international employment law firm alliance L&E Global

6. Cost-Reduction Strategies

To what extent can employers implement the following cost-reduction strategies as a result of COVID-19, and what are the primary limitations on each? 

In order to guarantee the rights of employees, the Ministry of Labour has announced extraordinary investigative procedures (Rigorous Labour Audits) that carry with them severe penalties for violations thereof.

  • Furloughs.

Colombian Law specifies seven circumstances in which a contract of employment could be suspended. During the COVID-19 outbreak, there are, in particular, three that may be used:

    • First, the employer could be prevented from any service by a force majeure. In this event, a notice must be sent to the Ministry of Labour, so they may verify the force majeure.
    • Second, if the activities have been suspended up to 120 days, the employer should petition the Ministry of Labour for authorisation to suspend the contracts of employment, based on technical, economic, or other reasons beyond their will, prior to the commencement of such suspensions.
    • Third, the parties to the contract may freely and willingly agree to the suspension of the contract.

The effect of the suspension of the contract of employment, for any reason, will mainly be a cost reduction, as the employer will not have to pay any salary, wages, entitlements to annual paid leave (vacations) or severance payments to the employee.

  • Salary reductions.

The Colombian government has not enacted any changes with respect to the possibility for the parties to the contract of employment to reduce the salary, or even adjust the shift work to the current and real working conditions. Therefore, as long as any agreement is reached freely and willingly, the parties to the contract may acquiesce to temporarily reducing the employee’s salary.

  • Working time arrangements.

During the National Health Emergency, the parties to the contract could agree to institute special conditions for shift work, in order to avoid crowds in public transportation and workplace settings, as well reducing the overtime payment.

  • Redundancy and Facility closure.

Finally, the law establishes a collective dismissal procedure for employers in case of complete or partial facility closures. Employer should petition the Ministry of Labour for authorisation to terminate the contract of employment of a large number of employees, depending on the headcount, while proving the grounds for the collective dismissal.

Any questions

Ask our member firm López & Asociados in Colombia