Hire Contractors in Colombia

As more than half of the Colombian workforce is self-employed, remote workplace trends are catching up in the country. 

This creates favorable conditions for global companies to hire contractors in Colombia and leverage the global workforce without complex HR compliance. 

The global talent pool offers expertise across various industries, making it an attractive option for businesses seeking to fill specific needs or scale their operations in Colombia.

But how do you tap into this potential while navigating the complexities of hiring contractors in Colombia? 

This comprehensive guide explores the key considerations, challenges, and solutions for contractor management in Colombia. 

Read on to learn how to hire an independent contractor in Colombia.

How to Hire Independent Contractors in Colombia

The best approach to hire contractors in Colombia depends on your specific needs and risk tolerance:

• Direct hiring: Suitable for small-scale projects with a willingness to manage labor law & payroll complexities.
  • However, this is a complicated process.
    • You need to define clear requirements for the project.
    • Source candidates via job boards, and recruitment agencies.
    • Negotiate and design a contract as per contractor laws in Colombia.
• AOR services: Ideal for simplifying hiring contractors in Colombia.
  • You can partner with Skuad AOR, and the team will take care of contractor management, from onboarding to payments.

Hiring contractors through Skuad AOR

• Skuad’s Agent of Record (AOR) is a platform that helps businesses hire and manage international contractors. 
• We offer various services, including onboarding, compliance, invoicing, and payments. 
• Skuad can help businesses avoid misclassifying their contractors, which can lead to expensive penalties.
• We also offer IP protection and built-in contractor management processes.

How to pay contractors in Colombia

Here are your options for paying an independent contractor in Colombia:

• Direct Payments:‍
  • This method offers you more control over the transaction.
  • Services like PayPal or Payoneer can facilitate international payments to contractors.
  • You must handle currency fluctuations if paying in a currency different from the Colombian Pesos (COP).

• Agent of Record (AOR) Services like Skuad:
  • Skuad is a contractor software application that allows the contractor to submit an invoice outlining the completed work and agreed-upon payment terms.
  • You (the client) review and approve the invoice within Skuad's platform.
  • Skuad takes care of all the complexities of your contractor's Colombian payroll.
  • Skuad sends the net payment (after tax and social security deductions) to the contractor in their preferred currency.

Challenges of Hiring Contractors in Colombia

While Colombia boasts a talented workforce, it may be a challenging endeavor to hire contractors in Colombia. Let’s list out the hurdles you might encounter:

1) Navigating Complex Colombian Labor Laws

Hiring contractors in Colombia & onboarding them involves strict compliance with complex labor laws. Here's a deeper dive into this challenge:

• Stringent definitions: Colombia's Substantive Labor Code (Código Sustantivo del Trabajo) outlines clear legal definitions for employees vs. contractors. These definitions go beyond just basic job titles and delve into the details of the working relationship:
  • Minor control over a contractor's work schedule, tools, or specific tasks can be interpreted as an employer-employee relationship.
  • Moreover, if the contractor heavily relies on your company for work and income, it favors the argument for an employee classification.
  • If companies hire contractors in Colombia to work alongside regular employees closely and use company infrastructure extensively, it might be seen as an employment relationship.

• High stakes of misclassification: Misclassifying an employee and non-compliance with contractor laws in Colombia can lead to severe consequences for companies:
  • The Colombian government can impose hefty fines on companies found to misclassify workers as independent contractors in Colombia.
  • Companies may be required to make back payments for social security contributions, health insurance, and other benefits the contractor should have received as an employee.
  • Non-compliance can also lead to lawsuits from the worker claiming unfair treatment and demanding employee benefits.

• Background checks: Companies have limited options to conduct background screenings, such as immigration or education screenings or past employment checks while hiring an independent contractor in Colombia. Moreover, companies require explicit consent from candidates before running any background checks. 

2) Managing Payroll Challenges

The most straightforward answer to how much it costs to hire a contractor in Colombia depends on fulfilling the local payroll requirements:

• Strict tax rules: 
  • The Colombian government is actively enforcing compliance for national and foreign companies through the Pension and Social Security Unit (Unidad De Gestión Pensional y Parafiscal or "UGPP"). 
  • Companies must be extra diligent in misclassifying their employees as independent contractors in Colombia for undue benefits. 
  • This can even lead to penalties and back payments for social security contributions.

• Documentation for foreign exchange: 
  • While payments to independent contractors fall under the non-regulated foreign exchange market, it's still recommended to document the purpose and nature of the payments using the Central Bank's Form No. 5 to avoid unnecessary scrutiny.

• Intellectual property ownership: Similar to the Colombian contractors in the US, independent contractors in Colombia retain ownership of intellectual property they create unless a written agreement transfers ownership to the company.
• Lawsuits from misclassified employees: Companies that misclassify employees as contractors risk lawsuits for unpaid benefits like vacation and social security.‍
• Currency fluctuations and foreign exchange management: Currency fluctuations can complicate international companies' payroll management in Colombian Pesos (COP). 

3) Facing Hiring Issues

Hiring contractors and employees in Colombia is challenging for the following reasons:  

• Language barriers: Spanish is the primary language of business in Colombia. This can create communication challenges, especially for companies working with remote contractors who may not be fluent in English. 
• The large informal economy: While the informal economy facilitates engagement with independent contractors in Colombia, finding documented and qualified contractors who can legally work for your company is challenging. 

• Technology disparity: While internet connectivity and access to technology have improved in Colombia's urban centers, they can vary drastically across regions, especially impacting remote contractors in rural areas. 

Fortunately, we have a proven solution for the listed challenges of hiring independent contractors. 

Global companies expanding in Colombia can partner with an Employer of Record (EOR) like Skuad to help navigate legal and administrative hurdles, ensure compliance, and handle payroll complexities.

Hiring Contractors Directly vs Hiring With Contractor Software via Skuad

This table summarizes the ultimate guide to hiring contractors and employees in Colombia:

Cost of Hiring Contractors in Colombia

The cost of hiring contractors in Colombia is not just the upfront contractor fee but also includes various other costs:

• Contractor rates:
  • Highly skilled and experienced contractors will command higher rates than those with less experience.
  • Research typical rates for similar contractors in your industry and location.
  • The complexity and duration of the project will influence the total cost.
  • Moreover, you need not comply with minimum wage laws to hire contractors in Colombia.

• Additional costs:
  • Using specialized contractor management services can incur platform usage fees but can eliminate administrative burdens.
  • Consider the cost of managing the project and the potential communication tools needed for remote collaboration.

How to Convert an Independent Contractor into an Employee in Colombia

Companies hire independent contractors to avoid labor law compliance. However, Colombian laws allow you to convert an independent contractor to an employee for better control over daily tasks. You can start with: 

1. Review the nature of their work - has your control over their tasks and schedule increased?  
2. If yes, draft a formal employment contract, ensuring proper benefits and tax withholding.  
3. Consult an Employer-of-Record (EOR) service provider to help you reclassify contractors to full-time employees. 

• Such contractor software platforms keep their employment history and records intact.
• Furthermore, it helps you comply with applicable payroll taxes, benefits administration & other HR compliance per Colombian labor law,

Hire Contractors in Colombia with Skuad

Skuad simplifies hiring contractors in Colombia, acting as your Agent of Record (AOR). 

Our comprehensive platform empowers organizations to hire, onboard, pay, and manage contractors in Colombia efficiently. 

Skuad handles all the complexities of onboarding and paying contractors alongside contract management, ensuring adherence to local Colombian regulations. 

You can focus on building successful working relationships with your contractors while Skuad mitigates compliance risks and administrative burdens.

Partner with Skuad to unlock the full potential of a global workforce and seamlessly hire qualified independent contractors in Colombia and over 160 other countries without needing a local entity. 

Book your demo today and experience the future of globalized talent acquisition. 

FAQs

1) What is the difference between an employee and a contractor in Colombia?

Colombian worker classification hinges on control. Your company tightly controls employees regarding schedules, tasks, and tools. They rely on your company for income and receive benefits. On the other hand, independent contractors have more autonomy in their work methods and aren't integrated into your daily operations. They're not entitled to benefits, and you don't withhold taxes, but misclassifying them as contractors can lead to legal trouble. 

2) Can I hire an independent contractor overseas?

Yes, hiring independent contractors overseas offers access to a broader talent pool and potential cost savings. Moreover, you must consider complex contractor laws in Colombia, payroll taxes, and cultural differences. 

3) Is it cheaper to hire employees or independent contractors in Colombia?

It is cheaper for global companies to hire contractors in Colombia. However, you'll need to factor in potential misclassification penalties, managing your payroll for contractors, and limited access to skilled talent pools while choosing to hire between independent contractors or employees. 

4) How do I pay an employee living in another country as an independent contractor?

Paying an overseas worker as an independent contractor is simple with contractor software. Keeping in compliance with labor laws in Colombia, standard payment methods include direct bank transfers or online payment platforms (considering fees and currency fluctuations). Ultimately, contractor management software like Skuad can help you pay independent contractors from another country.