The OECD accession review of labour market, social and migration policies in Colombia (OECD, 2016[1]) noted that profound dualism in the labour market resulting from widespread informality and a strong reliance of non-regular employment contracts created large economic and social costs. Box 2.1 lists the recommendations that the Employment, Labour and Social Affairs Committee (ELSAC) made in its Formal Opinion on Colombia’s accession to the OECD in 2018 (OECD, 2018[2]).
OECD Reviews of Labour Market and Social Policies: Colombia 2026
1. Continue tackling labour informality by:
Implementing a one‑stop-shop for the registration of companies that unifies procedures for the registration of new companies (Ventanilla Única Empresarial).
Designing and implementing a single affiliation system for the different social security systems (including health, pensions, family subsidies and accident insurance).
Improving the link between what workers and employers are required to contribute to social insurance and the benefits and services they receive in return.
Launching a citizen awareness programme, especially in rural areas, on the importance of formal employment, benefits of social insurance and workers’ rights.
2. Protect labour rights of subcontracted workers by:
Strengthening the legal framework, as appropriate, to prohibit all forms of abusive subcontracting, including through the use of co‑operatives, union service contracts and simplified stock companies.
Ensuring investigations of all abusive subcontracting, especially in rural areas, and publishing on an ongoing basis notifications of complaints, investigations, and outcomes.
Resolving existing investigations regarding abusive subcontracting in a timely manner, imposing fines where appropriate and publishing the results on an ongoing basis.
Collecting all outstanding fines for subcontracting violations within the legally mandated time frames.
Requiring firms to formalise employees working under abusive subcontracting through regular employment contracts that provide access to all basic labour rights.
Source: OECD (2018[2]), Accession of Colombia to the OECD: Formal Opinion of the Employment, Labour and Social Affairs Committee (ELSAC), unpublished document.
At the end of 2025, 56.9% of workers in Colombia were not contributing to the pension system, the standard definition used by the OECD and the International Labour Organization (ILO). A broader definition of informality used by Colombia’s Statistical Office (DANE), which also considers affiliation to the contributory health system, shows an informality rate of 55.7% in December 2025. Irrespective of the definition used, informality has decreased considerably since the start of Colombia’s accession process to the OECD in 2013, when 69.3% of workers were not contributing to the pension system (Figure 2.1, Panel A). The reduction in informality was particularly strong between 2020 and 2024, despite a slowdown in 2022. However, since mid-2024, the informality rate has stabilised around 56‑57%. In rural areas, informality remains much higher, at 83.5% at the end of 2025, compared to 91.3% at the beginning of the accession process.
Compared with other OECD Latin American countries and accession countries, Colombia has seen one of the largest declines in informality over the past decade (after Chile), bypassing Mexico in the ranking since 2023 (Figure 2.1, Panel B).
Note: Informality is defined as the percentage of workers not contributing to the pension system. Panel A: 12‑months moving averages. Panel B: The data for Argentina refer to 2014 and 2024, for Mexico to 2024, for Indonesia to 2016 and 2023, and for India to 2012 and 2024.
Source: Panel A: Gran Encuesta Integrada de Hogares (GEIH) of Colombia’s Statistical Office (DANE). Panel B: ILOSTAT.
A major labour market reform took place in Colombia in 2025, aligning Colombia’s labour market regulation more closely with OECD standards. Law 2466 of 25 June 2025 represents a comprehensive overhaul of the country’s labour framework, aimed at strengthening labour law compliance and aligning working conditions with international standards. The reform is explicitly framed around the principles of decent work, legal certainty and social justice, and introduces structural changes related to employment relationships and enforcement practices.
A central pillar of the reform is the rebalancing of employment contracts and job stability. The law establishes open-ended contracts as the default form of employment, significantly restricting the use of fixed-term and task-based contracts to genuinely temporary situations, with the aim to reduce precarious employment and abusive subcontracting practices – two aspects that are of high importance to ELSAC’s post-accession process. In parallel, the reform strengthens working-time regulation and remuneration, redefining day and night work (with night surcharges starting earlier) and progressively increasing premium pay for work on Sundays and public holidays. These regulatory changes bring Colombia closer to OECD practices (Figure 2.2).
Median usual hours of full-time employees and statutory normal weekly hours in OECD countries (2019) and Colombia (2019 and 2026)
Note: For Colombia, the standard workweek is gradually reduced from 48 to 42 hours between July 2023 and July 2026. For Australia, Israel, New Zealand and Türkiye data represent the average usual hours for full-time employees. Usual hours in Norway and Australia refer to 2018. Countries marked with a (*) do not have a statutory limit on normal weekly hours. OECD is the unweighted average of OECD countries shown in this chart.
Source: OECD (2021[3]), OECD Employment Outlook 2021: Navigating the COVID‑19 Crisis and Recovery, https://doi.org/10.1787/5a700c4b-en.
Another key aspect of the labour law is the regulation of emerging and previously weakly regulated forms of work, particularly digital platform work. The law creates clearer categories of platform workers (dependent or independent) and imposes obligations on companies regarding social security contributions and algorithmic transparency to address compliance gaps in new sectors of the labour market. The explicit distinction between dependent versus independent platform workers in legislation is a more structured and proactive approach than in many OECD countries, though in line with Italy, Spain and Canada (Lane, 2020[4]). Additionally, sector-specific measures – such as the formalisation of agricultural labour contracts – aim to adapt labour law enforcement to contexts traditionally characterised by informality.
Beyond contractual aspects, the reform also introduces stronger guarantees for labour rights and enforcement, particularly regarding freedom of association and workplace conduct. It limits abusive employer authority, mandates preventive measures against workplace violence and discrimination, and establishes expedited judicial mechanisms to protect workers’ rights, including in cases of anti‑union practices. However, key provisions related to collective labour rights and freedom of association, while initially included, were dropped during the legislative process (see Chapter 4 of this report for a discussion).
Even though the promotion of formalisation is stated as one of the primary objectives of the reform, the increases in labour costs and regulations risk discouraging formal job creation. While measures such as higher surcharges for night and weekend work, stricter limits on fixed-term contracts, and expanded benefits benefit workers with a formal job, they also raise hiring costs and administrative burdens and can potentially lead to layoffs, particularly in small and medium-sized enterprises. Fedesarrollo, an independent research institute in Colombia, estimated the increase in payroll costs at 9% to 15%, and the loss of formal jobs between 1.3% and 3.6% (Fedesarrollo, 2025[5]).
High labour costs
One of the key drivers of informality in Colombia, the high cost of formal labour, is not being addressed. Costs are even growing, not only as a result of the labour reform but also due to subsequent significant increases in the minimum wage (see Chapter 4 of this report for an in-depth discussion on the minimum wage evolution). High non-wage costs further raise the price of formal jobs.
An example of such costs are the mandatory contributions to family compensation funds (Cajas de Compensación Familiar), to which employers contribute 4% of their wage bill. The family compensation funds were originally introduced in 1957 to redistribute income from high-wage to low-wage formal employees through family allowances for workers with (large) families earning less than four times the minimum wage. Since then, the funds have increasingly been mandated by the government to provide benefits and services to non-affiliates. As a result, a growing part of the contribution to the family compensation funds is in reality a tax to finance social policy programmes for which formal workers are not eligible. In addition, many of the funds’ services (such as cultural and recreational services, training and education) are only delivered in the regional capitals and thus not available to formal employees in smaller cities. For these workers, the benefits of contributing into the formal social security system are therefore not necessarily clear, hence reducing their incentives to formalise.
To bring down informality and improve social protection coverage in a sustainable way, additional reforms needed, as discussed in detail in the OECD’s accession review of Colombia (OECD, 2016[1]) and the 2022 OECD Economic Survey on Colombia (OECD, 2022[6]). Reducing the cost of formal employment while ensuring basic social protection for all is crucial in this process.
Economía Popular
Instead, the current government has made the strengthening of the “Economía Popular”–a terminology that refers to a diverse array of grassroot economic organisations, both individual and communal, and often informal – a central pillar of its social and economic policy. This effort combines structural reforms, targeted programmes, and new institutional frameworks.
First, within the 2022‑2026 National Development Plan, the government formally recognised the Economía Popular as a distinct sector and committed to a comprehensive public policy. Key measures include support for productivity and commercialisation (e.g. local markets and short supply chains), access to finance and training, and the promotion of associative forms of organisation. The Plan also created a National Council for the Popular Economy to co‑ordinate policy and advise the government, alongside a dedicated statistical system led by DANE to improve targeting and data availability. A major innovation has been the use of public procurement to support the sector. Public-Popular Associations (Asociaciones Público-Populares) allow public entities to contract directly with actors in the popular economy for small-scale infrastructure, food provision, and local services – thereby integrating them into formal economic circuits.
Second, several programmes provide direct financial and technical support. The flagship programme Economía Popular para el Cambio offers grants, productive assets, and technical assistance to informal workers, microbusinesses, and community organisations, with differentiated support for individual and collective initiatives. Other initiatives (e.g. FortaleSER or cultural economy programmes) focus on training, business development, and territorial inclusion.
Third, recent legislation has targeted microbusinesses explicitly. Law 2 470 of 2025 and subsequent regulations promote neighbourhood microenterprises (e.g. small shops), including access to seed capital, inclusion in business support programmes, skills certification, and incentives for associativity and participation in public procurement.
Finally, the 2025 labour reform (Law 2 466) complements these efforts by extending elements of social protection and formalisation to non-standard and independent workers – such as platform workers – and by mandating policies to support sectors like agriculture where popular economy actors are concentrated. Similarly, a major pension reform – which was approved in July 2024 but afterwards suspended by the Constitutional Court for further investigation – would have unified the current two competing pension systems into a multi-tier system with basic benefits going to a larger share of the population – see the OECD’s second post-accession review on Colombia for an overview (OECD, 2024[7]).
One‑stop-shop for the registration of companies
The one‑stop-shop called “Ventanilla Única Empresarial” (VUE) has been operational since 2018. The VUE integrates tax, commercial and social security administrative procedures to facilitate company openings. Currently, it integrates a total of 40 procedures, including the insurance of workers in health and occupational risks, and the affiliation and registration in Family Compensation Funds and Pensions. In 2025, nearly 84 000 companies were created through the VUE portal, raising the total number of active companies to 1.8 million, approximately 15% higher than in 2017. The geographical reach of the VUE portal also expanded, from 72 cities and municipalities at the beginning of 2024 to 129 at the end of 2025.
Single affiliation system for social security
The single Transactional Affiliation System (SAT), launched in March 2020, aims to digitalise and integrate all social security subsystems. Currently, the social security procedures related to health, occupational risks and family subsidies are available through the platform. The discussions on the integration of the general pension system into SAT were suspended in 2023 as it is pending on the approval of the pension reform. In 2025, around 5.4 million users were registered in the SAT system, which is about 60% of the 9 million workers who are actively contributing to social security, and nearly 32 000 companies. The SAT system will eventually connect with the VUE, but technical discussions stalled between 2023 and 2025. Since October 2025, the discussions between the Ministry of Commerce, Industry and Tourism (which managed the VUE portal) and the Ministry of Health (which administers the SAT system) have picked up again.
Citizen awareness programme
The National Network for Labour Formalisation (Red Nacional de Formalización Laboral, RNFL) an inter-institutional co‑ordination strategy led by the Ministry of Labour. It brings together public institutions, employers’ organisations, trade unions and employment-service providers to promote the transition from informal to formal work. In practice, the Network functions as a platform for joint action, combining policies, resources and programmes aimed at improving working conditions and expanding access to social security. Its activities include outreach, training, guidance, support for formal hiring, and follow-up of formalisation initiatives, often implemented through regional and local “tables” or co‑ordination spaces. In 2025, 300 such activities were organised, reaching 17 600 people spread over 30 departments.
As discussed in previous (post-)accession reports of the OECD on Colombia, there is a tendency among employers in Colombia to rely on contracts regulated under civil-law provisions for their employment relations, such as dependent self-employment and third-party contracting through associated work co‑operatives, simplified joint stock companies and union service contracts (see Box 2.2 for a description). These different forms of contracts have in common that the workers involved do not benefit from the rights stipulated in the labour code (such as minimum wage, hiring and firing rules, affiliation to trade union, and collective bargaining rights and social security rights), even though working conditions are often similar to those of regular employees.
Associated work co‑operatives (Co‑operativas de Trabajo Associado, CTAs) are, in principle, non-profit ventures in which workers own and manage its operation. As associated workers are considered owners and not employees, they are not covered by the labour law. As such, they receive a compensation instead of a salary and are not entitled to healthcare, pension payments or other benefits outlined in the labour law, nor do they have the possibility to establish a trade union (because the workers are the owners of the co‑operative). The resulting cost reduction opportunities stimulated the expansion of associated work co‑operatives in the 2000s.
Union service contracts (contratos sindicales) are civil-law contracts under which trade unions agree to supply their members’ labour to employers for certain activities. These contracts allow unions to ensure good working conditions for their members, but trade union federations continue to denounce the ongoing use of such contracts by false unions as a mean to circumvent the labour law, undermine collective bargaining rights and fragment trade union organisation (ILO, 2026[8]). While union service contracts have been in place for a long time, misuse for employment relations was facilitated in 2010 when the authority of signing a service contract was transferred from the union’s general assembly to the union’s president. This change in the law implied that it was no longer necessary to obtain the workers’ agreement, allowing businesses to construct fake unions and contract out their services.
Simplified stock companies (Sociedades por Acciones Simplificada, SAS) are commercial entities that were introduced in 2008 to stimulate the formalisation of micro firms by simplifying the administrative and legal procedures to register, manage and dissolve a firm. While the impact of this commercial entity on reducing informality is unclear, anecdotal evidence suggests that simplified stock companies are used to disguise employment relations. Like associated work co‑operatives, workers are considered as partners in a simplified stock company and then contracted out to user firms. As such, these workers are not covered under Colombian labour laws.
Source: OECD (2016[1]), OECD Reviews of Labour Market and Social Policies: Colombia 2016, https://doi.org/10.1787/9789264244825‑en.
While the new labour law has specific provisions on outsourcing, subcontracting and labour intermediation (see Box 2.3 for an overview), there are no provisions to address the misuse of civil-law contracts for regular labour relations. The provision to eliminate trade union contracts, which was part of the draft reform submitted in 2023, was withdrawn during the legislative process in Congress. Instead, a central element in Colombia’s strategy to tackle such misuse is the reinforcement of labour inspection, with a focus on identifying disguised employment relationships combined with stricter enforcement and sanctions. In recent years, the Ministry of Labour elaborated clearer legal criteria and guidelines to distinguish legitimate forms of organisation from abusive practices, supported by training and co‑ordination among inspection authorities. The use of data-sharing and inter-institutional co‑operation also helps detect irregularities, especially in the case of SAS structures.
Law 2466 of 2025 significantly tightens the regulation of outsourcing, subcontracting and labour intermediation by reinforcing the principle that the reality of the employment relationship prevails over its formal structure. This approach means that when a worker performs core and permanent activities of a company under conditions of subordination (e.g. receiving orders, working fixed schedules), they must be recognised as a direct employee, even if formally hired through a contractor or intermediary.
Outsourcing and subcontracting remain permitted under the new labour law, but only under strict conditions. Contractors must be genuinely autonomous, with their own technical and managerial capacity, and must assume business risks. The use of outsourcing to carry out core business activities in a way that undermines labour rights is prohibited. In such cases, the contracting company may be deemed the true employer. Similarly, labour intermediation is allowed only through authorised temporary service companies and for limited, clearly defined situations, such as replacing absent workers or meeting short-term production needs. Any form of intermediation that supplies workers on a permanent basis or for core functions is considered illegal.
The law also strengthens enforcement by introducing joint liability between companies and contractors and granting greater powers to labour inspectors.
Over the past decade and a half, the number of newly registered associated work co‑operatives declined radically, from more than 2 000 in 2010 to 187 in 2025, as did the number of workers in such constructions (Figure 2.3). In contrast, the number of newly signed union services contracts increased rapidly over the same period, though in a very volatile manner since many of such contracts last less than a year. In 2025, 89% of the 1 913 newly signed union services contracts were in the health sector. The strong use in this sector is related to a combination of factors, including a fragmented service delivery model, tight and often uncertain budgets, and hiring constraints in the public sector.
In 2024, there were 150 administrative actions for abusive subcontracting and in 2025, the labour inspectorate carried out 17 inspections of union services contracts, of which 16 in the health sector and 1 in the palm cultivation sector. For 4 of them, the labour inspectorate started a preliminary inquiry, leading to a total of 29 preliminary inquiries over the period 2022-2025 related to the use of union services contracts for labour intermediation practices.
Labour Formalization Agreements (Acuerdos de Formalización Laboral) are another important tool for the labour inspectorate to formalise workers. They are voluntary arrangements between the Ministry of Labour and employers through which the latter commit to regularising employment relationships – typically by converting informal or outsourced workers into formal employees with contracts, social security coverage, and labour rights. In return, authorities may suspend or refrain from sanctions during the process, encouraging compliance while promoting job quality and formal employment.
In 2025, a total of 4 179 workers were formalised through the Labour Formalisation Agreement programme, one of the highest numbers in the past nine years (Figure 2.4, Panel A). The number of signed agreements also increased considerably, reaching 78 agreements in 2025. To verify compliance with the terms of the formalisation agreements signed, the labour inspectorate carried out 225 verification visits (Figure 2.4, Panel B). While in 2025, the focus of the Labour Formalisation Agreement programme were the export sectors and key economic areas that have a significant impact on the national economy, the focus for 2026 shifted to the health sector, and in particular hospitals where union service contracts are widely used.
Number of newly signed union services contracts and newly registered associated work co‑operatives (Panel A) and number of workers in associated work co‑operatives (Panel B), 2010-2025
Source: Data provided by the Ministry of Labour.
Number of signed agreements and formalised workers (Panel A) and number of follow-up visits (Panel B), 2017‑2025
Source: Data provided by the Ministry of Labour.
Colombia enacted a major labour market reform in 2025, reflecting a shift toward a more protective and compliance‑oriented labour regime, by combining stricter rules on employment relationships with enhanced enforcement tools and coverage of new forms of work. The reform does not only aim to improve compliance ex post, but also to prevent violations structurally by reshaping incentives and closing regulatory gaps in the labour market.
In addition, the government made the strengthening of the Economía Popular – small-scale, informal productive activities – a central pillar of its social and economic policy through financial support, training, and public procurement access, alongside institutional recognition. Further progress has also been made in the functioning of the VUE one‑stop-shop for the registration of companies and the expansion of the SAT affiliation system for social security.
However, one of the key drivers of informality in Colombia, the high cost of formal labour, remains largely unaddressed, and costs are even growing. With a halt in the decline of informality in recent years and persistently high levels of informality in rural areas, renewed efforts are needed to bring down the cost of formal labour.
On enforcement, the labour inspectorate increasingly targets disguised employment and has scaled up labour formalisation agreements. Even so, the misuse of civil‑law contracts – especially union service contracts in health – persists and demands more systematic detection, transparent follow‑up, and timely sanctions.
References
[5] Fedesarrollo (2025), Fedesarrollo da análisis de la reforma laboral y las oportunidades que traería si se aprueba, https://fedesarrollo.org.co/noticias/fedesarrollo-da-analisis-de-la-reforma-laboral-y-las-oportunidades-que-traeria-si-se-aprueba.
[8] ILO (2026), Application of International Labour Standards 2026: Report of the Committee of Experts on the Application of Conventions and Recommendations, https://www.ilo.org/resource/conference-paper/ilc/ilc114/application-international-labour-standards-2026.
[4] Lane, M. (2020), “Regulating platform work in the digital age”, OECD Going Digital Toolkit Notes, No. 1, OECD Publishing, Paris, https://doi.org/10.1787/181f8a7f-en.
[7] OECD (2024), OECD Reviews of Labour Market and Social Policies: Colombia 2024, OECD Reviews of Labour Market and Social Policies, OECD Publishing, Paris, https://doi.org/10.1787/6ed40726-en.
[6] OECD (2022), OECD Economic Surveys: Colombia 2022, OECD Publishing, Paris, https://doi.org/10.1787/04bf9377-en.
[3] OECD (2021), OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, OECD Publishing, Paris, https://doi.org/10.1787/5a700c4b-en.
[2] OECD (2018), Accession of Colombia to the OECD: Formal Opinion of the Employment, Labour and Social Affairs Committee, Unpublished report.
[1] OECD (2016), OECD Reviews of Labour Market and Social Policies: Colombia 2016, OECD Reviews of Labour Market and Social Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264244825-en.