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22 January 2014
In the labour law field, the first months of 2014 will be synonymous with modifications and structural changes, which must be understood and applied by companies in order to ensure optimum employer-employee relationships.
Due to recent legislative amendments, some of which came into force at the start of 2014, it is important to review certain payments and contributions that affect the operation and management of payrolls and employees.
Following sessions of the Permanent Agreement Commission of Salary and Labour Politics,(1) which took place with the active participation of unions, pensioners, employers and government entities, and after many years of disagreement, it was finally agreed to increase the legal minimum monthly wage by 4.5% for 2014. This is the highest salary increase over the rate of inflation since the permanent commission was established. Thus, the legal minimum monthly wage increased from $305 (Ps589,500) in 2013 to $319 (Ps616,000) in 2014.
One of the characteristics of employer-employee relationships in Colombia is the existence of a large number of contributions and payments that employers must assume beyond ordinary remuneration. Thus, employers must pay various social benefits and make significant contributions to the Social Security and Social Assistance System for healthcare, labour risk prevention, pensions, family allowance and parafiscal contributions for their employees, leading to high costs connected to labour contracts in Colombia.
In order to deal with the high hiring costs and expensive employer contributions and payments, in 2012 Law 1607/2012 was issued to design and develop tax policies to reduce the contributions and payments made by employers in order to promote the creation and maintenance of formal employment relationships, thus making it easier to hire employees through labour contracts and reducing by a considerable percentage the costs of employment contracts.
Some of these new tax modifications are already effective, while others will take effect in 2014:
Another significant change for 2014 is the completion of the transition regime for the most recent amendments to the general system of social security in pensions. The amendment was published in 2003 but its effect was postponed until 2014 – this time was needed in order to protect certain groups of people who were near to receiving a pension and who would have been seriously affected if the law had become effective immediately. The amendment pushes the pension age back by two years, to 57 for women and 59 for men. In term of weeks, the maximum is 1,275 weeks for women and 1,300 weeks for men for the average premium plan managed by Colpensiones.
These modifications are expected to have a significant impact on labour relationships in Colombia, and companies must be aware of them.
For further information on this topic please contact Diego Felipe Valdivieso Rueda at VS+M Abogados by telephone (+57 1 610 6180) or email (email@example.com). The VS+M Abogados website can be accessed at www.vsmlegal.com.
(1) The entity in charge of discussing the legal minimum monthly wage every year in Colombia, according to Article 56 of the Politic Constitution and Law 278/1996. The legal minimum monthly wage for 2014 was established by Decree-Law 3068/2013.
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Diego Felipe Valdivieso Rueda