Regulatory update
When a services agreement is really an employment contract
Hiring someone under a services agreement does not, by itself, turn the relationship into anything other than employment. If in practice that person works under the company's subordination, a judge can rule that an employment contract existed all along, regardless of what the parties called the paperwork. It is the most expensive and most common contingency for a Colombian company: a retroactive award of social benefits, social security contributions, and damages that can add up to several times what was paid in fees.
Schedule a consultationThe presumption that shifts the burden of proof
Article 23 of Colombia's Labor Code sets three elements of every employment contract: personal provision of the service, pay, and continued subordination. Article 24 goes further: it presumes that every personal work relationship is governed by an employment contract. In practice, this means the worker only needs to show they personally provided the service for the judge to also presume subordination, and it is the company that must prove otherwise. Article 53 of the Constitution backs this logic with the principle that substance prevails over form: what actually happened in the relationship matters, not the name given to the contract that was signed.
The signs a judge looks for
The law does not set a closed list, but judicial practice repeats the same pattern of signs: a fixed schedule the company controls, de facto exclusivity even if the contract does not mention it, tools and equipment the company provides instead of the contractor, real integration into the company's structure (corporate email, participation in internal meetings, a direct supervisor), specific instructions on how to do the work (not just on the expected result), a fixed monthly payment unrelated to delivering a specific product or outcome, and a relationship that stretches on for years under successive contracts that are, on paper, independent of one another. No single sign decides the case by itself, but the more of them accumulate, the harder it becomes to argue there was no employment relationship.
What it costs when a judge rules against the company
If a judge rules that an employment relationship existed all along, the company must pay, retroactively and for the entire duration of the relationship, the social benefits it never paid (severance, severance interest, bonuses, vacation pay), the pension and health contributions it never made, and the moratory indemnification of article 65 of the Labor Code may also apply: one day's wages for every day of delay, for up to twenty-four months. This indemnification is not automatic: Colombia's Supreme Court has said that merely having a series of services agreements does not by itself amount to good faith on the employer's part, but the judge still evaluates case by case whether there were serious, credible reasons to believe the relationship was not an employment one. Signing the right contract from the start, or correcting in time a relationship that already functions as employment in practice, is substantially cheaper than defending against the ruling afterward.
The question that really matters is not what type of contract was signed, but how the relationship actually works day to day. An audit of current services agreements, done before someone requests one in a lawsuit, is the cheapest way to find the risk while it can still be fixed.