US company hiring in Colombia: what American teams need to know

Most US firms arrive in Colombia because of working hours. Bogotá, Medellín and Cali run on one clock all year, with no daylight saving change, so a team there shares most of the business day with New York, Chicago or Austin. For support desks, engineering squads and sales development teams that need live overlap rather than overnight handovers, that alone settles the shortlist.

The second reason is predictability. Colombian employment costs are set by statute: a minimum wage fixed each year by decree, contribution rates written into Ley 100 de 1993, and prestaciones that fall due on known dates. A US finance team can model a Colombian salary in a spreadsheet and the model holds, provided it includes all of the statutory items and not only the base pay.

What does not travel well is the US employment model itself. A Colombian employee works under the Labour Code (Código Sustantivo del Trabajo), whatever the nationality of the company directing the work. At-will termination, open-ended non-competes and pay in dollars through a US payroll all run into Colombian rules. The sections below go through each friction point and the order in which a first Colombian hire usually comes together.

Realistically there are three routes from a US head office: a services contract with the person, a Colombian SAS of your own, or a Colombian contract held by an employer of record.

Contractor. A contrato de prestación de servicios is quick to sign, but Colombian law starts from the assumption that someone personally doing work for you is your employee (Labour Code, art. 24), and it is your job to rebut that. Fixed hours, instructions from your managers, your laptop and a single client point towards employment, whatever heading the document carries. The UGPP, the agency that audits social security contributions, can then claim the missing contributions, and an official assessment may add penalties reaching double the shortfall, with interest running on top.

Your own SAS. The Sociedad por Acciones Simplificada is the usual vehicle. It is formed by private document, authenticated and registered with the Cámara de Comercio, needs no minimum capital and must have a legal representative. After that come tax registration with DIAN, bank accounts, employer affiliations and a monthly filing calendar. It makes sense once a team is large and permanent.

Employer of record. Here the contract carries the EOR’s name as employer. The EOR handles affiliations and the monthly pay run; your managers keep setting priorities and reviewing output. Before signing with any provider, run through the questions in our piece on choosing an EOR in Colombia.

A Colombian employment contract is a statutory document rather than a short offer letter, and several US habits need to come out of it. Indefinite-term employment is the default under article 47 of the Labour Code; the fixed-term and project variants are the exception, need a signed document, and since the 2025 reform a fixed-term relationship tops out at 4 years overall.

• Probation exists only if agreed in writing, and it lasts at most 2 months.
• Hours: the ordinary week has been capped at 42 hours since 15 July 2026, at no more than 8 hours a day.
• Termination: an indefinite contract ended without a just cause triggers a statutory indemnity; the US at-will default has no Colombian equivalent.
• Non-competes: post-exit restraints are void under article 44, so leave the US template clause out.
• IP: ownership of work product leans on a written contract, so put the assignment clause in the signed document.

The termination point surprises US managers most. Article 64 prices it: for a permanent employee paid under 10 SMMLV, a month’s pay covers the opening year of service, and every later year adds 20 days’ pay. Our comparison of US and Colombian dismissal rules walks through the table and the groups of workers with extra protection.

Pay is in pesos. Article 134 of the Labour Code wants wages in Colombian legal tender, settled at least monthly for monthly staff, which rules out a dollar wire from a US bank as the salary itself. Agree the salary in COP and let the exchange rate sit on your side of the arrangement.

Colombian pay is built from a monthly salary plus statutory items that a US payroll does not have, each with its own date. Budgeting on twelve salaries alone understates the real cost by a wide margin.

• Service bonus (prima de servicios): a month’s pay per year, split between a June instalment (deadline 30 June) and a December one (deadline 20 December).
• Severance savings (cesantías): one month’s salary per year of service, deposited in the employee’s chosen fund before 15 February of the following year.
• Interest on cesantías: 12% a year on the balance, paid to the employee in January.
• Annual leave: 15 working days of paid vacation after each year of service.
• Public holidays: 18 in 2026, several of them moved to a Monday under the Ley Emiliani.

Staff paid no more than 2 SMMLV get two further items: COP 249,095 a month of auxilio de transporte in 2026, and dotación, a set of work clothes and shoes on three fixed dates. For the professional roles US firms usually hire, salaries sit above that line and neither item applies.

Shared calendars need a second look too. Colombian staff are off on 20 July and 7 August for the independence and Boyacá holidays, and on a string of Mondays created by the Ley Emiliani, while they work through the Fourth of July and Thanksgiving. Agree in advance how release dates and on-call rotas handle the gaps, because since 1 July 2026 a Colombian working a public holiday earns 90% on top of the normal rate.

Income tax is withheld every month under the retención en la fuente table in article 383 of the Estatuto Tributario. Because all payments in a month count together, June and December carry more withholding when the prima is paid, which is worth explaining to a new hire before their first mid-year payslip.

Picture a Bogotá analyst or developer earning COP 8,000,000 monthly: in 2026 the employer spends about COP 128,821,120 over the year, or 34.19% on top of a base salary of COP 96,000,000. That figure assumes an indefinite contract, ARL risk class I and an employer that files Colombian income tax.

The total breaks down into pension at 12% (COP 11,520,000), occupational risk cover at 0.522% (COP 501,120), the family compensation fund at 4% (COP 3,840,000), and the three prestaciones: prima COP 8,000,000, cesantías COP 8,000,000 and interest COP 960,000. Because that pay sits under the 10 SMMLV line, article 114-1 of the Estatuto Tributario removes three employer charges: the 8.5% health share and the SENA and ICBF levies. Without that exemption the same employee would cost COP 12,960,000 more.

On the employee side, the same person takes home COP 93,054,000 in cash through payroll over 2026 after health, pension and solidarity-fund contributions and monthly withholding. Cesantías and their interest arrive on top in early 2027.

US readers comparing this with FICA and FUTA will find a line-by-line comparison in our guide to US and Colombian employer costs. Any EOR fee is billed on top of those statutory amounts. Ours, for Colombian staff, is from USD 560 per employee per month.

The legal steps before a Colombian hire starts are few but strictly timed, and the first one has to happen before day one. Cover by an occupational risk insurer (ARL) starts the calendar day after affiliation, which is why the affiliation has to be lodged no later than the eve of the start date.

The new hire also needs an EPS for health, Colpensiones or an AFP for the pension, and a caja de compensación familiar. From then on the employer self-assesses every contribution on the PILA each month; its due date is a business day from the 2nd to the 16th, fixed by the NIT’s final digits. Withheld income tax goes to DIAN on a separate monthly return, and the electronic payroll record (nómina electrónica) reaches DIAN by the tenth day of the month following each payment.

With an EOR, these steps move off your desk. Employer of Record Colombia handles affiliations, the contract and each monthly run; our step-by-step EOR onboarding timeline for Colombia shows what happens in which week. Your side is the offer, the salary decision and the person’s first assignments.

Before work starts, settle who owns what the employee creates; this article on IP in Colombia explains the default rules.

British companies face a similar set of questions, answered in our guide for UK firms hiring in Colombia.

A US national who will be employed by a Colombian employer needs a visa that allows that work, and the digital nomad visa is not it. Resolución 5477 reserves the visa V nómada digital for people working remotely for employers abroad; anyone on a Colombian payroll falls outside it.

Most employees in that position apply for the visa M trabajador: the Cancillería grants it for a maximum of 3 years, and it only authorises the job and employer it names. The employer’s side of the file is heavy: a signed contract summary, a motivation letter on why no Colombian candidate was chosen, and four months of bank statements averaging at least 100 SMMLV of monthly income. The official text is on the Cancillería normogram.

Once in the country, the American has 15 calendar days to request a cédula de extranjería. On the employer’s side, Migración Colombia must hear of the hiring inside 15 days, and RUTEC, the Ministry of Labour’s foreign-worker register, inside 120. Tax residence follows after more than 183 days in Colombia within any 365-day period, at which point worldwide income becomes taxable there. Plan the visa before fixing a start date. Cancillería’s rules give it 30 calendar days to decide a complete application, longer if other agencies are consulted, and nobody can promise the outcome.

Q01Must an American parent form a SAS before employing anyone in Colombia?+

A.Yes. The EOR becomes the legal employer on the Colombian contract, enrols the worker with each required body (EPS, ARL, caja and a pension fund) and files the PILA every month, while your managers direct the work.

Q02Is a dollar salary possible for someone on a Colombian contract?+

A.Not as the contractual salary. Colombian wages are owed in pesos and paid at least monthly. Agree the salary in COP and manage the exchange rate on your side.

Q03Does at-will employment apply to Colombian staff of a US company?+

A.No. Colombian law governs the employment, so an employer that ends an indefinite contract without a just cause owes the indemnity that the Labour Code sets in its article 64, and some groups need Ministry of Labour authorisation first.

Q04What percentage do statutory items add to a Bogotá salary?+

A.Roughly a third. Our 2026 Bogotá example at COP 8,000,000 monthly lands at 34.19% above base pay once pension, ARL, the caja and the three prestaciones are counted. Salaries of 10 minimum wages or more cost more because health, SENA and ICBF then apply.

Q05Can a US hire work from Colombia on a digital nomad visa while on a Colombian payroll?+

A.No. The nomad category exists for people whose employer or clients are abroad, so a Colombian employment relationship disqualifies it. A person on a Colombian contract normally needs a worker visa or another status that permits that job.