Country Spotlight: Payroll in Colombia

Ranking number two on the list of the most biodiverse countries, Colombia is one of 17 countries that can be classified as "megadiverse." Colombia is home to over 1/10th of all species on earth, and as National Geographic once claimed, "If Earth's biodiversity were a country, it could be called Colombia."

Colombia's biodiversity is intricate and has various components, making it difficult to keep up with. Similarly, Colombia's global payroll scene is complicated and entangled, making it difficult for individuals to handle.

In situations like this, using a Global Payroll provider is ideal, considering that combing through Colombia's income tax and social security may feel like finding a needle in a haystack due to its intricate combination of salary schemes, varying contribution rates, and exemptions. Outsourcing your payroll needs to a provider like Neeyamo could drastically reduce your workload and make calculating complex payrolls a breeze.

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What is the Colombian Wage Conundrum?

Minimum wage:

Effective January 1st, 2024, the minimum wage in Colombia stands at 1,300,000.00 COP per month.

Employers in Colombia are required to pay their employees a mandatory 13th-month salary in two separate installments. The first payment must be made within the first 15 days of June, and the next must be paid within the first 20 days of December. This payment depends on an employee’s service period. 

Salary Schemes:

Colombians are paid under two different salary schemes: the ordinary salary scheme and the integral salary scheme.

Ordinary Salary Scheme: Under this scheme, employees aren't just paid a regular paycheck. They also get perks like health insurance and extra days off and boosts like severance pay with interest, overtime pay, and bonuses for good work.

Integral salary scheme: Instead of separate payments, integrated salaries give employees a single sum that covers their base pay, extra perks like overtime pay, and mandated pay like social security. This includes a 30% premium and has a minimum threshold for employees earning 13 times the minimum wage.

Tick-Tock Goes the Colombian Clock:

Given the transformative nature of the current work environment, Colombia aims to reduce its employees' work hours from the current 47 hours per week to 42 hours by 2026. With plans to gradually decrease the hours yearly, ensuring accurate hours calculation is essential. Using a time management system such as Neeyamo’s would ease employers’ workload and simplify overtime calculations.

Overtime:

An employee in Colombia who works between the hours of 10 pm and 6 am is eligible to earn 35% more than their respective daytime wages. 

Employees who work overtime during the day in Colombia are entitled to be paid 125% of their regular wage, which increases to 175% of their standard wage for night shift workers. However, certain restrictions are in place, such as a restriction on the number of overtime hours employees are allowed to work in a day/week.

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Time Off in Colombia:

Multiple leave types with specific regulations, varying payment structures, and potential overlap between categories like maternity and annual leave in Colombia demand careful attention to detail. Navigating these intricacies without specialized knowledge can lead to costly errors and frustrated employees, which can be easily avoided using an Absence tracking system like Neeyamo’s.

• Annual Leave: Upon completion of their first year of service, employees receive 15 paid days of annual leave. They must take a minimum of six of these days within the year. Employers seeking to mandate specific leave dates must notify employees 15 days' prior. Employees can also avail cash compensation for up to half of their unused vacation days with a maximum accrual of four years' worth.
• Sick Leave: After four weeks of social security contributions, employees qualify for 180 days of sick leave. The employer covers the first two days at full pay, with the social security system providing two-thirds pay thereafter. Work-related illness or injury entitles employees to a full salary from the social security system.
• Paternity leave: Upon the birth or adoption of a child, eligible fathers are entitled to 10 fully paid days of leave. Eligibility requires at least 100 weeks of social security contributions to ensure full cash benefits.
• Maternity leave: Pregnant employees are entitled to 18 weeks of paid maternity leave, starting two weeks before delivery and extending for:
  • The gestational difference for premature births.
  • Two additional weeks for multiple births or disabled children.
  • Any remaining leave from the mother in case of her death, abandonment, or illness is transferred to the father.

What is the Colombian Tax Labyrinth?

The tax system in Colombia has several exemptions and specifications that must be considered when processing payroll, making it a tedious and lengthy process. But with the help of a Global Payroll Provider, adhering to tricky tax specifications and compliances like those given below will no longer be your burden to carry-

• Complex tax system: Colombia has a complex tax system with progressive tax rates and various deductions and allowances. This can make it difficult for employers to ensure withholding of the correct amount of income tax from their employee's paychecks.
• Employer responsibilities: Employers in Colombia are responsible for withholding income tax and social security contributions from all their employees' paychecks and paying additional local and national payroll taxes. This can be a time-consuming and error-prone process.
• Risk of errors: If employers make errors in calculating or withholding taxes, they may be liable for penalties, fines and interest. This can be a significant financial risk for small businesses and large corporations, who are held responsible for these mistakes.

Handling all this and more can prove to be a distracting burden for employers; using a global payroll provider to handle these complexities would save time and prove cost-efficient. Neeyamo’s Global Payroll provides additional services such as compliance, expenses, benefits, etc. If you want to hire globally, Neeyamo’s Global Tech Stack will meet all your global hiring needs. For inquiries or to know more, contact irene.jones@neeyamo.com or connect with an expert here.