Colombia’s Labor Reform Threatens Over 400,000 Jobs by 2026

A new report from Bancolombia indicates that Colombia’s recent labor reform, enacted in June 2025 to protect workers, may unintentionally eliminate over 400,000 jobs by next year.

The reform has significantly increased labor costs, averaging 7.6%, and businesses are now struggling to manage these rising expenses.

Unemployment is expected to rise notably, from 10.4% in 2025 to approximately 11.0% by 2026, translating into an estimated loss of 422,300 formal jobs across various sectors.

Professional services face the greatest impact, potentially losing around 183,000 jobs, or 7.7% of its workforce. Retail and trade sectors could lose about 56,000 jobs, while construction is likely to see around 44,100 job losses.

Manufacturing and agriculture also face significant cuts, with estimated losses of 35,000 and 21,700 positions, respectively. Business leaders, concerned by increasing costs, report that 13% of companies intend to reduce temporary staffing levels.

Upcoming provisions, such as an earlier start for night shifts and substantial increases in weekend and holiday pay, will further strain businesses financially.

Sectors heavily reliant on nighttime and weekend operations, including commerce, tourism, and security services, will be hit especially hard.

Industry representatives warn this reform could inadvertently boost informal employment as companies seek cheaper labor alternatives. Intended to improve worker conditions, the reform now risks harming overall job growth and economic stability.

Colombia must balance enhancing employment protections with maintaining economic competitiveness to avoid significant long-term economic challenges.

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