed-term contract, the employer should notify the employee of termination 30 days before the end of the contract, to avoid its automatic renewal on the same terms.

The employer is obliged to provide employees with a safe workplace and the necessary and adequate elements and tools to prevent work accidents and professional diseases. Every employer or contracting party must implement the “Safety and Health at Work Management System” to ensure the enforcement of all health and safety at work legislation.

A health check is required before commencement of an employment contract, and annual health checks are mandatory.

In Colombia, while the exit medical exam is optional for the employee, it is the employer’s responsibility to offer it during the offboarding process.

Post termination Non-competes, Customer non-solicits and Employee non-solicits are not enforceable. However, such provisions are typically included in employment agreements because they can have a deterrent effect or create a sense of moral obligation on the part of an employee.

The option for employers and employees to associate through trade unions and employers’ associations is guaranteed as a constitutional right, Trade unions are prevalent in certain sectors, particularly industrial and public sectors. A minimum of 25 workers is required to maintain or establish a trade union in Colombia, so that where the company employs at least 25 employees, the employees can establish a company level union. Only the employees can form a union.

There are no work councils or other employee representatives.

Employees hired under an indefinite employment agreement can be subject to a probationary period of up to 2 months.

Employees hired under a fixed-term employment agreement can be subject to a probationary period of up to 1/5 of the fixed term agreed upon (not exceeding 2 months). When considering the existence of successive fixed term contracts, the parties cannot agree to trial periods, other than for the first contract.

Both the employer and the employee are free to agree the working hours without exceeding the legal limit of hours per week. The ordinary working time cannot exceed 8 hours per day and 46* hours per week, with the employee being entitled to a mandatory rest day, normally on Sunday. However, the law allows for the parties to agree that the daily working time can be distributed between 4 and 10 hours per day, ensuring the maximum working week.

The daily working time must be distributed in at least two parts, with a rest period between both of them. This rest period is not considered part of the daily working time.

* Effective 15 July 2026, Colombia’s maximum working hours will be 42 hours per week.

An employee may not be required to work more than 2 hours per day as overtime, or more than 12 hours in a given week. Overtime during the day (considered as between 6 am and 9 pm) is paid at a rate of 25% on top of the ordinary hourly rate. Overtime for night work (9:00 pm to 6:00 am) is paid at a rate of 75% on top of the ordinary hourly rate.

If employees work on a Sunday or during a public holiday, they are entitled to extra pay of 75% * above normal rates as compensation.

Employees who perform functions of direction, trust or management are excluded from the above rules regarding the maximum workday and overtime.

* Effective July 2026, they are entitled to extra pay of 100% above normal rates.

In Colombia, employment contracts may be terminated by any of the parties at any moment with immediate effect. Grounds for termination in Colombian legislation can be divided into three categories:

• Legal grounds – termination grounds which are unrelated to the behavior of the employee, but rather the operation of the law that mandates the termination of the contract. For example: the death of the employee; the expiration date of the term initially agreed in a fixed-term contract; the meeting of the condition in employment contracts by a definite task. In this case, as the employment contract ends because of the operation of the law, the employee is not entitled to a severance payment.
• Termination with a fair cause – normally refers to situations related to gross misconduct by the employee. These fair cause grounds are defined explicitly by law and the parties cannot add supplementary grounds as a basis for the contract to be terminated. However, the parties do have the possibility, through the contract or the Company manual, to define situations that by their nature can be considered as serious misconduct. Employers should complete prior diligence with the worker before notifying a decision. In this case the employee is not entitled to any severance payment.
• Termination without a fair cause – The termination without a cause includes all situations that are not considered as a legal cause or a fair cause. In these circumstances is the employee entitled to a severance payment in accordance with the law. The termination without a cause may find limitations for its use in situations that might be considered arbitrary. Such termination may be deemed unfair and can be considered void; typically, the consequence being the reinstatement of the employee rather than recognition of a severance payment.

Restricted or prohibited terminations

There are special cases where it is not possible to terminate an employment agreement without the authorization of the Ministry of Labour or a Labour Judge, even with just cause:

• Employees who are pregnant or on maternity leave (protection extends to a father/partner who is an employee when the mother is unemployed and included as her beneficiary with the social security authorities)
• Employees who are on sick leave or have restrictions that substantially inhibit their ability to comply with their duties.
• Employees who are less than 3 years away from retirement

Collective Dismissals

For an Employer to proceed with a collective dismissal, it needs, beforehand, to receive authorization from the Ministry of Labour.

No specific notification procedure is required in case of dismissal with justified cause or without justified cause, but the reasons for dismissal must be communicated to the employee the by the termination date ((Articles 62, 64 & 66 of the Labour Code). However, a prior 15-day notice is required in certain specific situations of dismissal with justified cause related to employee’s misconduct or low performance.

Directors are not required to be residents. However, a local legal representative is mandatory for tax purposes.

A local resident is required to act as the company’s administrator or legal representative in Colombia. This individual will be responsible for managing the company’s operations and ensuring compliance with local regulations.

Upon incorporating a business in Colombia, certain insurances are either mandatory or recommended:

• Mandatory: Workers’ Compensation Insurance and Social Security.
• Recommended: General Liability Insurance and Property Insurance, which can help mitigate risks related to business operations.

To officially register your business in Colombia, you must provide a registered business address and maintain a physical office. This is essential for the entity’s operations and regulatory compliance.

• A minimum of one shareholder is required, offering great flexibility for solo entrepreneurs.
• Do not have a legally mandated minimum paid-up share capital requirement. However, it is essential to have enough capital to meet operational needs and satisfy regulatory requirements.
• Debt/Equity Rules: Colombia enforces thin capitalization rules, with a debt-to-equity ratio of 2:1 for related-party debt. Any excess interest on debt beyond this ratio may not be deductible for tax purposes.
• Does not require a board of directors, but must have at least one legal representative (who can also be the sole shareholder).

• A minimum of two shareholders is needed.

• A minimum of five shareholders is required
• Do not have a legally mandated minimum paid-up share capital requirement. However, it is essential to have enough capital to meet operational needs and satisfy regulatory requirements.
• Debt/Equity Rules: Colombia enforces thin capitalization rules, with a debt-to-equity ratio of 2:1 for related-party debt. Any excess interest on debt beyond this ratio may not be deductible for tax purposes.
• Requires a minimum of three directors and three alternate directors.

• Requires at least two partners.

• Requires at least one general partner and one limited partner.

Colombia has two main tax regimes: the Standard and the Special. The standard corporate income tax rate for 2024 is 33%. This tax rate applies to the taxable income earned by companies. Certain sectors or activities may qualify for special tax regimes with reduced rates or specific incentives, which aim to encourage investment in certain industries or regions.

The deadline for filing corporate tax returns in Colombia depends on the company’s taxpayer identification number (NIT). Generally, the corporate tax return is due between April and June of the following year.

Colombia imposes a 19% Value-Added Tax (VAT) on most goods and services. This local sales tax is a significant aspect of the country’s tax system.

Colombia has entered into numerous double taxation avoidance agreements with countries around the world. These include treaties with Spain, the United States, Germany, France, Mexico, Canada, the Netherlands, and many more. These agreements are designed to prevent double taxation and promote cross-border investment and trade.

Profits can be repatriated from Colombia through various methods, each subject to tax regulations. Common methods of repatriation include:

• Dividends
• Royalties and fees
• Loan repayments
• Sale of investments

Colombia follows the transfer pricing methodology set by the Organisation for Economic Co-operation and Development (OECD). The main methods employed include:

• Comparable Uncontrolled Price (CUP)
• Cost Plus Method (CPM)
• Resale Price Method (RPM)
• Transactional Net Margin Method (TNMM)
• Profit Split Method (PSM)

These methods are applied depending on the circumstances of the transaction or business arrangement.

Foreign companies with a permanent establishment in Colombia are required to appoint a local tax representative. The representative is responsible for ensuring compliance with corporate tax filings and other related tax obligations.

Annual Bonus (Prima de Servicios): Equivalent to one month’s salary, paid in two installments (June and December).

All employers are required to pay a “prima,” or bonus. The total of this payment is equivalent to a month’s salary and the bonus is paid in two instalments, in June and December.

Only employees under Ordinary Salary are entitled to this bonus payment.

An additional 8.33% of the annual salary is set aside as a reserve for severance payments when an employee is terminated.

Unilateral termination without cause is lawful but will trigger severance obligations.

1. If the termination is unilateral and without cause, the employee will be entitled to receive an indemnification, in addition to the final wages.
2. For employees with an indefinite term agreement, such indemnification would be calculated as follows:

• For employees earning less than 10 x minimum legal monthly wages, the compensation is 30 days of salary for the first year of service and 20 days of salary for each additional year of service (proportional to the fraction of a year)
• For employees earning 10 x minimum legal wages or more, the compensation is 20 days of salary for the first year of service and 15 days of salary for each additional year of service (proportional to the fraction of a year)

3. For employees with a fixed-term agreement, the severance would be equal to the salary owed to the employee until the term of the agreement expires.
4. For employees who entered into agreements for the duration of a project, the severance would be the estimated salary owed to the employee until the project concludes, however in no case can severance be less than 15 days of salary.

Salary or Wages: The primary cost of employment is the salary or wages paid to the employee. This is the agreed-upon compensation based on the employment contract and can be calculated as either an hourly rate or a fixed salary.

Employers are required to pay their employees monthly by bank transfer. Salary should be paid on the last working day of the month and must be paid in local currency.

Payslips should be delivered either via protected email or through an ESS (employee self-services). It is a mandatory requirement for the payslip to be in the local language.

Vacation Pay (Vacaciones): Employees are entitled to paid leave, typically 15 days per year of service.

The minimum holiday entitlement per year is 15 days and accrues on a basis of 1.25 days per month for the commencement of employment. Employees are required to take at least 6 annual leave days a year.

***Vacations must be approved at least 30 days in advance.

Carry over rules

Upon agreement holiday days may be accumulated for a period of 2 years. Employer and the employee can agree a monetary compensation of the vacation period provided it does not exceed the 50% of the holiday.

In the event of the employee’s sickness and/or an accident that causes a work incapacity, it is necessary to have the incapacity certified by a licensed practitioner or the competent authority, normally chosen by the employee, that clearly establishes the days required for the employee to recover and return to work. The employer pays sick leave during the employee’s absence (for an indefinite period) but, as from the third day of sick leave, the employer can claim the payment back from the social security system.

In the case of illness or accident unrelated to work the employee is entitled to receive 66.67% of their regular salary.

In the case of any work-related accident or illnesses the remuneration is assumed by the social security system on a base of 100% of the employee’s salary during the entirety of his incapacity to work.

Maternity Leave

Paid maternity leave for every employed pregnant or adoptive mother in Colombia is granted for 18 weeks. At least one week of leave must be taken before delivery, which is extendable to two weeks when medically necessary. Adoptive mothers (and fathers in charge of the newborn in case of sickness or death of the mother) are also entitled to this maternity leave. An additional two weeks are added for multiple births. The payment of this leave is entirely under the charge of the Healthcare system, as a monetary benefit for the mother.

When the mother returns to work, she can take two 30-minute breaks per day for nursing (or as rest breaks) with no reduction in pay until the child is 2 years old, or longer with a doctor’s note, and there must be a place adjacent to the workplace where she can do so. Dismissal without just cause during this period is presumed discriminatory. This protection also applies to fixed-term contracts, project-based contracts, and temporary/mission workers.

Paternity Leave

A father is entitled to two weeks of paid paternity leave when his spouse or significant other gives birth or he adopts a child.

Adoption rights

The same rights regarding paternity and maternity leave are applicable in cases of adoption. However, in the case where the father is the only adopting parent, he will have the same rights as a mother.

• Mourning leave: An employee is entitled to five days’ paid leave for the death of a spouse or permanent partner, a parent, a child, a sibling, a grandparent, a grandchild, a mother or father-in-law, son or daughter-in-law, a stepchild or a stepparent.
• Burial leave: employers are obliged to grant the necessary leave for his employees to assist with the burial of their co-workers.
• Compassionate leave: while Colombian labour law mandates the obligation for employers to grant his employees with a paid compassionate leave, it does not define its scope or length. Employers are recommended to analyze on a case-by-case basis, the conditions to grant, and the length of, a compassionate leave.

Employees can take paid leave for the following circumstances:

• Marriage Leave – Employees are entitled to five days paid leave.
• Trade Union leave – Employees are entitled to paid leave to serve on a trade union committee. Employees also are entitled to leave for other trade union purposes if they give adequate notice to the employer and the absence does not adversely affect the business.
• Voting leave – Employees are entitled to paid leave for purposes of voting in public elections (1/2 a day of paid leave).
• Personal Leave – Employees are entitled to take up to five days’ paid leave to attend to “serious” personal matters.

Employees have the right to take unpaid leave for the following circumstances:

• Military Service – The employment contract is deemed suspended if an employee is called to military service. The employee must allow the employee to resume the same position within 30 days of the completion of service.
• Personal Reasons – The employment contract can be suspended for specific causes, as defined by law. One such cause offers a general possibility for the parties to suspend the employment contract on mutual consent. This specific situation is commonly used by employers to grant his employees non-paid leave for personal reasons.

Employees are entitled to be absent from work on the public holidays defined by the law and are entitled to their regular remuneration. While it is common for the municipalities to create other public holidays related to local festivities, private employers are not bound to such holidays. If, under any circumstance, the employer requires an employee to work on a public holiday, such work must be remunerated as if the employee worked on a Sunday or his weekly rest day.

Employers and employees make compulsory contributions to the Colombian Social Security System, which protects employees from certain social risks. The Colombian system is composed by the subsystems of healthcare, pension, labour risks and family allowance. As the social security system is managed by different companies, both private and public agencies, the employee has the right to choose the agency they want to affiliate with for healthcare and pension.

The main provisions include:

• Medical care
• Monetary sickness benefit
• Unemployment benefits
• Old-age benefits
• Occupational risk and injury benefits
• Family benefits
• Maternity benefits
• Disability benefits
• Survivor benefits.

Employers often provide additional benefits such as meal allowances, transportation subsidies, bonuses, or other incentives. These benefits are typically outlined in the company policy and can vary by industry.

Typical supplementary benefits offered by employers in Colombia include:

• Private Healthcare (despite the fact of the coverage of the healthcare subsystem, it is very common for employers to provide their employees with private healthcare as a benefit)
• Transportation subsidy
• Meal vouchers
• Life insurance
• Birthday holiday
• Educational Support