Absolutely! Employer of Record is your legal gateway to hiring software developers without the complexities of opening a legal entity abroad. Your EOR partner serves as the legal employer of programmers on your behalf, taking care of all the admin functions, like payroll, HR, legal, and benefits management. They also assume full liability for adhering to local labor laws, employment rules, and tax obligations, bearing any potential legal risks.

But make no mistake—you remain the one and only real employer of software engineers. From day one, you manage your team directly and integrate it into your culture and practices. All the bureaucracy? Gone. Legal risks and admin burdens? Off your shoulders. Instead, you focus on what matters the most—developing your software product.

So, an EOR service in Colombia is simply a means for tech companies to swiftly expand into new markets and hire a development team compliantly. Exactly what tech companies like BigCommerce, People.ai, Dotmatics, and Sift did. With the help of Alcor, an EOR provider for tech, they have seamlessly and securely built fully backed teams of 30+ developers and fast-tracked their product growth.

There are two prevalent models for hiring Colombian developers: employment agreement and B2B contract.

An employment agreement forms an employer-employee relationship governed by Colombia’s Labor Law. For employers, this type of employment comes with tax obligations, including paying payroll taxes and social security contributions (SSC), as well as withholding income tax and SSC on behalf of the employee. Additionally, it’s full of rigorous working terms and employee termination procedures. That’s where Alcor’s IT EOR in Colombia can serve as your lifeline in the deep employment waters.

For employees, an employment contract serves as a safety net, securing their salary amount, benefits, working hours, paid time off (PTO), and termination terms. The downside? Their salary is paid in a local currency, which may be affected by inflation.

A B2B contract is signed between a hiring technology company and a software developer, establishing a contractor-client relationship governed by civil or commercial law. The programmer must register as an independent professional with the Colombian Tax Authority (DIAN) to provide IT services.

Unlike an employment agreement, in B2B relations, the employer is free from tax obligations, while the contractors handle taxes and social contributions on their own or via an EOR vendor in Colombia. The reward is paid in a foreign currency, so inflation and exchange rate fluctuations are not an issue. However, benefits, PTO, and working terms are typically negotiated individually and are often more restrictive than those outlined in the employment contract.

An employment agreement typically entails tax obligations for both the employer and the employee.

What does the employer’s share include?

1. Social Security Contributions are the means to cover employee benefits presupposed by the Colombian Labor Law. These contributions are determined at the federal level and should be paid monthly through the PILA system. The due date varies based on the employer’s tax identification number (NIT).
   Here is the breakdown of the SSCs:- Pension fund contribution: 12%
   – Health insurance contribution: 8.5% (only applicable when salary exceeds 10 min. monthly wages)
   – Labor risks system: 0.522%
2. Payroll tax are the employer’s responsibility. The payroll cycle in Colombia is either monthly or bi-monthly, with payments made on the 15th and last day of each month. Basically, payroll taxes are divided into three categories:

• Institute for Family Welfare contribution: 3%
• National Apprenticeship Service (SENA) contribution: 2%
• Family Compensation Fund: 4%

Now, the employee’s share:

1. Personal income tax in Colombia is applied in tax units (UVT) and follows a progressive structure, with rates ranging from 19% to 41%. Both locally registered and foreign tech companies that engage Colombian software developers are required to withhold and remit income taxes on behalf of their employees.
2. Social Security contributions are equally divided between the employer and the employee, totaling 9%. The employee part includes:

• Pension fund contribution: 4%
• Health insurance contribution: 4%
• Solidarity Fund: 1% (only applicable when the salary exceeds 4 minimum monthly wages).

The second employment model is the B2B contract, which enables tech companies to hire Colombian software engineers as contractors. In this case, paying payroll taxes is not mandatory for the company. Hence, developers should cover:

1. Personal income tax under the B2B contract is calculated under the Simple Taxation Regime, which ranges from 5.9% to 14.5%.
2. Social Security contributions, including:

• Pension fund contribution: 16%
• Health insurance contribution: 12.5%
• Occupational risks: 0.522%
• Solidarity Fund: 1%

Colombia is a goldmine of skilled software engineers offering a competitive advantage without the Silicon Valley price tag. The average senior developer salary here constitutes about $63,800 per year, with the most in-demand tech talents, such as Mobile Developers, AI Engineers, and Cloud Developers, making from $54,000 to $79,200. 

Even the highest-paid tech experts don’t break the bank in Colombia. For instance, senior DevOps Engineers get about $69,500, while a Site Reliability Engineer receives only $88,200 annually. 

That’s about 48% savings compared to the US. See yourself: 

So, how much should you really budget to hire a software developer in Colombia? To break down the total cost beyond just salary, you need to include:

• annual income of a software engineer,
• taxes, social contributions, and additional payments presupposed by the local labor laws,
• employee benefits package, which typically includes health insurance, professional training, hardware, and corporate merchandise, totaling about $6,500 in Colombia and $15,400 in the US per developer/year,
• recruitment fee, which is typically 20% in Colombia and 30% in the US of the senior developer’s gross annual salary.

Have a sneak peek at the figures:

Contact Alcor, your EOR service provider in Colombia, to get precise payroll calculations for your tech positions and discover your true savings.

When hiring software engineers in Colombia, as an employer, you must comply with statutory employee benefits outlined in federal labor laws. They are mandatory for tech specialists working on the employment contract. Failure to provide these benefits may lead to legal troubles, penalties, and fines.

So, what are these statutory employee benefits?

• Social security (covered by Institute de Seguros Sociales), including healthcare, pension, retirement plan, occupational risk insurance, parental leave, survivors benefits;
• Prima de Servicios (13th-month salary) is equivalent to one month of the worker’s annual wage and is paid twice a year, on the 15th day of each six months.
• Cesantía payment is equivalent to one month’s salary per year worked, and Cesantía interest corresponds to 12% of the Cesantía payment.
• Annual leave consists of paid days off, calculated based on the number of years an employee has worked.
• National holidays, including Christmas Day, New Year’s Day, and Independence Day, are all set out in the Colombian Federal Labor Law.
• Severance pay is paid to an employee in the event of termination and varies depending on the reason for termination.
• Transportation allowance for employees earning ≤2x the minimum wage.

There are also supplementary employee benefits, which are optional but good to have if you want to attract top software engineers in Colombia, like:

• Private medical insurance is a common addition to national basic medical coverage, typically covering hospitalization, vision and dental care, emergencies, and other related services. Both employee-only plans and family coverage options are available.
• Life insurance provides financial protection to employees’ beneficiaries in case of death or accidental disability.
• Internet allowance, relevant for international dev teams working remotely;
• Tech courses & English classes to promote professional development;
• Stock options are predominantly offered to C-level experts.

According to Colombia’s labor law, the standard workweek in the country is 46 hours, with the possibility of overtime, which should not exceed 2 hours per day and 12 hours per week. The overtime compensation is generous—125% of the standard rate during regular hours and 175% during the night. Additional rates apply for work on Sundays or national holidays.

When you hire a software developer in Colombia, their probation period lasts 60 days. Usually, this time is enough to test the skills and assess the performance of the new hire. We at Alcor guarantee only high-quality tech talent, with 98.6% of our hires passing probation with flying colors. And in the rare case someone doesn’t meet your expectations, we provide a replacement free of charge.

Software developers working on an employment contract in Colombia are entitled to the following paid time off (PTO):

• Annual leave is granted for a minimum of 15 working days after one year of service has been completed. The employment agreement parties may agree to pay up to half of the vacation in cash when certain conditions are met.
• Sick leave is covered by the employer at 100% of the salary for the first two days. Then, from the third day, the Social Security Institute (EPS) covers 66.67% of the salary for up to 90 days and 50% from the 91st to the 180th day.
• Maternity leave lasts for 126 calendar days, which must commence 7 days prior to the expected due date.
• Extraordinary paid leave includes cases of paternity leave, which lasts 14 days and is covered by the Social Security Institute (EPS). Moreover, the employer covers bereavement leave of up to 5 days and education leave (for taking exams) of up to 10 days per year.
• Public holidays in Colombia include 18 paid holidays, as per the annual leave entitlements for the year 2025.

When a US-based tech company hires software developers in Colombia, it should consider visa requirements. To travel on a business trip to the United States, a Colombian programmer should obtain a B1/B2 visa, which permits a stay of up to 6 months, depending on the visa’s validity. It allows business-related activities, such as attending conferences and meetings, participating in short-term training or team-building sessions, and exploring partnerships, but not permanent work in the United States.

To get it, a Colombian citizen should

• Complete Form DS-160,
• Pay the application fee of $185,
• Schedule and pass the interview at the nearest U.S. embassy/consulate,
• Prepare documents, including a valid passport, proof of corporate ties, and financial proof (bank statements, sponsor letter, etc.).

But no need to stress over these visa challenges. Alcor, your Employer of Record service provider in Colombia, can seamlessly handle all aspects of visas for your software engineers, just like we did for US tech company ThredUP.

The termination of an employee in Colombia is governed by federal labor law, which establishes strict guidelines for the termination process, thereby protecting workers’ rights and posing risks for employers. Luckily, there are EOR companies in Colombia like Alcor that serve as your compliance buffer, ensuring a smooth employee offboarding process.

General termination rules:

The notice period is at least 15 days, unless a severe reason for dismissal (such as violence, revelation of industrial secrets, etc.).

Dismissal can be justified or without cause.

Termination payments:

• Compensation for unused vacation days, pro-rated 13th-month salary, and any pending compensation for days worked but not yet paid;
• 30 days of salary per worked year (Cesantía);
• Severance payments:
  • 20 days’ salary for the first year of service and;
  • 15 additional days for each subsequent year.

Pregnant women, union members, or employees with health conditions have enhanced stability and cannot be terminated without Ministry of Labor approval or just cause.

Expanding your development team abroad often means establishing a local legal entity, which varies from country to country based on the local laws of business incorporation. Generally, you would need to navigate complex legal requirements, including selecting the type of entity, registering with relevant authorities, opening bank accounts, and ensuring compliance with local tax and social security laws.

The business incorporation process can drag on for months, draining tens of thousands of dollars in legal fees, registration, and insurance. What is even worse, failing to comply with local laws and practices can expose your tech company to hefty fines or even legal actions, putting your expansion plans at risk.

The EOR solution in Colombia allows you to bypass the lengthy and expensive route of setting up your own entity abroad. For instance, with Alcor EOR for tech, you can hire developers through our readily established legal entities in LATAM or Eastern Europe, saving an average of 3.5 months on business incorporation. Plus, manage admin and legal complexities hassle-free. It’s a faster, safer way to expand your business compliantly without the financial burden.

Alcor’s Employer of Record for Tech is a 360-degree solution devised for the compliant and seamless hiring of software engineers in Latin America and Eastern Europe. With no need to open a legal entity, it saves tech companies an average of 3.5 months and tens of thousands of dollars in setup costs. This means you can skip the red tape and build your own team of 30+ developers in just three months, accelerating your software development and unlocking faster growth.

With our Employer of Record solution in geo, you get more than just HR & payroll:

• Tech-focused services: from FTE or B2B employment options and tax incentives to R&D deductions and tailored benefits for developers.
• 100% compliance: get shielded with guidance from our lawyers, who have expertise in IT law.
• Customized pricing: volume discounts, no hidden costs or pre-payment.
• Ongoing in-country support: our Dedicated Customer Success Managers go above and beyond to simplify your business expansion.
• All-in-one place: manage everything in one place, no need for multiple vendors.

But EOR is just the beginning…

You can upgrade it to our software R&D center solution, which includes:

• In-house tech hiring is handled by our 40 recruiters, who headhunt the top 10% of the market developers across LATAM and EE. With our 80% CV pass rate and 2-6 weeks to fill a vacancy, you can scale your team from 0 to 100 engineers in a year.
• Operational support encompasses additional services, including leasing office or co-working space, procuring equipment, setting up IT infrastructure, and employer branding.

The result? A fully backed tech R&D center with a software development team that’s 100% yours from day one.