Labor Contract in Colombia: What You Need to Know Under the Código Sustantivo del Trabajo

What Is a Labor Contract in Colombia?

A labor contract in Colombia is an agreement by which an individual agrees to provide personal services to another party under continuous subordination or dependency in exchange for remuneration. This is the definition set forth in Articles 22 and 23 of the Código Sustantivo del Trabajo (CST), Colombia's Substantive Labor Code. Many people do not realize that a labor contract can exist even without a signed document: if the three essential elements — personal activity, subordination, and salary — are present, the relationship falls under Colombian labor law, regardless of what the parties call it.

The CST is the backbone of Colombian labor law, governing everything from hiring to termination. Recent reforms, including Law 2466 of 2025 and the gradual reduction of the maximum workweek to 42 hours under Law 2101 of 2021, mean that staying current with Colombian labor law is more important than ever for employers, HR professionals, and foreign companies hiring in Colombia.

Essential Elements of a Labor Contract

Article 23 of the CST establishes three elements that must coexist for an employment contract to exist:

• Personal activity of the worker: the service is performed personally, not delegable.
• Subordination or dependency: the worker follows orders, schedules, and directives from the employer. This is the key distinction from an independent contractor.
• Salary as compensation: any amount the worker receives for their services, in cash or in kind.

When these three elements are present, the law presumes an employment contract exists (Article 24 CST), even if the parties signed a service agreement. The principle of primacy of reality over form (Article 53 of the Colombian Constitution) means Colombian courts will look at the actual working conditions, not the contract label.

Types of Labor Contracts Under the CST

The Substantive Labor Code, in Articles 45, 46, and 47, classifies contracts by duration:

Fixed-Term Contract

Must be in writing and cannot exceed three (3) years, though it is renewable. To avoid automatic renewal, the employer must provide 30 days' written notice before expiration. This is a common modality but demands strict documentation.

Indefinite-Term Contract

Has no set end date. This is the default modality when no written term is agreed. It offers greater stability and, in case of unjustified dismissal, generates higher severance compensation.

Work or Task Contract

Lasts as long as the specific work or task continues. Ideal for defined projects, but the scope must be clearly described to avoid disputes.

Occasional, Accidental, or Temporary Contract

For short-term tasks (under 30 days), no written form is required, but legal limitations apply.

Why Proper Contract Documentation Matters

An improperly documented labor contract in Colombia can lead to serious consequences. Employers risk lawsuits for unpaid social benefits, severance, and moratory penalties. Article 65 of the CST imposes a penalty of one day's salary for each day of delay in paying wages and benefits upon termination.

Furthermore, Law 2466 of 2025 introduced significant changes to night shift hours (now starting at 7:00 p.m.) and progressively increased Sunday and holiday surcharges to 100%. These changes directly impact payroll calculations and must be reflected in every contract template used.

The Código Sustantivo del Trabajo is not a static document. Downloading a generic template from the internet may leave you with outdated clauses that expose your business to liability. Each contract must be tailored to the specific industry, job profile, and current regulations.

Social Benefits and Social Security

Every dependent worker in Colombia is entitled to non-waivable social benefits: severance pay (cesantías, CST Article 249), service bonus (prima, CST Article 306), paid vacation (CST Article 186), and interest on severance (Law 52 of 1975). These benefits are calculated on the base salary and are paid in addition to the monthly wage.

Regarding social security, Law 100 of 1993 mandates enrollment in health insurance (EPS), pension fund (AFP or Colpensiones), and occupational risk insurance (ARL). The total health contribution is 12.5% (8.5% employer, 4% worker), and the pension contribution is 16% (12% employer, 4% worker). ARL is paid entirely by the employer.

Common Mistakes in Managing Labor Contracts in Colombia

Based on our daily practice, here are the most frequent errors:

1. Misclassifying workers as independent contractors. If subordination exists (fixed schedule, exclusivity, detailed instructions), a court will declare the contrato realidad and order retroactive payment of all benefits.
2. Failing to give 30 days' notice for fixed-term contracts. Many employers assume the contract ends automatically, but the law requires written notice to avoid renewal.
3. Paying salary without enrolling the worker in social security. This is illegal and exposes the employer to penalties from the UGPP and labor claims.
4. Omitting proportional benefits for partial-year work. Upon termination, severance, service bonus, and vacation must be paid proportionally to the time worked.
5. Confusing liquidation with severance indemnity. Liquidation covers unpaid wages and benefits; indemnity applies only when dismissal is without just cause.
6. Failing to update contracts for recent reforms. Law 2466 of 2025 changed night and Sunday surcharges; using outdated rates can trigger costly claims.

Frequently Asked Questions About Labor Contracts in Colombia

Is an oral contract legally valid?

Yes. Article 37 of the CST permits verbal contracts for work not exceeding one year. However, it is highly risky: without a written document, the employer will have difficulty proving the agreed terms. The worker can claim rights based on the presumption in Article 24.

What is the probationary period?

The probationary period allows either party to terminate the contract without penalty. Under Articles 76 to 78 of the CST, the maximum probation is two (2) months. For fixed-term contracts under one year, it cannot exceed one-fifth of the agreed term, capped at two months.

When does unjustified dismissal indemnity apply?

When the employer dismisses the worker without a just cause listed in Article 62 of the CST. For indefinite-term contracts, the indemnity is 30 days' salary for the first year and 20 days for each additional year (if salary is below 10 minimum wages). For fixed-term contracts, it equals the salary for the remaining term of the contract.

Is an integral salary valid in Colombia?

Yes, but only if the salary is equal to or exceeds 10 times the legal monthly minimum wage (SMLMV) plus the benefits factor. If agreed below this threshold, the arrangement is illegal, and the worker can claim additional benefits.

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