Hiring talent in Colombia allows your company access to a highly skilled and competitive workforce, but managing international payroll can be complex. Aligning with Colombia’s payroll taxes and regulations is crucial for maintaining compliance with local laws and ensuring employee satisfaction. 

For companies without a legal entity in Colombia, working with an Employer of Record (EOR) is a seamless way to pay employees in Colombia and stay compliant. An EOR assists with handling payroll processing in Colombia, including benefits, taxes, and deductions, reducing your administrative burden.

Here’s everything you need to know about Colombia’s payroll system. 

Payroll in Colombia: Wages and other payments

Employers don’t just have to pay employees in Colombia a monthly salary. There are other payments and benefits that businesses need to comply with. 

Colombia’s payroll cycle

According to Colombia’s payroll regulations, employees are paid monthly. Payments must be made at the end of each month, in Colombian pesos (COP) by bank transfer. 

Minimum wage and overtime pay

As of 2025, the minimum wage is COP 1,623,500 per month.

The standard workweek is 44 hours, which can be distributed over 5 or 6 days per week, provided employees receive at least 1 full day of rest. This is currently transitioning to 42 hours/week by July 2026. Employers must pay employees in Colombia overtime at the following rates:

• 125% of the regular hourly wage for overtime during daytime hours (6 am to 9 pm)
• 175% for night overtime (9 pm to 6 am)

Overtime is capped at 2 hours per day and 12 hours per week.

Sick pay

In Colombia, employees who experience a non-occupational illness or injury are eligible for up to 180 days of paid sick leave.

The payment structure is as follows:

• Days 1-2: The employer pays 100% of the employee’s salary.
• Days 3-90: The social security system (EPS) covers 66.67% of the salary.
• Days 91-180: The EPS covers 50% of the salary.

Should the disability extend beyond 180 days, the employee must undergo an evaluation by a Medical Board. The EPS may, under specific conditions, extend coverage for an additional period, up to 360 days total.

Maternity pay

Female employees are entitled to 18 weeks of paid maternity leave, starting at least 2 weeks before delivery. This is covered by social security. 

Non-birthing parents are entitled to 2 weeks of fully paid leave.

Severance packages

Employers must pay employees in Colombia severance. This entitlement varies depending on the type of employment contract and reason for termination.

• Employees earning less than 10 times the minimum monthly wage: They receive 30 days of wages for up to 1 year of service, plus 20 additional days for each year beyond the first, calculated proportionally.
• Employees earning 10 times the minimum monthly wage or more: They receive 20 days of wages for the first year, plus 15 additional days for each extra year, also calculated proportionally.
• Fixed-term or task-based contracts: The employee is entitled to the remaining salary due for the contract term. If the contract is job-based, at least 15 days’ wages must be paid.

In all cases, unused vacation, outstanding wages, and accrued benefits (like the 13th-month salary) must also be paid.

13th-month salary

It is mandatory to pay employees in Colombia a bonus known as the 13th-month salary. It’s equivalent to 1 month’s salary per year, paid in equal installments: ½ by June 30, and ½ by December 20. 

Colombia payroll: Taxes, contributions, and deductions

Payroll in Colombia involves a range of mandatory deductions and employer contributions. Understanding what both employees and employers are responsible for is essential to complying with payroll taxes in Colombia.

Income tax

Colombian payroll taxes include a progressive personal income tax system from 0% to 39%. In 2006, the government passed a significant reform (Law 1111 of 2006), introducing clearer tax brackets based on the Tax Value Unit (TU), which is adjusted annually. 

Pension fund contributions

Both the employer and employee are required to contribute to the national pension system. 

Employers are responsible for withholding the employee’s share and submitting the full amount.

Medical plan

Healthcare contributions are made monthly by the employer and employee to fund Colombia’s public health system (EPS).

Other Mandatory Employer Contributions in Colombia

In addition to pension and healthcare contributions, employers in Colombia are responsible for several other mandatory payments that form part of the overall payroll cost:

• Cesantías (Severance Fund): Employers must set aside 8.33% of the employee’s monthly salary as severance. This amount is accumulated throughout the year and deposited into the employee’s fund by February 14 each year. Cesantías serve as a financial safety net for employees in case of unemployment or for housing and education purposes.
  
• Vacation Accrual: Employers are required to accrue 4.17% of the employee’s gross monthly pay to cover vacation entitlements. If the employee does not take vacation leave, this amount is paid out upon termination.
  
• 13th-Month Pay Accrual: Employers must provision 8.33% of the employee’s monthly salary toward the mandatory 13th-month bonus, which is paid in two installments—half by June 30 and half by December 20.
  
• Compensation Fund (Caja de Compensación): Employers contribute 3% of the employee’s salary, increasing to 4% as per recent updates. These funds support social benefits and programs for employees and their families.

Colombia payroll compliance best practices

Managing payroll in Colombia is more than just paying salaries on time. Businesses need to keep close, ongoing attention to local laws and obligations. Even small errors can lead to penalties or reputational damage. 

Here are some best practices to help businesses stay compliant.

Stay updated on tax and labor law changes

Some Colombian labor and tax regulations change annually, so it’s essential to stay informed to make sure you’re operating within the law. This includes monitoring changes to:

• Income tax thresholds and tax value units
• Minimum wage adjustments
• Mandatory benefits and employer contributions

Conduct regular payroll audits

Periodic internal audits can catch payroll issues before they become a big problem. Routine checks help ensure you’re not only meeting Colombia’s payroll legal requirements but also treating your employees fairly.

Invest in ongoing payroll training

Even with the best payroll software for Colombia, your payroll teams still need to know the ins and outs of local law. They should receive regular training on Colombian labor law and standards of compliance. 

Or, you can use a global payroll provider or an EOR. Payoneer Workforce Management can support with Colombia payroll compliance. 

• Timely, accurate salary payments in local currency
• Expert guidance to navigate Colombia’s tax and social security regulations
• Seamless benefits and contributions management
• Reduced administrative overhead

Your options for payroll processing in Colombia

You have three main options for managing payroll in Colombia.

1. Set up a local entity

Establishing a legal entity in Colombia allows you to hire full-time employees directly, but it’s a long and complex process. It typically only makes sense for companies planning to hire multiple employees and stay for a while. 

2. Hire independent contractors

Hiring contractors may be a faster and more flexible option, but it comes with compliance risks. Misclassifying workers who should legally be treated as employees can result in penalties.

3. Partner with an Employer of Record

Working with an EOR offers a simple and compliant way to hire and pay employees in Colombia, without needing to set up an entity. The EOR acts as the legal employer, managing all the admin while you manage the employee’s day-to-day work. This allows you to onboard quickly, stay compliant, and reduce your administrative efforts. 

Payoneer Workforce Management helps handle your payroll, compliance, and workforce management so you can focus on growing your business. 

Speak to an expert today.

FAQs

1) What is the payroll system in Colombia?

Colombia’s payroll system operates monthly, with strict rules around payment dates, mandatory benefits, and statutory deductions. 

Employers are required to withhold income tax and social security contributions, including pension and healthcare, and submit them to the relevant authorities. Payments must be made in Colombian pesos.

2) What is the hourly wage in Colombia?

Colombia sets a monthly minimum wage, not an official hourly rate. As of 2025, the minimum monthly wage is COP 1,632,500.

3) What is the 13th salary in Colombia?

The 13th salary is a mandatory annual bonus equal to 1 month’s salary, to which all employees are entitled. It’s paid in 2 installments: in June and December.