international employment law firm alliance L&E Global

Starting a business in Colombia

1. Introduction

While globalisation has brought the world’s markets closer together, complying with the various multi-jurisdictional legal obligations and responsibilities is becoming more and more challenging, especially after a pandemic situation and new market conditions for potential investors seeking to expand their operations.

Throughout 2020 and 2021, companies in Colombia required assistance with the design of the hiring and employment remuneration structure for their reactivation in the country, with the common goal to guarantee the service provision and continuity of services after more than a year of suspension of activities due to the Covid-19 crisis. In order to make it easier for businesses to satisfy the rigorous conditions imposed by the nation’s laws, obtaining the appropriate legal advice is key when opening up shop in Colombia. The accompaniment of an experienced law office is therefore imperative, particularly since we are expecting important changes in labour and employment matters due to the new government proposals that will likely be issued in the first semester of 2023; and failure to comply with the necessary requirements such as corporate, commercial registrations and labour obligations, could expose the employer to significant legal, economic and even reputational risks.

With more than 15 years in the Colombian legal market, López & Asociados Abogados has earned a reputation for excellence as one of the nation’s most prestigious law firms in labour, employment and benefits services. We would of course be delighted to serve as your strategic partner and assist with your organisation’s Colombian expansion.

2. Labour and Employment Law Requirements

a) Employer Policy Requirements

In order to be legally compliant, employers are required by legislation to create and implement a number of employment policies. The following are required statutory policies for any organisation, which seeks to start hiring employees and develop a commercial activity in Colombia:

  • An employee handbook. An employee handbook is only mandatory for employers occupying more than five (5) employees in commercial companies, more than ten (10) employees in industrial companies, or more than twenty (20) employees in agricultural companies.
  • A written management system of health and safety in the workplace. For implementing the written management system, a study must be done by a professional in health and safety at the workplace to determine specific requirements, depending on the commercial activity intended to be performed.
  • In-house policies. Internal policies to be applied within the company should be designed and implemented, which may include the Code of Ethics, conflict of interest, drugs and alcohol, and lost property, among others.
  • An internal written policy on the right to disconnect. All employees now have the right to avoid any work-related contact outside their working hours and during vacations or any other statutory/contractual leaves. There are certain exemptions, such as employees in management positions.
  • A written policy on teleworking. The necessary conditions required for a safe teleworking environment must be included in the employment contract. Teleworking can only be established by written agreement between the employer and the employee. The employer shall inform the Ministry of Labour of the number of teleworkers employed by the company. This is a topic of continued discussion in Colombia and currently stakeholders in the promotion of remote working/teleworking (such as trade union organisations, business associations and academics) are working together on developing a public policy and consistent approach to teleworking in Colombia; this approach is expected to be rolled out in 2023.

Statutory policies imply certain posting obligations, as well as following a definitive number of requirements and procedures mandated by law for these policies to be valid.

While not a policy itself, every employer must create a special internal body in order to study and attend to complaints regarding harassment in the workplace and a committee of health and safety in the workplace. These bodies consist of representatives of the employer and the employees.

There are several policies which are not mandatory, but which employers should nonetheless create. These policies will help an organisation manage employee relations and mitigate the risk of legal liability:

  • Policies regulating non-statutory benefits (i.e. whether they are in-money or in-kind, their conditions for recognition, whether they are salary or not), if intended to be provided for any or all employees.
  • Policies related to the use of employer tools (computer and mobile phone use, Internet, social media, physical tools, etc.) to ensure employees are aware of the expectations on their use and their nature as a working tool and not salary in-kind.
  • Job Handbook for each position in the company. It is important to establish as an objective of this Handbook, the identification and determination of competencies for the jobs that make up its staff. We would like to highlight that the functions and responsibilities to be fulfilled by each worker must be expressly included in the employment agreement, in order to make them mandatory for such employees.
  • Authorisation of Overtime. Once the company is operational and the process for the implementation of the Internal Working Regulations has been carried out, the corresponding overtime authorisation may be requested before the Ministry of Labour.

For both statutory and recommended policies to be created, our firm has extensive experience preparing and counselling on precedent policies, which can be efficiently adapted to your organisation. In the particular case involving the written management system of health and safety in the workplace, we are available to prepare and provide counsel on the security and safety at the workplace policies, as well as the mandatory safety and hygiene regulations.

b) Employee Training Requirements

Employers are required to provide for, and complete, certain training activities. The following is statutorily mandated training that employers must provide:

  • Train at least one health and work safety representative to enable him or her to exercise the powers and perform the duties of that position. Level of training is established by law and depends on the size of the organisation. However, it is possible (and common) for the organisation to hire a person with the training and/or expertise already required for the position. This training must be performed by an authorised specialist in health and safety in the workplace.
  • Ensure all employees, prior to the start of their employment contract, receive basic training in general and specific aspects of the activities to be performed, including identification control of hazards at work and prevention of work accidents and professional diseases.
  • Employers must define a training program (reviewable at least once a year) to ensure basic knowledge in health and safety awareness for all employees, contractors, and temporary workers.
  • Train the employees who are members of the committee of health and safety in the workplace as well as members of the emergency brigade, in the aspects needed to perform their role in the organisation.
  • Employers with more than 50 employees and a working time of 48 hours-a-week, are mandated to designate two hours of the working time for cultural, sports, recreational or training activities.

c) Employment Agreements

In Colombia, creation of written employment agreements for all employees is not mandatory but is nevertheless recommended. In the absence of a written employment agreement, the employment relationship is deemed by law as an indefinite period employment contract. According to Colombian legislation, any personal service is presumed to be an employment relationship. In such cases, the alleged employer is the one called to rebut the presumption.

While employment agreements offer certain freedom for employers to establish the conditions and rules that govern the employment relationship, provisions cannot be to the detriment of the employee’s rights otherwise established by law.

Written employment agreements are essential to limit the risk of legal liability and financial exposure of the organisation, by setting clear rules for the employment relationship, especially for terms of salary and its form, non-salary benefits, type of contract, working time, position and trial period (which could only be possible in written employment agreements).

3. Corporate Law Requirements

a) Compliance for Incorporation

In order to incorporate a company in Colombia, a number of steps and requirements are needed to ensure legal compliance. Those steps and requirements are as follows:

  • Prepare and file articles of incorporation. Depending on the corporate type, a public deed may be needed. Articles of incorporation should comprise at least the following: name of the corporation, voting rules, corporate structure, legal representative powers and restrictions, shareholders’ rights, appointment of the members of the Board of Directors and their faculties, the appointment of the Statutory Auditor and the composition of corporate bodies, among others. Note: at least one of the legal representatives must be in Colombia and all of them must have a tax number identification in Colombia.
  • Define the organisation’s capital structure.
  • Establish the initial registered office address (at least for notification purposes).
  • Complete, with the National Customs and Tax Department, all the necessary requirements to obtain a Tax Identification Number.
  • Obtain the Mercantile Registry at the Chamber of Commerce of the place in which the corporation will develop its corporate purpose.

Our firm has established relationships with experts in business law, who are available to counsel and coordinate the work for the above requirements to be fulfilled.

b) Post Incorporation Obligations

While not mandatory, there are some steps we consider important post-incorporation:

  • Register trademarks or other intellectual property protections, if applicable.
  • Correspond with a Colombian bank for account opening procedures.
  • Additional registries with local tax authorities.

Please bear in mind that incorporation and post-incorporation registrations may vary depending on the type of entity and industry in which the corporation will develop its business; regulated entities, such as financial, public services or health organisations, will have to comply with additional requirements.

4. Payroll and Benefits Providers

While not a common practice, employers can outsource payroll and benefits administration responsibilities to third party companies. This outsourcing can only include payroll and benefits administration functions to qualified companies specialised in these areas. The outsourcing process cannot extend to a third party to directly pay the salary or benefits of the employees. While López & Asociadosdoes not manage payroll outsourcings, our firm has counselled several (multi)national companies and/or their payroll outsourcing entity on setting their parameters for payroll, benefits and social security contributions, in accordance with Colombian legislation.

Any questions

Ask our member firm López & Asociados in Colombia