Bolivar Plaza Bogota Colombia

PEO/EOR in Colombia - what you need to know when hiring

Are you planning on expanding your business to Colombia? Perhaps you’re thinking about diving into this South American market but are reluctant to establish an entirely new entity?
 Then, you need to familiarize yourself with Professional Employer Organizations (PEO) and Employer of Record (EOR) services. These services can be tremendous assets for your business, ensuring compliance, talent acquisition, and seamless expansion into a new territory with minimal hassle. But, before you partner with a PEO/EOR company, there are a number of factors to consider to assure the right fit for your business. 

Let’s start by understanding what PEO/EOR services are: 

  • PEO Services: Also known as co-employment, PEO involves a firm that provides human resources services to businesses. They handle tasks such as payroll, employee benefits, and regulatory compliance, leaving you to focus on your core business activities.
  • EOR services: EOR services go a step further than PEO. Essentially, the EOR company becomes the official employer of your staff, taking full responsibility over employee rights and responsibilities, payroll, and compliance with local laws. 

In using these services, you can bypass the complexities of hiring and managing staff in a foreign country, leaving you to focus on running and growing your business. However, with the essential knowledge you need to know when hiring a PEO/EOR company in Colombia, your expansion journey can be less demanding. So, what are these factors?

First and foremost, PEO and EOR-service companies serve as intermediaries in handling international workforce requirements, thereby mitigating any potential risks that may arise with direct employee management abroad. Now, let’s delve into some important aspects to know when engaging PEO/EOR in Colombia. 

Extensive Legal Knowledge

Any credible PEO/EOR should possess vast knowledge about Colombia’s regulations and law. This includes aspects like employment contracts, payroll, health and safety, and worker benefits. As a foreign company, it might be challenging for you to understand all these intricacies. This is where enlisting a knowledgeable PEO/EOR becomes instrumental. And how can you ascertain their expertise? 

  • Verify their experience: Do they have a proven track record in providing PEO/EOR services in Colombia? Ask for case studies or testimonials.
  • Ask them about legal changes: Are they updated on the current laws and rules? A good PEO/EOR should be able to anticipate and adapt to alterations in regulations

What are the legal requirements for hiring through a PEO/EOR in Colombia?

When it comes to hiring in Colombia through a PEO service, there are certain legal requirements that are paramount to be aware of. Understanding these requirements will help you remain compliant with Colombian laws and regulations, and ensure a smooth sailing in your business expansion efforts. 

Firstly, the employment contract. In Colombia, an employment contract can be verbal or in writing. However, for contracts longer than one month, it’s recommended to have a written contract. Your PEO provider should be able to draft a legally compliant employment contract tailored to your needs. 

Minimum wage and benefits is another area to consider. The Colombian government sets the minimum wage each year and must be adhered to. On top of this, there are mandatory benefits such as health insurance, pension contributions, and severance pay. Here’s where a PEO service really shines by managing these complexities for you. 

  • Health Insurance: The employer’s contribution to health insurance is 12.5% of an employee’s wage.
  • Pension Contribution: Employers are required to contribute 12% of an employee’s wage to the pension fund.
  • Severance pay: At the end of every year, employers are required to pay employees an equivalent of one month’s wage for every year worked, or a proportional amount for less than a year.

Another cornerstone of hiring in Colombia is vacation time and holidays. Colombian employees are entitled to 15 consecutive days of vacation per year, and there are 18 national holidays which employees have off work. 

PEO services will typically manage these aspects, helping to ensure you stay legally compliant without the need to familiarise yourself with every minor legal detail associated with hiring in Colombia. This not only simplifies the process but allows you to focus on your core business. 

Lastly, there is the matter of employee termination. The reasons for termination must be clearly stated in the Colombian law, and it’s always wise to consult with the PEO regarding the most appropriate proceeding. Wrongful termination can have severe financial implications, including payment of compensation, severance pay, and potential legal proceedings. 

Indeed, the legal sphere of hiring in Colombia can be complex, but by leveraging the expertise of a reputable PEO service, it’s possible to navigate this landscape with a lot more ease and assurance. In essence, hiring in Colombia doesn’t have to be a formidable task when you have a trustworthy PEO by your side.

Cultural Compatibility 

Are they familiar with Colombia’s cultural norms and business etiquettes? Misunderstanding or neglecting these elements can lead to poor interaction with your staff and potential legal issues. A recommended PEO/EOR should clearly understand and respect Colombian culture. There is one key question you should ask. 

  1. How do they ensure cultural compatibility in their management approach?

Networks and Connections

An effective PEO/EOR should have established networks within the Colombian business realm. Such connections can fast-track the hiring process, provide insights on local talent and offer potential partnerships. Therefore, it’s a crucial point you should consider. What is a good way to gauge their connectivity? 

  • Ask for references: It could be past clients or other business entities they’ve worked with. This will give you a better understanding of their network reach.

Indeed, hiring PEO/EOR in Colombia can take much of the burden off your shoulders. But remember, your chosen PEO should not just be a service provider, but a partner who understands your needs, aligns with your objectives, and commits to nurturing your growth in the Colombian market.

Final Thoughts

When it comes to expanding in Colombia, partnering with the right PEO/EOR service is absolutely crucial. An informed choice can not only streamline your operations, but also foster establishing strong relations with your Colombian workforce, local entities and authorities. So, take your time, do thorough research and make the right choice wisely.

Globedesk has been a trusted PEO/EOR partner in Colombia for several years and has been independently assessed by RemotePad as one of Colombia’s leading PEOs. We pride ourselves in being highly knowledgable in their legal system as well as cultural adaptation for our clients. Are you also considering expanding to Colombia? Reach out to us and lets talk at info@globedesk.one 

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