Colombia’s Social Reforms for 2025
Colombia’s social reforms for 2025 are a sweeping transformation of its labor, healthcare, and pension systems, with reforms that could promise to reshape the business landscape for national and multinational employers. The government’s stated aim is to improve worker conditions, promote formal employment, and address longstanding inequalities. However, these changes bring new compliance challenges and increased costs for employers. As Pilar Acevedo Figueroa, Vice President of Strategy and New Business Development for Correcol in Colombia, explains: “The labor reform would increase labor costs. For example, night shifts, currently paid extra from 9 pm, would now start at 7 pm, and Sunday or holiday work would be paid at double the regular salary. The flexibility to hire would be reduced, with restrictions on temporary and service contracts, pushing everything towards indefinite contracts and higher severance payments for terminations without cause.”
Labor Reform: Higher Costs and Stricter Rules
The proposed labor reform, a flagship initiative of the Colombian government, is advancing through Congress and has already sparked intense debate. Key elements include an earlier start for night work (7 pm instead of 9 pm), a gradual increase in the payment of Sundays and holidays from 75% to 100% until 2026, and stricter limits on temporary contracts and outsourcing. The reform also extends labor protections to gig economy workers and expands paid leave, including doubling paternity leave from two to four weeks. For multinational employers, these changes mean increased payroll expenses, reduced flexibility in workforce management, and greater administrative burdens. “There would be limitations on outsourcing and core business activities,” Acevedo Figueroa notes. “With this reform, there would be limitations; obviously, there would be a greater administrative and legal burden.”
Healthcare Reform: Centralization and Uncertainty
Colombia’s healthcare system, currently managed through a mix of public and private entities known as EPS, is also set for a significant overhaul. The government plans to eliminate the intermediary role of private EPS and centralize healthcare funding and management under a public entity (ADRES). While the stated goals are to improve access, reduce corruption, and strengthen primary care, the impact of centralization on these objectives is unclear. Critics warn of potential declines in service quality and increased difficulty accessing care. The insurance market is already responding by developing new products to fill possible gaps in coverage as the public system evolves.
Pension Reform: Centralized Contributions and New Administrative Burdens
Unlike the labor and healthcare reforms, pension reform has already been enacted and will take effect on July 1, 2025. The new system requires all contributions on salaries up to 2.3 times the minimum wage to go to the public pension fund (Colpensiones), Salaries above this threshold may be directed to private fund savings accounts. This change reduces the flexibility for workers to choose between public and private pension regimes. It increases the administrative workload for employers, who must now manage more complex payroll deductions and reporting requirements. “There is going to be more administrative work for the HR areas,” Acevedo Figueroa confirms. “There is also going to be less flexibility for workers to choose, the potential for greater equity and coverage, but also uncertainty for employees about their retirement.”
What’s Next for Employers?
While the pension reform is set, the labor and healthcare reforms are still under debate, with final versions expected by July 2025. Employers should prepare for higher labor costs, stricter compliance requirements, and the need to adjust HR policies and benefits offerings. As Acevedo Figueroa observes, “Employers and every industry are reacting by telling [the government] that the cost of this reform is going to impact unemployment because employers are not going to be able to employ as many people as they do right now.”
Multinational companies operating in Colombia should closely monitor legislative developments, consider using Employer of Record (EOR) services to navigate compliance, and be prepared to adapt to a rapidly evolving regulatory environment.