Payroll
in Colombia

Pre-payroll

1. Create a payroll policy: devise a payroll policy outlining the payment method, pay periods, payroll deductions and withholdings, payroll benefits, and other aspects. 
2. Collect employee data: gather their personal details, tax identification numbers, bank account information, employment contracts, and other relevant documentation.

Payroll calculation

1. Calculate gross salary: take your employees’ basic earnings and add all the allowances, bonuses, and any other taxable income components specified in the employment contract as well as overtime work, PTO, etc.
2. Deduct income tax & social contributions: As an employer, you must calculate the employee’s income tax, withhold their portion of social security contributions, and contribute your share. Most of these contributions go to the pension fund, healthcare, unemployment schemes, etc. 
3. Calculate net pay: after estimating employees’ gross pay, withholding payroll taxes, and determining deductions, you can identify your employees’ net pay. You can easily perform this task by using payroll software or entrust it to a service provider.

Post-payroll

1. Approve the payroll: once all the calculations are done, you can take some time to check if everything is included and estimated correctly, so that your employees would get accurate paychecks on time.
2. Issue payments: you can pay compensation to your employees via the most convenient payment method whether cash, cheque, pay cards, mobile walletі, etc. 
3. Payroll reporting, compliance, records: after paying out the salary, spend some time on filing other mandatory documents, keeping employees’ payroll records and submitting reports to the finance department or management team for analysis.

A proper payroll guide for Colombia includes accurately calculating and withholding taxes, contributing to social security funds, granting all mandatory employee benefits, and fulfilling other financial obligations. Failure to comply can result in penalties, fines, lawsuits, and even criminal charges. Moreover, non-compliance with payroll and tax regulations can cause errors in wages, benefits, and deductions, which can erode employee trust and morale.

The most efficient and risk-free way to achieve payroll compliance in Colombia is by partnering with a trusted Employer of Record provider, like Alcor, who knows all the ins and outs of the local legal, taxation, and labor law systems of Eastern Europe and Latin America. 

Keeping payroll management in-house is often associated with overspending. Not only do you need to scale up your internal payroll team but also spend time and resources on their training so they can understand the legal, tax, and payroll specifics of the offshore location where you plan to expand.

In contrast, using external payroll services provides tech companies with access to a professional team of accountants and lawyers who are knowledgeable about the peculiarities of the local laws and regulations. This ensures your payroll is fully compliant and error-free. In addition, getting outsourced payroll services in Colombia is several times cheaper and more time-effective, especially when included as a part of a comprehensive Employer of Record solution. 

• Qualification & experience: Choose a vendor with experienced payroll and legal professionals in the tech industry. Also check out their case studies, client reviews, and testimonials.
• Pricing structure: Consider firms with predictable pricing and detailed invoices to avoid hidden fees and therefore eliminate the risk of overpayment. 
• Technology & security: Check if your vendor uses modern payroll software, applies security protocols and encryption standards, and complies with data privacy regulations to safeguard employee information.
• Guarantees: If your vendor provides compensation for mistakes or missed deadlines, has outlined timeframes, and offers pricing transparency, they are a green flag.

No business growth is possible without a powerful team of A-players. And, in order to legally employ such software developers, some tech companies see only two possible solutions:

• establishing their legal entity and managing the employment, payroll, tax payments, and compliance on their own 
• or outsourcing these operations to multiple vendors. 

The good news is that there is a viable alternative — an Employer of Record (EoR) service that allows tech businesses to employ talented software developers without setting up a legal entity and receive all the needed operational support in one place.

What you get with Alcor’s EoR 

Alcor provides an Employer of Record service in Eastern Europe and Latin America. Unlike other EoR vendors, we focus on the technology field, possessing niche knowledge of recruiting and employing Senior, Lead, and C-level software developers on the best terms. We handle everything from payroll management in Colombia, onboarding, and employee termination to tax payments, documentation, and employee benefits management.

We guarantee:

• 100% compensation for fines caused by our mistake
• 20%-40% cost reduction in comparison with outsourcing
• 100% transparency, with direct salaries instead of rate cards
• Key account manager to assist you in all matters
• No third parties as we do everything in-house
• 2.5 years is the average tenure of our hires