This English translation is provided for general information and has not been legally verified. Consult the Spanish original for legal interpretation. The article reflects its original publication date, not subsequent changes in the law.
When a services contract amounts to employment under Colombian law
A poorly managed services contract may be recognised as employment years later, leading to benefits, compensation and contribution liabilities. We explain the warning signs and how to protect your operations.
What is a contrato realidad?
A contrato realidad is a legal concept recognised under Colombian law. Regardless of the name or form given to a contractual relationship, if the essential elements of employment are present in practice — subordination, personal performance of the work and remuneration — the relationship is understood to be an employment contract rather than a services contract.
Which elements determine whether there is an employment contract?
Under Article 23 of the Substantive Labour Code (CST), there are three essential elements:
1. Personal performance of the work: the worker undertakes to perform the work personally.
2. Subordination or dependence: the employer has the power to issue orders and instructions and exercise control over the work performed.
3. Remuneration: a salary is paid in exchange for the services.
Services contract or employment contract?
If these three elements are established, the relationship is presumed to be employment, regardless of whether a services contract or another type of agreement was signed. Colombia’s high courts have reiterated that substance prevails over form and that employment rights cannot be undermined through civil or commercial contracts when subordination exists in practice. As a general rule, they have protected the rights of people who appeared to be independent contractors but actually worked set hours, received orders and were subject to internal rules.
Potential liabilities
Consequently, when employment in substance is recognised, the employer must pay all employment benefits, social security contributions, holiday pay, compensation and other rights arising from an employment contract. The employer also faces administrative penalties from the Ministry of Labour.
How can risks be prevented?
To prevent a services contract from subsequently being recognised as employment, the contracting party must ensure the contractor’s autonomy in performing the work. This means not imposing fixed working hours, establishing direct subordination or requiring compliance with orders characteristic of employment. Contractors must also provide their own resources to perform the services, bear the risks inherent to their activity and demonstrate technical independence.
Finally, the contract should be properly justified, clearly limited in duration and scope, and document its civil or commercial obligations without including duties that indicate dependence.
At Marín Ortega Consultores Jurídicos, we advise on preventing and managing the risks of a relationship that may qualify as a contrato realidad, supporting the proper structuring of employment and services contracts and the implementation of business practices consistent with labour law. Our aim is to help your company engage people with legal certainty, avoiding penalties, claims and unexpected financial liabilities, with the confidence that your arrangements comply with the applicable rules.