Colombia is a country located in South America and bordered by Venezuela, Brazil, Ecuador, Peru, the Andes mountain range, and the Caribbean Sea. It is a megadiverse country with rainforest, highlands, desert, and grasslands. Since the 2010s, Colombia has tried to diversify its economy by exporting modern pop culture to the world.

The minimum wage in Colombia is COP 1,423,500 per month, as of 2025.

The maximum number of working hours is 8 per day and 44 hours per week. Colombia is gradually reducing its standard workweek from 48 to 42 hours. As of July 2025, the limit dropped to 44 hours, with a final reduction to 42 hours set for July 2026.

Any work done past the standard working hours is paid as overtime. In Colombia, overtime compensation varies depending on whether the extra hours are worked during the day or at night:

• Daytime overtime applies to hours worked beyond the standard schedule between 6:00 a.m. and 6:59 p.m.
• Nighttime overtime applies to extra hours worked between 7:00 p.m. and 5:59 a.m.

Overtime payments are considered part of an employee's taxable income for the employer. This means that when overtime is paid, employer contributions (such as social security, pension, and other statutory benefits) must also be calculated based on the increased total salary (i.e., base salary + overtime). When overtime is paid, employer contributions also increase, because they are calculated based on the total compensation, not just the base salary.

Separate from overtime, employees in Colombia are entitled to a night shift surcharge if their regular working hours fall partially or entirely between 7:00 p.m. and 5:59 a.m. This surcharge is paid even if the employee is not working beyond the standard daily or weekly hours, as it compensates for working during night hours.

Auxilio de Transporte (Mandatory Transport Subsidy)

Employees earning up to 2 times the minimum wage (up to COP 2,847,000/month in 2025) are entitled to a mandatory transport subsidy of COP 200,000/month (2025 rate, updated annually). This is a legal obligation, not a discretionary benefit. The transport subsidy is included in the calculation base for Cesantías and Prima de Servicios.

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Employee Taxes

Income Tax (Impuesto sobre la Renta)

Colombia uses a unit-based income tax system. The Valor Unidad de Valor Tributario (UVT) is the reference unit used to calculate tax thresholds — in 2025 one UVT equals COP 47,065. Employees pay income tax on the portion of their salary above 95 UVT/month (~COP 4,471,175). Progressive rates apply as follows:

• 0% up to 1,090 UVT/year (~COP 51.3M)
• 19% from 1,090 to 1,700 UVT/year
• 28% from 1,700 to 4,100 UVT/year
• 33% from 4,100 to 8,670 UVT/year
• 35% from 8,670 to 18,970 UVT/year
• 37% from 18,970 to 31,000 UVT/year
• 39% above 31,000 UVT/year

Employee Social Contributions

• Pension: 4% of gross salary
• Health: 4% of gross salary (for employees earning more than 10 minimum wages, this increases to the full contributory rate)

Total employee social contributions: approximately 8% of gross salary.

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Employer Taxes & Contributions

Colombia has one of the highest employer burdens in Latin America. Contributions fall into two categories: social security contributions and parafiscales.

Social Security Contributions:

• Pension (Fondo de Pensiones): 12% of gross salary
• Health (EPS — Entidad Promotora de Salud): 8.5% of gross salary
• Work Risk Insurance (ARL — Administradora de Riesgos Laborales): 0.348% minimum (office/admin) up to 8.7% (high-risk sectors)

Parafiscales (mandatory social contributions):

• Caja de Compensación Familiar: 4% of gross salary
• ICBF (Instituto Colombiano de Bienestar Familiar): 3% of gross salary
• SENA (Servicio Nacional de Aprendizaje): 2% of gross salary

Note: Companies with fewer than 10 employees are exempt from ICBF and SENA contributions.

Total statutory contributions: approximately 30% of gross salary.

Mandatory Labour Benefits (additional employer costs):

• Cesantías (severance fund deposit): 8.33% of annual salary — see Cesantías section
• Interest on Cesantías: 1% annually on the fund balance
• Prima de Servicios (service bonus): 8.33% of annual salary — see Prima section
• Vacation provision: 4.17% of annual salary (15 days per year)

Total estimated employer cost including all mandatory benefits: approximately 52–54% of gross salary.

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Parental Leave

Pregnant employees in Colombia receive 18 weeks of paid maternity leave, usually starting 1 week before the due date. Fathers receive 2 weeks of paid paternity leave. This leave also applies to adoption. Employers pay for the leave upfront at 100% of the salary, and later receive a refund from the government.

Sick Leave

Sick leave is not accrued but rather granted as needed, based on medical need and certification, and there is no fixed annual limit. Employees in Colombia are entitled to sick leave at 2/3 of their regular pay. The employer pays for the first 2 days and the rest is reimbursed by social security.

Paid Leave

Colombia recognizes 18 public holidays each year. Under Ley 51 de 1983, several holidays that fall mid-week are moved to the nearest Monday. In addition, employees who have completed one year of service are entitled to 15 working days of paid annual leave, accrued at a rate of 1.25 days per month. Annual leave cannot be taken in half-day increments. Employees may also be eligible for bereavement leave and marriage leave under Colombian labor law.

‍Cesantías (Mandatory Severance Fund)

Cesantías is one of the most important and distinctive obligations for employers in Colombia — and one of the most commonly misunderstood by foreign companies.

Every year, the employer must deposit the equivalent of 1 month's gross salary (8.33% of annual salary) into a Cesantías fund (Fondo de Cesantías) administered by a private pension fund. This deposit must be made by 14 February each year for the prior year's accrual. Late deposits incur a penalty of 1 day's salary per day of delay.

Cesantías belongs to the employee and can be accessed during employment for three specific purposes: purchasing or improving housing, paying for higher education, and covering unemployment after termination.

On termination — regardless of the reason — the employee receives the full balance of their Cesantías account. This is separate from and in addition to any termination indemnity.

Prima de Servicios (Mandatory Service Bonus)

All employees on ordinary salary are entitled to a Prima de Servicios equivalent to 1 month's salary per year, paid in two equal installments:

• 15 days' salary paid by 30 June
• 15 days' salary paid by 20 December

This is a mandatory legal obligation under CST Art. 306 — it is not discretionary. The Prima applies to all employees regardless of earnings level (unlike the 13th month bonus exclusion for integral salary earners).

Employees who have not completed a full semester receive a proportional payment based on days worked.

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Process

Either party unilaterally terminating the employment contract must state in writing at the time of termination the cause or motive that led to the termination, except in some special cases.

The termination process must follow rules and regulations set by employment contract law, salary law, and social security regulations. Employers must offer a “fair” reason for terminating the employee in the eyes of the law or risk penalties and fines.

Notice Period

In Colombia, the notice period for termination depends on the reason for dismissal. No notice is required when termination is due to misconduct. If the dismissal is based on poor performance, the employer must provide at least 15 days’ notice. For fixed-term contracts, a 30-day notice period is required.

Severance Pay

The severance amount depends on the cause of the termination, the salary, and the agreement.

For fixed-term contracts, the severance must be the remaining amount of salary due to the employee up to the last date of the contract.

For indefinite contracts, severance depends on the years of service and current salary:

• If earning less than 10 times the monthly minimum wage, the employee receives 30 days salary for the 1st year of employment and then 20 days salary for every additional year worked.
• If earning more than 10 times the monthly minimum wage, the employee receives 20 days salary for the 1st year of employment and then 15 days salary for every additional year worked.

Important: this indemnity is one component of the total amount owed on termination. The full termination payment also includes the employee's accrued Cesantías fund balance, proportional Prima de Servicios, accrued but unused vacation days, and interest on Cesantías. The total cost of termination in Colombia is therefore significantly higher than the indemnity alone.

In Colombia, there are two types of salary structures: ordinary salary and integral salary. They differ in their composition, legal requirements, and the benefits they include. By law, employees on an ordinary salary are entitled to a statutory “13th-month” bonus — equivalent to an extra month’s pay each year — paid in two installments, one in June and the other in December.

Employees earning more than 13 times the minimum wage (more than COP 18,500,000/month approximately in 2025) fall under the Salario Integral (integral salary) scheme. Under this structure, the mandatory labour benefits — Cesantías, Prima de Servicios, and vacation — are considered embedded in the higher salary and are not paid separately. The 13th month bonus also does not apply.

However, social security contributions (pension, health, ARL) and parafiscales (ICBF, SENA, Caja) still apply, calculated on 70% of the integral salary rather than the full amount.

Integral salary must be expressly agreed in the employment contract and must be at least 13x the minimum wage. It is commonly used for senior and executive hires.

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