Employee Termination & Liquidations in Colombia

As one of the most attractive Latin American communities, Colombia is known for its foreign investment. However, a couple of challenges that a person faces when starting a business and paying employees.

The Labor Code governs businesses in Colombia. It oversees all employees and employers and controls the employment procedures, such as contracts, salaries, overtime pay, holidays, and social security contributions. All contracts must be written and overseen by an attorney, and every employment term should be spelled out clearly. The Labor Code is subject to change by the new government every four years.

Now that you know the basics about Colombia’s Labor Code, let’s take a look at how to employers deal with employee termination and liquidations:

Employee Termination & Liquidations in Colombia
The-Expats-Law-FirmThe-Expats-Law-Firm

Reasons for Dismissals

Fair Dismissals

The cause of dismissal is considered fair if the employer identifies the broken standards. According to Article 62 of the Colombian Labor Code, “No specific notification procedure is required in case of dismissal with a justified cause or without justified, but the reasons for dismissal must be communicated to the employee at the termination date.”

While the labor laws in Colombia favor employees, in this case, the employee won’t be entitled to compensation and damages caused by the termination of a contract.

Unfair Dismissals

The employer can make a unilateral decision and end the contract with an employee at any time, even when there is no fair cause. In this case, the employee will receive compensation, such as legal severance.

Unfair Dismissals

An employer is required to give an employee 30 days prior notice before terminating a contract.

Project Termination

Suppose an employee was hired for their skills valuable to a specific project. In that case, their contract stays in place until the said project is finished. Once the project ends, the employer can terminate the employee without prior notice and severance or compensation. However, the end date and these terms should be stated clearly in the contract.

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Terminating the Employment Agreement

Terminating the Employment Agreement

Suppose an employee is dismissed with a lawful cause. In that case, they are entitled to damages caused by the loss of employment in the form of the severance payment. When an employee is liquidated, their severance is calculated based on the length of their service and salary. For example, suppose an employee has worked at a company for less than ten months. That is too legal in a minimum wage. In that case, they are entitled to the following:

  • One month’s salary if they served in the company for less than a year.
  • One month’s severance payment for the year they are terminated and salary packs of 20 days for every consequent year (If the employee has worked more than a year).

    If an employee has been working at a company for more than ten months and has a high wage, then they are entitled to the following:

    • 20 days of salary if they worked at a company for less than a year
    • 20 days of severance pay for the year they are terminated and salary packs of 15 days for every consequent year (If the employee has worked more than a year)

    Severance Pay

    As mentioned above, each employee’s condition differs based on which severance payment is given. Let’s say that there is a fair cause behind an employee’s dismissal. They were found guilty of leaking the company’s confidential information to the rivals, and the theft was caught on camera.

    In this case, the employee cannot claim the severance payment.

    On the other hand, let’s say that the employee was dismissed unfairly. For example, the boss fired the employer because they talked back to them during a meeting. In this case, the Colombian Labor Law states that the employee should be paid for the time left in their employment and the damages caused by unemployment.

    Collective Redundancies

    If a company terminates multiple employees without fair cause, this act is considered a collective redundancy. If the following percentage of employees is terminated within six months, then the mass dismissal is called collective redundancy:

    • 30% of employees when the company has 10 to 49 employees
    • 20% of employees when the company has 50 to 99 employees
    • 15% of employees when the company has 100 to 199 employees
    • 9% of employees when the company has 200 to 499 employees
    • 7% of employees when the company has 500 to 999 employees
    • 5% of employees when the company has above 1,000 employees 
    Collective Redundancies

    Before taking any action and dismissing multiple employees at this scale, the company must ask for prior authorization from the Colombian Ministry of Labor.

    For approval, the company needs to prove that it is facing bankruptcy or a financial crisis. It thus is forced to lay off a large number of employees.

    Prohibited Unfair Dismissals

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    During pregnancy and six months after birth

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    Employees who are beneficiaries of a bargaining agreement may not be dismissed without fair cause

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    Employees who have economically dependent partners and are pregnant

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    Employees who have union immunity. A judge has to verify whether the cause of termination is fair or not

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    Employees who have three years left until they reach pension age

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    Employees who, six months before their termination, filed a labor harassment claim, and the judge verified it

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    Employees who have health limit their interaction (An employee may only be terminated with fair cause, which precludes discrimination. However, the termination might be authorized if the employee’s handicap interfered with the type of work they are required to do)

    In conclusion, the Colombian Labor Code looks out for the employees. It makes sure that if an employer wrongfully terminates a contract and dismisses an employee, they are forced to pay severance payment, along with other benefits, based on how many years the employee has worked.