A Guide to PEO and EOR Services in Colombia

Colombia is one of Latin America’s most attractive investment destinations, but navigating its labor and compliance requirements can be complex. A Professional Employer Organization (PEO) or Employer of Record (EOR) in Colombia allows international companies to legally hire local employees before company formation in Colombia. Biz Latin Hub provides compliant PEO and EOR services from Bogotá and across Colombia to help you expand with confidence. This guide explains the specific payroll loads and benefits required by the Colombian Labor Code when hiring through an EOR.

What Is a Professional Employer Organization (PEO) in Colombia?

A Professional Employer Organization (PEO) in Colombia functions similarly to an Employer of Record (EOR), though the two terms are often used interchangeably. Many providers also market themselves as PEO payroll companies because payroll services are among their most in-demand services.

A PEO handles a broad spectrum of employee-related responsibilities, including drafting legally compliant contracts, managing statutory leave allowances, ensuring accurate salary and bonus payments, and maintaining compliance with tax and social security obligations.

By partnering with a PEO firm in Colombia, you benefit from their local expertise and established networks while eliminating significant administrative and compliance burdens. Moreover, you bypass the complexities of company formation and subsequent liquidation, making PEO services particularly appealing for businesses seeking a streamlined entry into the Colombian market.

This model is especially advantageous for companies looking to:

• Hire a small number of senior staff to manage operations or lead regional initiatives.
• Employ professionals on a short-term or project-specific basis, such as software developers for a dedicated project.

The legal framework governing PEOs in Colombia is rooted in the Labor Code, which defines the obligations of employers and the employer-employee relationship. Additionally, the government has introduced specific regulations covering tax and social security compliance for PEOs.

Key Advantages of PEO and EOR Services for Expanding into Colombia

There are many advantages to working with a PEO in Colombia. Hiring through a PEO allows foreign companies to operate without the need to establish a local entity. This is particularly beneficial for companies looking to test the market before committing to a full-scale expansion.

Without the delays associated with establishing a local entity, companies can quickly hire employees and begin operations. In this way, using an PEO can help companies accelerate their time-to-market. Moreover, when the time comes for you to close operations in Colombia, your market exit will be completed in only the time it takes for staff hired via a PEO firm to serve their statutory notice period.

Another advantage of working with a professional employer organization in Colombia is the immense network that is already established for recruitment including the knowledge of the best educational institutions and local companies that ideal candidates may have experience with. Hiring through an EOR in Colombia allows companies to access a wider pool of talent across the country.

Moreover, the PEO can handle the complexities of employment law across different regions, and allow a company to hire in multiple jurisdictions, making it easier for them to expand their operations. EORs in Colombia offer a high level of flexibility in terms of employment arrangements. They can handle short-term or project-based contracts, part-time, and provide support for employees across multiple jurisdictions.

In addition, PEOs in Colombia have a deep understanding of the local employment market, labor laws, and cultural norms. This expertise can be invaluable for companies looking to navigate the complexities of doing business in the country. Working with a professional employer organization in Colombia will guarantee that you avoid legal inconveniences and financial penalties for non-compliance.

Finally, PEOs handle all aspects of HR administration, including payroll, benefits, taxes, and compliance. This can significantly reduce the administrative burden on the company, freeing up time and resources to focus on core business operations.

Benefits of Using PEO & EOR Services in Colombia:

• Hire Colombian staff without forming a local company
• Ensure compliance with Colombian labor laws (Código Sustantivo del Trabajo)
• Manage payroll, contracts, and social security (PILA system)
• Accelerate your market entry and reduce overhead costs
• Flexible solutions for both short- and long-term hiring
• Support from bilingual employment and legal specialists

What Does a Professional Employer Organization (PEO) in Colombia Do?

A PEO in Colombia will take care of the regulatory and compliance concerns that are related to having employees in the country. They will also inform you if changes to the relevant regulations are due to occur; These are some of the labor regulations a PEO in Colombia takes care of:

1. Working hours: Colombia has a standard working week of 48 hours long, generally made up of six days lasting eight hours each.
2. Overtime: Employees mustn’t work more than two hours of overtime per day. Your professional employer organization in Colombia will make sure compliance is a top priority, including overtime restrictions and wage duties.
3. Paid vacations: After 12 months of employment, an employee is entitled to 15 consecutive days of paid leave, of which they must take at least six days during the following 12 months.
4. Bonuses: Colombia, like many Latin American countries, has a ‘13th salary’ bonus that employees are entitled to — consisting of a full month’s salary, usually paid in two installments in the middle of the year and at the end of the year. A reliable professional employer organization in Colombia will fully understand these matters and have them handled timely.
5. Parenthood leave: Mothers are entitled to 18 weeks of maternity leave, which can be extended to 20 weeks, and by law must start at least a week before the due date of the birth, while fathers are allowed eight days of paternity leave.
6. Voting leave: In Colombia, employees are entitled to half a day of personal leave to vote in local and national elections, should they fall on a work day.
7. Trade union leave: Employees are entitled to personal leave in order to serve on a trade union committee.
8. Minimum wage: As of January 2024, the minimum wage was set at COP$1.3million per month (approximately USD$340). If minimum wage fluctuates, a quality professional employer organization in Colombia will be able to adapt the company to meet compliance standards.

Expert Tip: The February 14th Deadline

From our experience, the payment of Cesantías is a critical compliance date. While the funds are deposited into the employee’s fund by February 14th, the Interest on those Cesantías (12% per year) must be paid directly to the employee by January 31st. Missing these specific dates results in a penalty of one day’s salary for every day of delay. We advise strict adherence to this calendar.

PEO vs. EOR: Which Is Right for Your Business?

When expanding into Colombia, businesses often choose between a Professional Employer Organization (PEO) or an Employer of Record (EOR) to hire and manage employees.

• PEO (Professional Employer Organization): A service provider that supports companies with a local entity establishment and then managing payroll, benefits, and HR compliance. While entity setup requires initial time and investment, it offers greater stability, talent attraction, ability to build a long company culture and reduced permanent establishment risks.
• EOR (Employer of Record): A third-party provider that legally hires employees for companies, handling payroll, taxes, and compliance. It enables quick market entry without a local entity but may have limitations for long-term operations. EOR services are legal in Colombia, allowing companies to hire employees without establishing a local entity.

Note that EOR and PEO are often used interchangeably and, in some cases, may even mean the same thing, as their meanings can vary depending on context, local legal frameworks, and business local norms. In Colombia specifically, many providers market themselves as PEO payroll companies because payroll services are among their most in-demand services.

Important Tip: While an EOR provides a quick-entry solution for testing the Colombian market, establishing a legal entity and working with a PEO typically offers greater control, long-term cost efficiency, reduced permanent establishment risk, stronger legal standing, and better talent attraction in Colombia. Biz Latin Hub offers both EOR and PEO solutions, helping businesses navigate Colombia’s complex labor regulations, establish entities, and ensure full HR compliance with local employment laws. Whether you need a fast market entry into Colombia or a stable long-term presence, we can guide you through the process.

How to Choose the Right EOR or PEO in Colombia

Feature — PEO Colombia — EOR Colombia

Legal Employer — Client (requires entity) — Biz Latin Hub (acts as legal employer)

Hiring Speed — Moderate — Fast

Compliance Responsibility — Shared — Handled entirely by EOR

Best For — Companies with legal presence — Fast-entry projects and testing markets

Contract Ownership — Company-employee — EOR-employee

Use this comparison to determine whether a PEO or EOR model aligns with your hiring and operational goals in Colombia.

How to use a payroll calculator for a PEO or Professional Employer Organization in Colombia

If you want to get an idea of the possible costs involved with a PEO in Colombia, using a payroll calculator is one way to get a good estimate.

A payroll calculator will give you the opportunity to look at costs while varying the salary, the number of employees, the country you want to enter, and the currency you wish to work in. As such, you will be able to understand your likely costs across a range of salaries, while also being able to compare other countries as potential alternative destinations.

You can find the BLH payroll calculator at the bottom of our Hiring & PEO Services page. The calculator will allow you to make good estimations of the costs involved in hiring in Latin America and the Caribbean based on country, currency, and salary, with the calculator factoring in local statutory deductions.

To use the BLH payroll calculator, you will need to undertake the following steps:

Step 1: Select the country

Choose the country where you are doing business, or planning to launch. This feature will be useful when it comes to comparing potential alternative markets.

Step 2: Select the currency you wish to deal in

You can choose between US dollars (USD), British Sterling (GBP) and Euros, as well as the local currency for the country you are looking at, compared to what is most convenient for you. Note that for Ecuador, El Salvador, and Panama, the local currency is also USD, as they have dollarized economies.

Step 3: Indicate an employees monthly income

Here you can indicate the expected salary you will be paying an employee, in the currency of your choice.

Step 4: Calculate your estimated costs

Based on all of the information you have provided, you will receive results indicating your estimated costs, including a breakdown for estimated statutory benefits you will be liable for.

Step 5: Compare your costs to other options

With a good estimate at hand of how much your staff in Colombia would be, if you are flexible about your expansion into Latin America and the Caribbean, you can use the BLH payroll calculator to compare those costs to other jurisdictions.

Why should I Invest in Colombia?

The economy has been growing consistently over the years. In 2022, despite the challenges posed by the COVID-19 pandemic, GDP grew by 7.3%. Colombia ranked 67th out of 190 countries in the World Bank’s Ease of Doing Business Index 2020.

The country has free trade agreements with multiple countries, including the United States, Canada, and the European Union. Forming a company in a country with free trade agreements offers many benefits, and a knowledgeable PEO, or Professional Employer Organization in Colombia can help you take advantage of them.

In addition, Colombia boasts a well-educated and skilled workforce. The country has over 600 universities and technical institutions, producing a pool of talented professionals.

Colombia is recognized for its strong engineering programs and has a growing number of graduates in technology-related fields. Hiring through a PEO or Professional Employer Organization in Colombia can help your company hire from this highly skilled talent pool.

The country is an attractive location for business opportunities, investment, skilled workforce, infrastructure development, tourism, and a safer operating environment. To take advantage of these opportunities, it is beneficial to work with a reliable PEO or Professional Employer Organization in Colombia.

FAQs on hiring through a PEO or Professional Employer Organization in Colombia

Based on our extensive experience, these are the common questions and doubts of our clients on hiring through an EOR or PEO in Colombia:

1. How does one hire employees in Colombia?

You can hire an employee by incorporating your own legal entity in Colombia, and then using your own entity to hire employees or you can hire through an Employer of Record (EOR), which is a third party organization that allows you to hire employees in Colombia by acting as the legal employer. Meaning you do not need a Colombian legal entity to hire local employees.

2. What is in a standard employment contract in Colombia?

A standard Colombian employment contract should be written in Spanish (and can also be in English) and contain the following information:

• Additional benefits (if applicable)
• ID and address of the employer and employee
• City and date
• The location where the service will be provided.
• Type of tasks to be carried out
• Remuneration and bonifications/commissions (if applicable)
• Method payment frequency
• Duration of the contract.
• Probation period
• Work hours

3. What are the mandatory employment benefits in Colombia?

The mandatory employment benefits in Colombia are the following:

• Overtime and surcharges (if applicable)
• Working tools necessary to carry out the work (if applicable)
• Payment of social security contributions (health, pension, and labor risks).
• Social benefits (service premium, severance pay, and interest on severance pay).
• Paid time off (vacation and Sunday rest).
• Disabilities (common or labor origin).
• Transportation allowance (if applicable)

4. What is the total cost for an employer to hire an employee in Colombia?

The total cost for an employer to hire an employee varies based on the salary structure, as in Colombia there are two types of salary structure. These are ordinary salary (salario ordinario) and integrated salary (salario integral). The total cost to the employer for mandatory employment benefits via an ordinary salary is between 40% and 55% and via an integrated salary is between 20% and 35% and is additional to the employee’s gross salary.

5. What is the difference between hiring through an EOR and forming a legal entity?

The best decision depends on the needs of your company. Forming a legal entity has the following characteristics:

• Slower to establish.
• Permanent presence in the country.
• All costs deductible through a local entity.
• Ability to sign contracts and agreements locally.
• Ability to invoice through local entity.
• Legal entity compliance support required.

6. What is the difference between a PEO and an EOR?

A PEO works with your company as a co-employer, while a EOR is the legal employer of your employees. An EOR can provide more services than a PEO.

7. What is a PEO and how does it work in Colombia?

A PEO in Colombia provides HR, payroll, and benefits support while your company retains employer status — ideal if you already have a local legal entity.

8. What is an Employer of Record (EOR) in Colombia?

An EOR acts as the official employer, allowing you to hire local staff legally without registering an entity — Biz Latin Hub assumes all compliance responsibility.

9. Can I later switch from EOR to my own legal entity?

Yes. You can migrate employees from EOR to your Colombian company at any time with Biz Latin Hub’s support.

10. Are these services compliant with local laws?

Yes. Biz Latin Hub ensures compliance with labor laws, tax regulations (DIAN), and social security systems (EPS, ARL, pension).

Biz Latin Hub can be your PEO or Professional Employer Organization in Colombia

At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in 17 key cities around the region, including Brazil’s economic hub Sao Paulo.

Our portfolio includes accounting & taxation, company formation, due diligence, hiring & PEO, and corporate legal services, while our unrivaled regional presence means we are ideally placed to support multi-jurisdiction market entries and cross-border operations. If you need a PEO firm in Colombia, we are ready to help.

Contact us today to find out more about how we can assist you.

If you found this article on hiring through a professional employer organization in Colombia of interest, you may want to check out the rest of our coverage of this South American country. Or read about our team and expert authors.