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Setting up and managing a payroll in Colombia
Colombia has undergone a period of significant cultural and economic upheaval in recent years, and an increasing number of foreign businesses are looking to the South American country as a target for expansion.
If your organization is looking to expand in Colombia, one of the first steps will be hiring employees locally, and this requires setting up a payroll in the country. While it is certainly possible to do this, Colombia’s unique employment laws, as well as language and cultural barriers, can cause delays and make it a lengthy process for foreign businesses.
One way to bypass the process of setting up a payroll in Colombia is to outsource the complex administrative work and ongoing management. At Horizons, we will establish and run your Colombia payroll, ensuring full compliance with local legislation. Our outsourcing services are perfect for organizations with or without a Colombia-based entity.
Why choose the Horizons payroll solution?
If you have an entity
If you have already established an official entity in Colombia, we offer outsourced payroll support to help you set up and run your Colombia payroll. In addition, we can provide HR, contract, and legal compliance support meaning you won’t have to worry about any of the complex administration and can focus on your expansion efforts.
This service is the perfect solution for any organization that has already registered an entity in Colombia but could benefit from support navigating the unique Colombian employment system.
If you don’t have an entity
If you haven’t set up an entity in Colombia, our Colombian subsidiary can work as your employer of record. Our team will handle all of your payroll, contracts, associated legal work, and associated administration, helping you focus solely on a successful expansion.
This service is ideal for any organization aiming for full flexibility and low risk while expanding into Colombia. You will remain autonomous and have full control over your Colombian workforce while not having to deal with any of the complex administration and compliance work.
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Colombia payroll guide
What are payroll tax and withholdings rules in Colombia?
Employers and employees in Colombia are required to pay a percentage of salaries into various social schemes:
- Health insurance = 8.5% from employers and 4% from employees
- Workplace risk insurance = Between 0.348% and 8.7% from employers, depending on the nature of the work
- Family welfare fund = 9% from employers
- Pension = 12% from employers and 4% from employees
The income tax rate in Colombia is between 0% and 39% depending on income level.
Corporate tax in Colombia is charged at a rate of 32%, but this is set to decrease slightly in 2022.
|
Pension Fund
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12.00%
|
|
Medical Plan
|
8.50%
|
|
Labor Risks
|
0.50%
|
|
Family Compensation Funds
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4.0%
|
|
Total Employment Cost
|
25% |
|
Pension Fund
|
4.00%
|
|
Medical Plan
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4.00%
|
|
Total Employee Cost
|
8.00% |
Tax Units (1 Tax Unit= 35,607 COP) | |
0-1,090 Tax Units | 0.0% |
1,090-1,700 Tax Units + 116 Tax Units | 19.0% |
1,700- 4,100 Tax Units + 788 Tax Units | 28.0% |
4,100- 8,670 Tax Units + 788 Tax Units | 33.0% |
8,670- 18,970 Tax Units + 2,296 Tax Units | 35.0% |
Income between 18,970- 31,000 Tax Units + 5,901 Tax Units | 37.0% |
Income above 31,000 Tax Units + 10,352 Tax Units | 39.0% |
Entitlements and terminations
Termination of employees in Colombia can be difficult, and it is common for employees to take legal action if they feel unfairly treated. To avoid this, it is always best to come to an agreement with employees, which may involve providing a bonus payment.
Employees are generally also entitled to a severance payment upon termination, which equates to one month of salary for every year of service.
How to establish a Colombia payroll
If you have not registered an official entity in Colombia yet, we can provide our more comprehensive payroll service, offering our Colombia subsidiary to work as your employer of record in the country. Our Colombia payroll experts can also manage your HR, contracts, legal compliance, and more.
Alternatively, you can outsource the setup and management of your payroll to Horizons. We will ensure that your expansion into Colombia is as simple as possible, helping you get started in the county faster and more efficiently. Additionally, we can offer our employer of record service, so even organizations without an in-country can benefit from our outsourcing services.
Manage payroll in Colombia
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
