Colombia payroll and benefits guide
What global businesses need to know about payroll in Colombia
Colombia’s economic and political landscape hasn’t been especially stable in the past, but it’s currently enjoying something of a boom — its GDP increased by more than 50% in just four years between 2020 and 2024.
This vibrant nation of over 52 million people connects Central and South America, and is supported by a strong industrial and manufacturing sector, including mining, coffee, textiles, and more. Its geographical advantage of having both Atlantic and Pacific coastlines has also helped it build a strong maritime and shipbuilding sector.
However, running payroll in Colombia can be complicated. In particular, the presence of two salary systems — ‘regular’ and ‘integral’ — means that some employees’ payroll will need very different administration than others. This guide covers all the key facts.
Getting Started
Most companies in Colombia set up as simplified joint-stock companies (S.A.S.); there is no minimum start-up capital requirement as long as at least some capital is present. All companies, however, should recruit the services of a lawyer and an accountant to help ensure the setup of the company is fully legal and compliant.
The good news is that Colombia is working hard to strip out much of the red tape and bureaucracy that has hindered the business setup process in the past. As part of this effort, many of the functions can now be completed online.
The first step of setting up a business in Colombia is to register at the Chamber of Commerce: approval should only take around 24 hours. Then you can get all your key documents drafted and notarized, including articles of incorporation, shareholder agreements, and proof of capital. Alongside this, a tax ID number (NIT) can be applied for, from which the mandatory in-country corporate bank account can be opened.
After this, registrations for the Family Compensation Fund, employee health and pension coverage, and the Labor Risk fund should be explored, along with any industry-specific permits and licenses that may be required. A Colombian bank account is required for running payroll and remitting tax and social security money.
Employment Considerations
Collective bargaining is allowed in Colombia, though the practice is likely to vary considerably from industry to industry. Recently there has been a real push within certain parts of the country to encourage more open dialogue between workers and employers in an effort to strengthen the economy. Employment contracts must be in writing.
Colombia has an unusual approach when it comes to salaries. “Regular” salaries work in the same way as in many other countries, where employees’ wages are paid separately from their benefits and social security contributions. However, employees who earn more than 10 times the national minimum wage can instead opt for the “integral” salary, where extras such as overtime and public holiday hours are rolled into one fixed payment. Understanding the differences between the two are important from a payroll perspective, as they will require differing levels of administration.
Colombia has gradually been reducing the length of its standard working week in recent years. On July 15 2025, it was reduced from 46 hours to 44, and it will come down again to 42 hours on July 15 2026.
Overtime pay is defined by employment contract or collective bargaining, and is limited to two hours per day and 12 hours per week. Overtime should be paid at 125% of the employee’s normal rate. Any work conducted between 9pm and 6am as part of a normal working arrangement must be paid at 135% of the normal daytime rate. Any overtime during the nighttime period, for any worker, should be paid at 175%. Employees in managerial positions are exempt from restrictions around standard working hours and overtime.
Unusually, employment contracts can be terminated by either party for any reason at any time, although there are a number of exceptions, such as those who are pregnant, on health-related leave, or are less than three years from retirement. In February 2025, this was expanded to include new or expectant fathers whose partners are pregnant or on maternity leave. If the termination is for poor performance (rather than misconduct), 15 days’ written notice is required.
Probation periods are two months for permanent employees, or the first 20% of the term for those on fixed-term contracts.
Compensation and Severance
The national minimum wage in Colombia has consistently risen every year of late. On January 1 2025, the rate was bumped up by 9.54% to 1,423,500 pesos per month (approx. £260; $355; €300). Unions had been pushing for a 12% increase, and so it’s likely that there will be continued pressure for further increases in the years to come. On top of this, employees who earn less than double the minimum wage should also receive a transportation allowance of 200,000 pesos per month (approx. £35; $50; €40) to help them get to and from their place of work.
The payment of a 13th-month ‘Aguinaldo’ bonus is mandatory in Colombia for regular salaried employees (those on integral salaries don’t receive the Aguinaldo). An extra month’s salary is paid in two halves, one in the first half of June, and the other no later than December 20. Other bonuses may be awarded and vary depending on industries and employment contracts.
Common employee benefits (for regular salaried employees) include internet and mobile phone allowances, meal allowances, fitness allowances and private health insurance. Workers earning less than double the minimum wage are also legally entitled to allowances for clothing and footwear they need for work.
Severance pay varies, depending on the amount the employee was earning. If their monthly pay was less than ten times the national minimum monthly rate, then they receive 30 days’ salary for their first year of service, and an extra 20 days’ salary for every year of service thereafter. For employees earning more, these entitlements are reduced to 20 days’ salary and 15 days’ salary respectively.
Tax and Social Security in Colombia
Like many other countries, income tax in Colombia is levied at progressively higher rates and is withheld by employers at source. The first 56,770,860 COP pesos per year (approx. £10,000; $13,500; €11,500) is exempt, above which the first of six rates kicks in at 19%. The highest rate of 39% is applied to all earnings over and above 1,543,769,000 pesos per year (approx. £283,000; $384,000; €328,000). The corporate tax rate is 35% and the VAT rate is 19%.
There are a variety of different social security schemes and payroll taxes to which both employers and employees must contribute. All of these contributions are applied to a fixed amount of income, which is 25 times the minimum salary. They are not applied to earnings over and above this level. These include:
- Pension: 12% employer, 4% employee
- Health: 8.5% employer, 4% employee
- Solidarity pension fund: 1-2% employee (if employee earns more than four times minimum wage)
- Professional risks: 0.52-6.96% employer (variable according to the level of risk in different occupations)
- Family Compensation Fund: 4% employer
- Family Welfare: 3% employer
- National Apprenticeship: 2% employer
Holidays and Leave
There are approximately 19 public holidays in Colombia each year, and employees are entitled to take these days off. Several holidays that fall midweek are liable to be moved to the following Monday, so that the public can enjoy longer weekends.
Paid leave entitlement is 15 days for all employees with at least one year of service. This is often taken as one large block, determined by the employer at a minimum of 15 days’ notice. However, employees have the right to convert up to half their paid leave entitlement into additional pay instead.
Maternity leave entitlement is 18 weeks at full pay, and although employers are responsible for making these payments, they can then claim the money back from social security. Regular salaried employees receive 100% of salary, and those on integral salary 70%. Paternity leave is two weeks at full pay, and is reimbursed in the same way.
Sick leave should be certified by a registered social security entity in order for sick pay to be authorized. Employers cover full pay for the first two days. After this, the rate is two-thirds of normal pay up to 90 days in total, and then 50% for the following 90 days. As with maternity and paternity pay, employers can claim this money back from social security.
There are also leave entitlements of five days for a marriage, or the death of an immediate family member, and half a day to vote in elections.
Colombia Payroll: A Summary
There are lots of complications from a payroll perspective in Colombia: two different salary systems, changing legislation around working hours, and a relatively complex tax structure. You’ll definitely need access to a lawyer and an accountant to get set up in Colombia, but you’ll also need continuing in-country payroll expertise to keep you on the right side of compliance. This is where a strong partnership with a global payroll provider can be especially helpful.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional. Click here to see more country payroll guides from CloudPay.