Colombia Labor Reform 2025: Critical Legal Changes for Multinational Employers

Colombia labor reform 2025Multinational companies with operations or staff in Colombia must prepare for the sweeping Colombia labor reform 2025, alongside related healthcare and pension overhauls now in force. These changes present new compliance, cost, and talent management challenges—particularly for global HR and legal teams. The labor reform was approved on March 6, 2025, and is currently being discussed in Congress with two debates still pending. The government considers that there is no viable alternative and has presented a favorable fiscal opinion through the Ministry of Finance, which estimates increasing costs through the year 2034.

Impact on Workers & Employers

For workers

  • Job protection and stability: Permanent contracts by default, shorter workdays, and better-paid surcharges.
  • Social inclusion: Increased formalization for apprentices, domestic workers, platform workers, and people with disabilities.
  • Mandatory benefits: Health, pension, occupational risk insurance (ARL), vacation, and connectivity allowance, even for remote work.

For employers

  • Higher labor costs: Increased night and Sunday shift surcharges of up to 100%, shorter workdays, and required contributions for apprentices.
  • Contractual restrictions: Limitations on temporary contracts and joint liability in indirect hiring.
  • Formalization and inclusion obligations, with potential fines for non-compliance and associated costs.
  • Dual model: Micro and small businesses are exempt from the early night shift surcharge, partially easing the impact.

This reform marks a leap toward greater labor formalization, more rights, and higher income for millions of workers. However, it also places pressure on companies, especially SMEs, which will need to adapt to new payroll calculations, hiring practices, and regulatory compliance.

Healthcare reform

Impact on Private Insurers

Current Status

The reform was approved on March 6, 2025, and is currently being discussed in Congress, with two debates still pending. The government considers that there is no viable alternative and has presented a favorable fiscal opinion through the Ministry of Finance, which estimates increasing costs through the year 2034.

Demand

  • The purchase of private health insurance grew between 23% and 24% during 2024, mainly due to fears of a collapse in the public healthcare system.
  • Fasecolda reported premiums totaling COP 40 trillion, with claims amounting to COP 18.4 trillion. Sura leads the market (69%), followed by Allianz (14%) and Bolívar (11%).

Profitability

Health insurance policies show high loss ratios (75%), which result in tight margins, significant operating expenses, and operational losses in some years.

Risks and Challenges for Insurers

  • High financial risk if demand surges without corresponding adjustments in pricing or administrative efficiency.
  • Regulatory pressure: The government may seek further centralization of the system, limiting the role of private insurers.
  • Competition from prepaid medical plans and voluntary insurance policies, although rising in price, makes them increasingly difficult to sustain.

Impact on the Healthcare System

  • Transition toward a preventive and coordinated model through CAPS (Primary
  • Health Care Centers) and ADRES (Administrator of Health Resources).
  • Reduction of the financial role of the EPS (Health Promoting Entities), which will be reorganized as management entities.

Pension Reform

Current Status

The reform was enacted into law in July 2024 and came into effect on July 1, 2025.

Impact on Private Insurers

The Pension Reform impacts private insurers, particularly those involved in annuities, pension insurance, voluntary savings funds, and occupational risk insurance, in several critical and structural ways.

Reduced Role of Insurers in Mandatory Pensions

  • 86% of contributors (those earning up to 2.3 times the minimum monthly wage) will be required to contribute to Colpensiones, under a pay-as-you-go system.
  • Only those earning above 2.3 times the minimum wage may save the surplus in ACCAI (Administrators of the Complementary Individual Savings Component), which could be the existing pension funds (AFPs) or new entities.
  • This significantly reduces the inflow of new affiliates into the private system and, consequently, the future demand for insured annuities.

The potential client base for life and pension insurers shrinks, as the State assumes an almost exclusive role in mandatory pension savings.

The pension reform in Colombia reduces the role of insurers within the mandatory pension system, shifting the majority of contributions to Colpensiones and limiting insurers’ participation to high-income segments and voluntary products. This entails:

  • A reduction in the natural market for annuities, pension insurance, and individual pension funds.
  • Pressure to reinvent product portfolios and expand into financial education and voluntary offerings.
  • Fiscal risks of the new model could further undermine confidence in the system and in complementary products

Correcol provided this information on Colombia’s labor reforms 2025. If you need support with your employee benefits in Colombia, please contact Asinta, and we will put you in touch with the local experts at Correcol.