Proposed Colombian labor reform has software industry on edge

The labor reform being discussed in Colombia could have a significant impact on hiring in the software and IT industry, at a time when personnel are needed to leverage growth.

“The proposal as made could have a negative impact on employment in the technology sector,” Ximena Duque, president of business chamber Fedesoft, told BNamericas.

According to a survey carried out by the chamber's research center Cenisoft, around 163 companies needed to immediately fill 870 vacancies for specialized software and IT profiles.

“The IT sector faces a great talent shortage and a continuous demand for new professionals,” Duque said.

In mid-June, the second labor reform promoted by the Colombian government was approved in the first debate in the lower house.

The reform includes benefits for workers that translate into an increase in costs for the business sector, critics say.

“The approval of the reform in its current form could considerably exacerbate the slowdown and stagnation in job creation in this vital sector for the country's digital economy,” Duque added.

The software industry in Colombia has been experiencing a slowdown since 2022, which has intensified in 2024. This is related to the economic cooling that was reflected in GDP growth of only 0.6% in 2023. In addition, the national unemployment rate was 10.2% and informality was 56.4%.

While in 2021 the number of people employed in the IT and telecommunications sector grew 25.4% over the previous year, since 2022 growth has remained at around 5%.

In the first quarter of this year, the average number of employees in the sector was 373,000, compared with 400,000 a year earlier, according to Fedesoft data based on the survey of households by statistics agency DANE.

In April, however, the number of people employed in the sector was 412,000, according to the DANE survey.

“We believe we should not focus solely on the potential risks of job losses due to technology. The real risk that this reform faces is labor informality,” Duque said.

Among the changes that would increase labor costs are, for example, the modification of night shifts, which would start at 6pm instead of 9pm. In addition, the bill would increase payments for mandatory rest days from 75% to 100% of basic salaries and increase compensation for the termination of contracts without just cause, among other modifications.

The debate comes in a context of economic slowdown and projections of slow recovery during 2024.

DIGITAL INDUSTRY

The text being discussed also includes labor rights for digital platform workers.

“We positively value the recognition of technological advances and the new jobs that emerge in these developments in the country's labor market,” said Duque.

However, she believes that “other sectors of the digital industry are also experiencing new dynamics” that should be key points of labor reform such as informality.

“It's crucial to focus on addressing the creation of strategies that allow our sector to create opportunities to close the existing talent gap and promote a more dynamic, productive and competitive labor market at a national and international level,” she added.