Introduction

Columbia as a dynamic market is constantly growing and making significant space for contractual work providing flexibility for both business and individuals. As a surge of this is captivating the market, companies constantly look for hiring talent without the bounds of traditional employment relationships which means it becomes highly important to explore and understand the legal aspects of independent work and contracts. This working model helps individuals with autonomy of working on their own terms while it also helps businesses procure skills based on project requirements from time to time. 

Who is an Independent Contractor?

Colombian law outlines three primary elements determining that an individual is an employee: 

1. The individual provides a service to another legal entity
2. The individual receives compensation in return
3. The individual operates under continuous and direct subordination to the employer.

This means that legal subordination is the key criterion for distinguishing an employee from an independent contractor. In reality, however, this can be difficult to determine and therefore a range of additional factors may be looked at. Essentially, an individual contractor:

1. Does not have fixed hours of work that are determined by the hiring company.
2. Can choose the location from which to work.
3. Assumes all risks related to carrying out the work specified in the contract.
4. Provides their own equipment, rather than receive it from the hiring company.
5. Can be (or is expected to be) dismissed once the contracted work is complete. 
6. Is not integrated into the hiring company’s organizational structure.
7. Can refuse to perform a task (unless that task is part of their contract).
8. Is not entitled to a minimum amount of work or a minimum amount of pay.
9. Is not listed on the hiring company’s normal payroll.

Legal Distinctions: Employee vs. Independent Contractor

Based on the columbian labor law, there are mainly three distinctions that define that work of an independent contractor and an employee;

1. Personal Service: the individual must perform the service on their own.
2. Subordination or Dependency: this is the most important element which dictates the terms of work for the employee of working in the subordination of the employer. The employer governs the kind of work, the schedules and the requisites of the work and the employee is supposed to comply. 
3. Remuneration: payment is made for the services provided, employees also get benefits like paid leaves, medical benefits etc.

An independent contractor, on the other hand, works autonomously on their own terms. Although the outcome and the desired product is defined by the employer, the time of work, location, terms and schedules are fully governed by the freelancer making it an appropriate environment for them to work and thrive.

Independent Contracting Practices and Contract Structures

Engaging in contractual work in Columbia involves a service agreement. This contract is fundamental for defining the relationship and terms for work between the employer and the employee. 

Elements which are mainly included in the contract are as follows;

1. Identification of parties: this includes legal names and identities of both client and contractor.

2. Scope of work: this defines the description of services provided, deliverables and objectives in specific terms.

3. Term: this defines the duration of the contract, which is based on the duration of the project and deliverables which are agreed upon between the two parties. 

4. Remuneration: this is the agreed upon payment amount based on all the factors relevant for deciding it. It defines the currency, payment cycles and other specifications. It claims it as a service and not salary.

5. Independence clause: It clearly states that the condition of the work is independent contracting and does not hold the contractor accountable for anything other than the specified contract.

6. Contractor’s obligation: it defines the responsibilities, deliverables, tools/equipment, materials procured and any other information that the client must know.

7. Client’s obligations: this outlines the agreement upon providing necessary material, information and any other requirement important for the contractor. 

8. Termination: This states various conditions under which either parties can terminate the agreement

9. Confidentiality: It specifies the protection of sensitive information adjoining the project for both the parties.

10. Governing law: this includes specifying that the Columbian law governs the contract. 

A well drafted contract is important for proceeding with the actual project as its the only valid document securing and defining the terms of work.

Tax Obligations and Insurance Requirements

Independent contractors in Columbia are accountable for managing their own taxes and security obligations. They are self employed and are treated on the same terms in case of taxes and obligations as well.

1. Income Tax: independent contractors must file their annual income tax returns based on their income thresholds. Income from service based contracts is considered taxable income. They may have to make advance tax payments based on nature, duration and amount of earning which is typically withheld by the client. 

2. VAT (IVA): if the independent contractor is providing a service which is subject to VAT and if their annual gross income exceeds the threshold for being classified as IVA, they must register their VAT also which they would charge on their invoice and file return for the same.

3. Social security contributions: Independent contractors are required to contribute to the social security system on their own;

• Pension: independent contribution to a pension fund
• Health: independent contribution to health insurance
• Occupational risks: contribution to cover fall off related to work activities.

These contributions are calculated based on a percentage of the contractor’s monthly income which is generally 40% of their gross income with minimum and maximum limits. The contractors are themselves responsible for calculating and paying these contributions monthly. The employers often keep an account of the contractors payments of these contributions before getting into a contract and making payments.  

Common Industries and Sectors

Independent contractors are required in many areas of the Columbian market, they are particularly utilised where there is a need for contractors for higher skills and flexibility of projects. Some common industries that utilize freelance contractors are;

1. Technology and IT sector: Software development, IT consultancy, data analytics and cybersecurity services.
2. Creative Services: Graphic design, content creation, writing, animation and video production.
3. Consulting services: business consulting, strategy and management, financial consulting, HR services
4. Professional services: legal consulting, accounting, architecture and engineering.
5. Gig economy platforms: events, coverage, transportation, management.

These sectors often provide growth and scalability without the bounds of a corporate ladder. The commitment and expertise of the contractors is the defining factor for success and associated gains.

Also find out about How to get paid as a remote worker without a PayPal account by following this link!

Must-Have income Management Tools for Freelancers

1. Transfi

Transfi is one of the best income management tools, making automating payables faster, safer, and more efficient. The end-to-end solution modernizes operations while providing an effective means to process payments internationally. Users can quickly and easily send payouts to suppliers, freelancers, and other recipients. The system also offers a variety of payment methods. From automation to virtual payment services and digital marketplaces, Transfi is a robust platform that delivers a worldwide quality experience. 

What does Transfi provide?

• Quick cross border transfers with instant processing
• Multi currency accessibility, provides 40+ currency options
• Multiple payment options 
• Effortless API integration
• Competitive and transparent pricing 
• 24/7 customer support

Transfi’s Bizpay provides a one stop solution for all your international payment needs, it is easily accessible and does not require a multi step- difficult process to make payments.

2. Payoneer

Payoneer makes it simple for freelancers, service providers, and stock photographers to manage their cross-border payments, proving getting paid for freelance work doesn’t have to be expensive or take a lot of time.

3. AND.CO

This tool streamlines the freelance flow from proposal to payment, all while allowing you to create and send customized contracts and invoices. You can accept payments through PayPal, credit card, or ACH bank transfer, and if a client hasn’t paid on time, they’ll even send out a payment reminder.

4. Mint

This financial tracking app allows you to see everything at a glance, which is perfect for freelancers who want to see all their financial information in one place. Mint allows you to pull information from your bank accounts, credit cards, savings, and investment accounts, giving you a comprehensive overview.

5. Cushion

Cushion was designed by freelancers who understand the roller-coaster ride that can be trying to run a business. According to the team, “we’re solving our own problems by building Cushion, while still using it to manage our freelance work.” They know what you’re looking for and do their best to provide it.

Conclusion

By switching to modern day payment solutions complying with local systems diligently, the Columbian working population has achieved a well built financial setup for international payment operations. These streamlined solutions have helped make payment processing efficient and eliminating unnecessary delays. Platforms like Transfi optimize cross border payments coming at the ease of users requirements, easy integrations combined with quick customer support, this efficient solution makes up the perfect medium for transactions in real time at completely transparent and low pricing.

Frequently asked questions (FAQs)

1. Why do freelancers trust Transfi for cross border payments and income management?

• Seamless cross border payments
• Low setting up cost
• User friendly systems
• Multiple currency and payment options
• 24/7 customer support 

2. How can freelancers accept payments from international clients?

Freelancers can receive international payments through various online platforms such as Transfi, PayPal, Stripe, Wise, and Amazon Payments. One can use Transfi for easy, minimal and flexible international payments as you can receive money in desired currencies or cryptos without exchange costs or additional charges.

3. What are the things to consider when getting paid as an independent contractor in Columbia?

• Evaluate the nature of your services and clients
• Consider your business structure
• Take into account the size and frequency of payments
• Consider ease of use and accessibility for your clients
• Understand fees
• Consider security 

4. What does an independent work contract in Columbia consist of?

• Identification of parties
• Scope of work
• Term 
• Remuneration
• Independence clause
• Contractor’s obligation
• Client’s obligation
• Termination
• Confidentiality
• Governing law

5. How do I avoid being charged high fees when paying international freelancers?  The high-cost charging avenues to avoid include PayPal and wire transfers, replacing them with the much lower-priced BizPay that charges minimal transaction fees and offers competitive forex rates.