Colombian President Gustavo Petro signed into law a sweeping labor reform on June 25, implementing measures including increased overtime pay for salaried employees and benefits for gig economy workers. Business groups in Colombia have criticized the legislation, which was reduced in scope from an earlier proposal from the Petro administration, the Associated Press reported. What are the most significant provisions of the reform, and how will it affect workers’ well-being? To what extent does the reform represent a risk for employers in Colombia? What does this reform mean for the future of Petro’s agenda over the remaining 13 months of his term in office?
Sergio Guzmán, political risk analyst at Colombia Risk Analysis: “On June 25, President Petro signed into law a landmark labor reform that redefined key aspects of the country’s labor landscape. While the measures are expected to improve existing workers’ well-being by enhancing job stability, increasing compensation, and extending protections to previously excluded sectors such as informal and platform workers, the reform does little to promote labor formalization or expand employment. It presents considerable risks for employers, especially small and medium-sized businesses, due to higher labor costs and compliance obligations. This will have an outsized impact on sectors that rely on late-hour or continuous operations, such as hospitality, healthcare, security, and retail. Business groups warn that the new rules could discourage formal hiring and fuel labor informality, while financial markets have reacted cautiously to the fiscal implications. Politically, the reform represents a rare legislative victory for Petro in a fragmented Congress and may serve as a flagship achievement of his presidency. However, it was passed through political pressure, as Petro threatened to call a popular consultation if Congress failed to pass the government’s preferred language or significantly watered it down. This hardball approach, seen by critics as a form of legislative extortion, sets a precedent for how Petro may govern during the final 13 months of his term. He will likely use similar tactics to push through other major initiatives, including healthcare, public utilities, and a looming tax reform, each of which faces considerable opposition and carries high political and economic stakes for the remainder of his administration.”
Laura Lizarazo, senior analyst at Control Risks based in Bogotá: “The approved labor reform mandates enhanced rights for gig workers and farmers, including medical coverage and social security; a gradual increase in night, Sunday, and holiday overpay for formal workers; standard labor protections and benefits for apprentices through special employment contracts; a limited duration for fixed-term contracts of up to four years; and a quota requiring employers to hire a minimum number of workers with disabilities, among other provisions. These measures—far from radical in the Colombian context (the country ranks 37th out of 42 in the OECD’s Strictness of Employment Protection Index, below the organization’s average)—will gradually and moderately improve protection standards and benefits for about 44 percent of the labor force, who are salaried employees (contrasting with 56 percent of workers in the informal economy). Although these reforms will increase the cost of formal labor, the extent of this impact remains uncertain and will depend significantly on the characteristics of specific industries and companies. Those heavily reliant on human labor, rather than technology, and operating uninterrupted or extended shifts will likely face higher costs. However, so far, claims predicting the collapse of companies and the formal economy as a result of these reforms are very likely overstated and lack support from policy, academic, or empirical evidence—more likely being politically or electorally driven.”
Silvana Amaya, senior manager for the Americas at the Tony Blair Institute for Global Change: “President Gustavo Petro’s labor reform, signed into law on 25 June, offers a symbolic breakthrough for an administration struggling to deliver on its social agenda. The law introduces stricter rules on short-term contracts, boosts overtime pay, and extends social security to some gig workers. But despite its progressive rhetoric, the reform raises serious economic and implementation risks. For a president who built his mandate on reducing inequality, the reform is politically expedient. Yet it falls short of structural transformation. Over 50 percent of Colombia’s workforce remains informal, largely untouched by the law. Meanwhile, the burden of compliance falls heavily on small and medium-sized enterprises, which employ the majority of Colombia’s youth. With expected increases of up to 34 percent in non-wage labor costs, many firms could resort to downsizing or informality, further weakening labor market outcomes. The reform also exposes a striking contradiction: the Colombian state—among the largest users of precarious contracts—must now reform itself to comply. Without leading by example, the government’s credibility on labor protections will be undermined. Petro’s promise of a complementary bill to support small and medium enterprises is thin on detail and may come too late to counteract investor anxiety. Bond markets have already signaled concern over the administration’s growing fiscal imbalances and weak policy coordination. With 13 months remaining, Petro has scored a legislative win—but one that risks deepening business skepticism and economic uncertainty. If mishandled, this reform could become a cautionary tale of ideology trumping pragmatism.”
Gimena Sánchez-Garzoli, director for the Andes at the Washington Office on Latin America: “The U.S.-Colombia Free Trade Agreement was frozen for several years by the U.S. Congress due to the country’s extremely poor labor rights records. Trade unionists and labor rights organizers who want to unionize but couldn’t were killed at an alarming rate. Reprisals against workers who fought for very basic rights, like bus drivers asking for bathroom breaks during their shift so they didn’t have to wear diapers, were rampant. Presidents Santos and Obama finally agreed on a labor action plan to help decrease unionist killings, do away with third-party contracting, strengthen collective bargaining, and improve conditions in the sectors most impacted by the FTA (sugar, oil palm, flowers and ports). This U.S. attention played a huge role in improving matters, at first. However, over time, these changes did not stick. Colombia is a very classist and incredibly unequal country, hence the violence and armed conflicts. If you got sick or injured on the job, you would be discarded and salaries, compensation and pensions, at times, would be withheld, further impoverishing workers and their families. Workers were forced to accept unfair labor practices just to eat. It is nearly impossible to improve your class status unless you engage in illicit economies. Unfair labor conditions and rampant impunity in rights violations facilitate that inequality. President Petro’s labor reform is an effort to dignify the working class, protect them from these systemic abuses, and allow for workers’ families to flourish. While the law is not a panacea, it contains in its 70 articles positive changes in terms of indefinite contracts, restrictions on hours worked, paternity and menstrual leave, and other provisions that dignify the worker. Politically, this is President Petro fulfilling one of his campaign promises. Beyond politics, labor rights conditions and violations committed against workers have caused much friction, undermining peace, democracy and necessary changes to society.”
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