In Colombia there are different types of employment contracts and each one of them has different conditions and characteristics. The most common types of employment contracts in the country are: the Labor Contract, which in turn can be divided according to its duration: Fixed Term Labor Contract or Indefinite Term Labor Contract; and the Non-Labor Contract also known as Contract for the Provision of Services. We will explain each one and at the end you will be able to draw the conclusion of the type of labor contract you prefer.
Let's start with the Labor Contract. This type of employment contract must always be in writing and you can enjoy all the minimum social benefits required by law such as: severance, EPS, vacations and bonuses.
Regarding the work tools, most of the times they are provided by the employer and you would be obliged to comply with a working day. You must take into account that the link can be direct with the company or through third parties with entities known as temporary employment agencies.
What rights do you have with this type of employment contract? The regulations specify that you would be entitled to the payment of surcharges for night work, overtime, Sundays and holidays under the terms established in the contract, as well as maternity, paternity and bereavement leave. In addition, in the case of earning up to two Minimum Legal Wages in Force (SMLV), you are entitled to three changing rooms per year (uniform).
In case of termination of the contract by the employer without just cause, compensation will be paid, according to the conditions of the type of employment contract. Therefore, it is important for you to know that in order to terminate this type of employment contract, a notice of no less than 30 days is required and must be given in writing. But, what happens if the company or the employer does not notify the notice in writing within the period indicated, in this scenario it will be understood that the employment contract will be renewed for a period equal to the one initially agreed.
Now, we had mentioned that the labor contract is divided into two, Fixed Term Labor Contract and Indefinite Term Labor Contract. How do they differ? In the duration of the employment contract.
Let us go into detail, the Indefinite Term Contract does not have a time limit as to its duration, that is to say, there is no agreed termination date for the employment contract, while the Fixed Term Labor Contract has a duration between 1 day and a maximum of 3 years and can be renewed indefinitely, as stipulated in article 46 of the substantive labor code.
The law specifies that "if the fixed term is less than one (1) year, the contract may only be extended successively for up to three (3) equal or lesser periods, after which the renewal term may not be less than one (1) year, and so on".
From employee to "contractor
When talking about a Contract for the Rendering of Services, the figure of the employer changes its name to "Contractor" and in the case of the employee, he/she will be called on paper as the "Contractor". The duration of this type of labor relationship is agreed upon by both parties and is generally framed for the duration of the service rendered.
When you become a contractor, it is important to know that you are not entitled to social benefits. You must assume the total cost of social security and labor risks on your own, however, in the case of parafiscal contributions, it is voluntary.
The Contract for the Rendering of Services suggests independence or autonomy, therefore you would not be obliged to comply with a work schedule. In this sense, a period of execution of the contracted services is agreed upon or compliance goals are agreed upon.
Unlike the Labor Contract (Fixed and Indefinite), you must provide the work tools without waiting for the "Contracting Party" to supply them. In addition, the work can be performed personally or by a third party as long as the parties agree.
This type of contract usually has clauses that allow for termination by the contractor without severance pay.You may be wondering how these two types of employment contracts can impact you financially? We made this simple comparison chart for you to draw your own conclusions:
Economic comparison
As per regulation as of Jun 30, 2020
| Labor Contract | Service Contract | ||
| Concept | Monthly value | Concept | Monthly value |
| Base Salary | $ 1.700.000,00 | Fees | $ 3.400.000,00 |
| Transportation assistance | $ 102.854,00 | Transportation assistance | - |
| Employer's social security contributions | Contributions to be paid by the contractor | ||
| Health Contribution 8% | $ 136.000,00 | Health Contribution 12,5 % | -$ 425.000,00 |
| Pension contribution 12% | $ 204.000,00 | Pension contribution 16% | -$ 544.000,00 |
| Arl Contribution 0,52% | $ 8.840,00 | Arl Contribution 0,52% | -$ 17.680,00 |
| Contribution to compensation funds | $ 153.000,00 | Contribution to compensation fund | Volunteer |
| Social Benefits | Social Benefits | ||
| Service Premium | $ 150.237,83 | Service Premium | $ 0 |
| Vacations | $ 70.833,33 | Vacations | $ 0 |
| Severance pay | $ 150.237,83 | Severance pay | $ 0 |
| Interests | $ 18.028,54 | Interests | $ 0 |
| Total Worker Income | $ 2.694.031,54 | Total Contractor's Income | $ 2.413.320,00 |
With this comparative chart you will have realized that even if the remuneration of the Service Contract is equivalent to double that of the Labor Contract, the net income is lower and this includes the fact that under a Service Contract you would not be entitled to additional benefits provided by the companies.
In Cecropia we are clear that our professionals prefer job stability, that is why we make employment contracts and provide more benefits to our employees for their commitment and perseverance to be the best every day. If you want to know more about working with us visit our section work here
Some recommendations for you
Keep in mind that when signing an employment contract these data, among others, are elementary for its validity: personal data of the employee, work or position to be performed, monthly salary, type of contract (either indefinite, provision of service or fixed term).
Remember that whenever you sign an employment contract, ask for a copy for your records. In case you do not understand something in particular of the contract, do not remain with the doubt, ask before signing.
October 1, 2020
