Planning to hire in Colombia? Here’s a quick guide

Colombia has become an increasingly popular place for U.S. companies to hire talent, thanks to its competitive salary costs and strong tech and business services sectors. With a high number of bilingual workers and a culture of remote work, hiring in Colombia is a great option for companies looking to scale their teams internationally.

In this guide, we walk through the steps to hire employees in Colombia, including the most common hiring methods, key legal and tax considerations, and how using an Employer of Record (EOR) like Payoneer Workforce Management can help simplify the whole process.

Hire employees in Colombia: Options for U.S. companies

If you’re looking to expand, there are a few different pathways for American companies hiring in Colombia​, each with its own pros and cons depending on your goals, timelines, and resources.

1) Set up a legal entity in Colombia

Establishing a local legal entity allows you to hire employees directly and gives you full control over your operations in Colombia. 

However, it’s a time-consuming and costly process that involves registering with local authorities, setting up payroll and tax infrastructure, and maintaining ongoing compliance. This option only really makes sense if you plan to establish a long-term presence in Colombia. 

2) Hire contractors in Colombia

Hiring independent contractors is a faster and more flexible solution ideal for limited-scope projects, but it comes with added risk. Misclassifying employees as contractors can lead to penalties and fines, so businesses really need to understand the ins and outs of Colombian labor law.

3) Use an Employer of Record

An Employer of Record is a third-party provider that acts as the legal employer on your behalf. You manage the employee’s day-to-day responsibilities, while the EOR assists with employment contracts, payroll, tax withholdings, and local compliance. 

EORs are a good option for companies that don’t want to set up legal entities in Colombia. They also help mitigate compliance risks.

Learn more in our Employer of Record Colombia guide.

Where to find employees in Colombia

Once you’ve decided how you want to hire in Colombia, the next step is knowing where to find qualified talent. Here are a few of the most effective ways.

1) Popular job boards in Colombia

Some of the most widely used job boards include:

• LinkedIn
• Indeed Colombia
• Computrabajo
• Magneto
• Elempleo (for the IT sector) 

Thanks to these job boards, you can have a job advertisement online and start receiving applications quickly.

2) Work with local recruitment agencies

Partnering with a recruitment agency in Colombia can speed up the hiring process, especially if you’re on a time limit or need help navigating language barriers. 

Agencies typically offer pre-screened candidates and local hiring expertise, but keep in mind that this will come at an additional cost.

3) Recruit with the support of an EOR

To streamline the process, an Employer of Record like Payoneer Workforce Management can support U.S. companies hiring in Colombia.

While your team still manages candidate interviews and final selection, the EOR supports with employment contracts, onboarding, benefits, and payroll compliance.

Onboarding employees in Colombia

After hiring in Colombia, the employers should follow several steps to ensure their new employee is set up and ready to work. 

• Collect and verify key documents, including national ID, proof of address, etc
• Register the employee with Colombia’s social security, pension fund, and occupational risk administrator
• Set up the employee’s tax identification and ensure proper tax withholding
• Provide access to internal systems like email, HR platforms, and productivity tools
• Deliver company devices or equipment, if applicable
• Offer onboarding materials and training in both English and Spanish (especially if your primary business language is not Spanish)
• Set up payroll processing, local benefits, and leave tracking in accordance with Colombian labor laws
• Schedule a company orientation session and provide an overview of company policies and culture
• Introduce the new hire to their team and key internal contacts

For companies hiring through an EOR like Payoneer Workforce Management, much of this process (particularly around tax setup, benefits, and payroll) is handled on your behalf, making the onboarding process smoother for everyone. 

Key employment laws and requirements in Colombia

Before you hire in Colombia, understanding the basics of local labor law is essential. Here are some of the most important legal considerations.

Employment contracts

Under Article 37 of the Colombian Labor Code (Código Sustantivo del Trabajo), employment contracts may be verbal or written. However, written contracts are strongly recommended to protect both parties and clarify the terms of employment.

According to Article 39, an employment contract in Colombia should include:

• Full identification and address of both the employer and the employee
• Date and place of execution of the contract
• The location where the services will be performed
• A description of the job duties
• The amount of remuneration, how it will be paid, and the payment frequency
• An estimate of the value of any perks (e.g., housing or meals)
• The duration of the contract (fixed-term or indefinite), as well as termination conditions

Employee benefits

Employees in Colombia are entitled to a range of mandatory benefits under local labor laws. These include:

• Vacation and PTO: 15 consecutive working days of paid vacation after 1 full year of service
• Sick leave: Up to 180 days in the event of a non-occupational illness or injury
• Parental leave: 18 weeks of paid leave for mothers, 2 weeks for non-birthing parents
• Public holidays: Colombia has 18 national public holidays
• Social security contributions: Employers contribute to health insurance, pensions, occupational risk insurance, and family welfare funds
• Service bonus: A mandatory bonus equal to 1 month’s salary, paid in 2 installments (mid-year and end-of-year)

Working hours and overtime

The standard workday in Colombia is 8 hours per day, up to a maximum of 42 hours per week. These hours can be distributed across 5 or 6 days, depending on the company’s policy.

Employers and employees may agree to flexible schedules, as long as they don’t exceed the legal maximum. Overtime is permitted but must be compensated accordingly, with higher rates for night work, weekends, and public holidays.

Income tax 

Employers have to withhold employee taxes in Colombia. Income tax in Colombia is charged at a progressive rate, with 7 tax bands ranging from 0% to 39%. 

These tax bands and thresholds are not fixed in the local currency. Instead, they are based on a monthly tax unit (TU), which is constantly adjusted for inflation. In July 2025, the TU is valued at COP 49,799 ($12.19). Withholdings must be reported and paid to the tax authority (DIAN) every month.

Social security

Employers must contribute to Colombia’s social security system, which includes:

• Health insurance (EPS): Employers and employees contribute 8.5% and 4% of the employee’s monthly salary, respectively.
• Pension fund (AFP): Employers and employees contribute 12% and 4% to the pension system, respectively.

Termination and severance

Terminating an employee in Colombia must follow strict legal procedures to avoid disputes and penalties. There are two potential scenarios:

• Termination with cause: If an employee breaches the terms of the employment contract, the employer must document the reason and notify the employee in writing. No severance payment is required if dismissal is justified and legally supported.

• Termination without cause: Employers can terminate a contract without cause, but must provide written notice and pay severance. The amount depends on the employee’s length of service and salary level.

For indefinite-term contracts, severance is equal to 30 days’ salary for the 1st year of service, plus 20 days’ salary for each additional year (or proportionally for partial years).

Note: Employers must also ensure timely payment of unused vacation days, the legal service bonus (Prima), and contributions to the severance fund (Cesantías).

Payoneer Workforce Management helps hire employees in Colombia

Hiring in Colombia comes with a unique set of legal, tax, and administrative requirements, from drafting contracts and registering with the tax authorities to managing payroll, benefits, and severance. For U.S. companies hiring in Colombia, navigating all this can be time-consuming, expensive, and risky.

That’s where Payoneer Workforce Management comes in.

It is a platform that helps you hire and pay full-time employees and independent contractors in 160+ countries (including Colombia) without the need to set up a local legal entity.

With Payoneer Workforce Management, you can:

• Onboard talent in Colombia quickly and compliantly
• Run secure, global payroll in a few clicks
• Get support to navigate compliance requirements and more

From fast onboarding to compliant, multi-currency payroll, Payoneer Workforce Management helps streamline the process, so you can focus on growing your global team.

Ready to hire in Colombia? Talk to our experts or request a demo today.

FAQs

1) How to hire employees in Colombia?

There are three avenues for American companies hiring in Colombia:

1. Set up a legal entity: This allows you to hire employees directly and operate as a local employer. However, it involves significant time, cost, and ongoing compliance responsibilities, so it is best suited for companies planning a long-term presence in Colombia.

2. Hire independent contractors: For short-term or project-based work, you can engage Colombian contractors. It’s a flexible and cost-effective option, though you must ensure proper classification to avoid legal and tax penalties. 

3. Use an Employer of Record: An EOR acts as the legal employer on your behalf. You manage the day-to-day work, while the EOR helps handle employment contracts, payroll, taxes, benefits, and compliance.

2) How do I hire a Colombian employee for a U.S. company?

Partnering with an Employer of Record can help you engage Colombian talent without setting up a local entity while helping you stay compliant with Colombian labor laws.

An EOR assists with employment contracts, payroll, and benefits, allowing your U.S. company to hire employees in Colombia without establishing a local office.

3) What is the work culture in Colombia?

Colombian work culture values respect. When meeting new people, it’s best to address people with their appropriate titles, then let them initiate a transition to a first-name basis. 

Social interaction plays an important role in the workplace. Small talk and friendly chats should precede any serious discussion of business. Expect meetings to be lengthy. Punctuality is very important.