Summary

The social security system in Colombia is complex. Pensions, which form the largest part of the system, are a combination of a state run, defined benefit scheme and mandatory private defined contribution schemes. Health benefits and labour risks are also covered by the core social insurance scheme.

Details

Contributions

Approximately 22% for employers, and 10% for employees, on monthly salary of up to approximately $6,000. A separate payroll tax of approx. 9% is payable by employers to the Family Welfare funds.

Treaties

Colombia has only a small network of social security agreements, and only one with a country outside Latin America – Spain.

Exemptions

Non-salary payments agreed between the employer and the employee are not included in remuneration on which social security contributions are calculated, providing such payments do not exceed 40 percent of the employee’s compensation. This presents an opportunity for remuneration structuring as a means of reducing social security costs.

Continuing to pay pension contributions in a home country is usually sufficient to exempt non Columbians from joining the mandatory Colombian pension schemes. Other contributions in Colombia remain due, however. Foreign local hires in Colombia will generally be liable to Colombian social security however.

Administration

Both private and state pension contributions, as well as contributions relating to health benefits and labour risks, are managed through payroll withholding. The employee’s ability to choose their own private coverage adds to the administrative burden of the employer. All of the above registrations must be completed by the employee’s start date, and all documents must be signed in person and on paper - no digital signatures are allowed when submitting documents to the social security office.

Benefits

To draw benefits, the minimum contribution period in the state pension system is 25 years; in the privatised pension system, benefits can be withdrawn if their account can finance an annuity of 110% of the minimum pension (equivalent to the legal minimum wage). In practice, few non Colombians contribute to the pension system due to the exemption noted above.

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