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.
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.
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
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
During pregnancy and six months after birth
Employees who are beneficiaries of a bargaining agreement may not be dismissed without fair cause
Employees who have economically dependent partners and are pregnant
Employees who have union immunity. A judge has to verify whether the cause of termination is fair or not
Employees who have three years left until they reach pension age
Employees who, six months before their termination, filed a labor harassment claim, and the judge verified it
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.
Readers exploring Employee Termination & Liquidation in Colombia might also want to check out these related posts: Colombian Labor Contracts, Employee Affiliations in Colombia, Corporate Accounting in Colombia, How to Create a Colombian Corporation, and Business Setup Law in Colombia.
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James Lindzey founded the website ColombiaVisas.com, which is constantly updated with new information explaining visa resolutions, procedures, and laws in Colombia to expats. James has worked as a private investigator and paralegal in the United States through the 90s until he moved to Colombia in 2005. James arrived in Colombia in 2005 and started doing visas for expats, but currently works as Director of Legal Services for Visas by James, and Colombia Legal & Associates SAS since June of 2023.
Colombia Legal & Associates acquired the brand name Visas by James as it became a more familiar and easy way for foreigners to remember the business, than the previous Visas y Tramites Internacionales.
While MedellinLawyer.com focuses more on legal issues for expats, ColombiaVisas.com focuses more on visas, and holds the trademark Visas by James. ColombiaVisas.com is the oldest website and provider of visa information for expats in Colombia. We are proud to be the first and always on the cutting edge of providing interactive website content to our visitors.
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