Whys and Hows of Professional Employee Organization in Colombia

Look Into the Whys and Hows of Professional Employee Organization in Colombia

Colombia in recent years have become a strong economy in the Latin America due to its business opportunities and fast-growing economy. This combination of the unlimited business activities with the growing economy leads to a rise in direct foreign investment (FDI). The major economic benefits of Colombia are derived from agricultural and natural resources.

Setting up a business in Colombia can be a little challenging as the labour laws are always changing thereby confusing the investors. Hence, Professional Employer Organization in Colombia is the best way to manage the labour force in countries like Colombia where the employment rules and regulations are not clearly defined.

 

Professional Employer Organization

PEO is a company that assist the investors setting up a market in a new place along with smooth working operations. PEO’s can almost take away all the managerial task of the new company in their hands thereby providing the right workforce, managing their payrolls, and meeting all the legal compliances. PEO’s are beneficial for small to medium sized companies thus helping them develop business. The three main services that are provided by a Professional Employer Organization are:

1. Payroll process management
2. Meeting the tax obligation
3. Payment of benefits

 
According to the National Association of PEO, a PEO is responsible for sharing the responsibilities of the managerial task between the PEO who provides the service and the client who requires the services.

PEO is majorly responsible for processing payrolls, providing HR services, protecting the company from the legal laws, however the parent company is responsible for day to day operations and the functioning of the organization. PEO is a part of a company that takes care of a few services and take active part in legal responsibilities.

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Employment Law in Colombia

Since the labour law of Colombia is always changing and is confusing, the investor must gain some amount of knowledge about the employment law and the HR services so that he can protect his own company in case of any legal dispute. Following are the important considerations one must know while hiring staff in Colombia:

Foreign Employers

Before beginning working in Colombia, a foreign worker must have a valid visa, following which the worker receives a written contract from his employer. He owns the same right as the Colombian workers.

Employment Contracts

There are four main types of employment contracts in Colombia:

• Fixed term: This contract is upto three years and can be extended<
• Short term: The contract cannot be larger than a month’s period
• Undefined length: There is no specific period of time defined here.
• Specific task: The contract has details about the specific task along with the time period.

 

Working hours

Working hours of Colombia are 48 hours.

Minimum wage

The minimum wage of the upcoming year is decided at the end of the last year, taking into consideration the annual inflation rate.

Leaves

The no. of leaves allotted to a worker is around 15 days a year.

Pensions

Every employee is entitled to contribute to about 25% to his pension from his salary while the rest of the contribution is made by the company. These financial managerial services can be outsourced so that financial security along with social security is established along with the precise pension payments to the employees.

Insurance or healthcare

A total 12.5% is contributed towards the healthcare where 8.5% is covered by the employer and the rest 3.5% by the employee himself.

Maternity and Paternity Leaves

The paternity leave according to the Colombian labour law is 8 paid leaves while the paternity leaves is around 3 weeks.

 

Why should you adopt PEO services?

Professional Employer Organization in Colombia can be beneficial to the foreign investors who are not familiar with the Colombian employment laws:

• Cost cutting benefits: PEO’s can provide payment benefits to the employees for covering the health insurance, pensions at the rates similar with the larger corporates. This is a cost-effective measure for the new establishments coming up in the Colombia.
• Record keeping: PEO’s as the name says, are a group of Professional people who can help in maintaining the right paperwork to meet the legal compliances and also save your time in maintaining the records as they themselves do it.
• Saves time and allows you to focus on other areas: PEO services usually take away all the administrative work which involves a lot of paperwork thereby being a time-saver and also it will give you time to focus on the other operations.
• Shares limited responsibility: A part of your company’s responsibility are shared by the PEO’s
• Saves money: PEO’s are helpful in forming a legal entity which saves a lot of money.

 
PEO services help you in establishing your stand in the market place of Colombia without you having to undergo the hassle of formation and registration of the new company. The PEO’s are involved in hiring the staff, taking care of the payments of the employees and forming a legal entity in the region and hence it is an effective solution to enter into the Colombia’s market. To those who do not want to complicate themselves by undergoing the business formation in Colombia, PEO services can be a good rescue.