Payroll Services in Colombia

Ley 2466 de 2025 was published on 25 June 2025 and is the largest change to Colombian employment law in two decades. Three provisions move payroll directly. The night work window moved from 9pm–6am to 7pm–6am – deferred six months, so it took effect on 25 December 2025. The premium stayed at 35%, but two extra hours of every evening shift now attract it. The Sunday and holiday surcharge, previously 75%, rises in steps: 80% from 1 July 2025, 90% from 1 July 2026, and 100% from 1 July 2027. And overtime remains 25% by day and 75% at night, which now compounds differently because the night window is wider.

The reform also made the indefinite contract the legal default and capped fixed-term contracts at four years in total, with renewals beyond the fourth requiring a minimum of one year and any excess converting the contract to indefinite. Worth auditing your contract population against that, because conversion is automatic rather than something the employer elects.

The change with the largest hidden cost is the apprenticeship contract. The contrato de aprendizaje is now a special fixed-term employment contract rather than a training arrangement, which means apprentices receive full social security, cesantías, interest, prima and proportional vacation. Apprentice pay rose from 50% to 75% of the minimum wage in the academic phase and from 75% to 100% in the productive phase, and monetising an unfilled apprenticeship place now costs 1.5 minimum wages rather than one. Decreto 0223 de 2026, of 5 March, regulates the transition and requires existing apprentices to migrate.

Two procedural changes matter for anyone managing people. Dismissal for cause now requires a documented disciplinary process – written charge, disclosure of the evidence, at least five days for the employee to respond, and a reasoned decision – and the internal work rules must be updated to match. And the harassment standard changed: a single incident now suffices where the law previously required persistent conduct, which widens exposure to constructive dismissal claims.

Colombian employer contributions have two possible shapes depending on what each individual earns. The full set is health at 8.5%, pension at 12%, SENA at 2%, ICBF at 3%, the family compensation fund at 4%, and occupational risk insurance from 0.348% to 8.7% by risk class – around 30% in total for a low-risk employer. But article 114-1 of the tax code, originating in Ley 1607 de 2012, exonerates employers from health, SENA and ICBF for each employee earning less than ten minimum wages. For those employees the employer pays only pension, the compensation fund and occupational risk: about 16.5%.

That produces a cliff rather than a slope, and it is the single most important number in Colombian workforce planning. The threshold in 2026 is COP 17,509,050 a month. Below it, employer contributions plus prestaciones run at roughly 38% of salary. At or above it, they jump to roughly 52%. A pay rise of COP 210,000 a year that takes someone from just under the threshold to exactly ten minimum wages adds about COP 28.7 million to the annual cost of employing them – a multiplier of roughly 136 times the rise itself.

The exoneration is not universal. It applies to companies and other legal persons that are income tax filers, to natural-person employers with two or more employees, and to régimen SIMPLE taxpayers and cooperatives. It does not apply to entities in the special tax regime, which covers most non-profits, nor to natural persons with fewer than two employees. Pension, the compensation fund and occupational risk are never exonerated for anyone.

On the employee side, health and pension are 4% each. Employees earning four minimum wages or more pay an additional solidarity contribution to the pension fund, rising from 1% to 2% across bands. The contribution base has a floor of one minimum wage and a ceiling of 25 – COP 43,772,625 a month in 2026.

Prestaciones sociales are statutory benefits paid in addition to salary, and they are where foreign parents most often under-provision. The prima de servicios is 30 days’ salary a year, paid in two equal instalments due by 30 June and 20 December. Cesantías are one month’s salary a year – 8.33% – but they are not paid to the employee: they are deposited into a severance fund by 14 February, and late deposit costs one day’s salary per day of delay. On top of the cesantías themselves, the employer pays interest at 12% a year on the accrued balance, and that interest goes directly to the employee by 31 January. Vacation is 15 working days a year.

Together those come to about 21.8% of salary – prima 8.33%, cesantías 8.33%, interest 1.0% and vacation 4.17%. Note that the prima and cesantías bases include the auxilio de transporte, which vacation does not, so the three do not calculate off the same figure. There is also the dotación: two sets of work clothing and footwear three times a year, due 30 April, 31 August and 20 December, for employees earning up to two minimum wages with at least three months’ service.

The 31 January and 14 February deadlines are the two that catch people. They fall in the same window as year-end reporting, they are easy to miss on a first Colombian payroll cycle, and the cesantías penalty accrues daily.

There is an alternative structure for senior staff. A salario integral, available where pay is at least thirteen minimum wages – COP 22,761,765 a month in 2026 – bundles ten minimum wages of salary with a prestacional factor of at least 30%, and that factor replaces cesantías, interest, prima and surcharges. It does not replace vacation, which remains payable separately, and the contribution base becomes 70% of the integral salary. It simplifies senior payroll considerably, but the threshold sits above the exoneration cliff, so anyone on a salario integral is by definition outside the exoneration.

Ley 2101 de 2021 cut the maximum working week from 48 hours to 42 in annual steps: 47 hours from July 2023, 46 from 2024, 44 from 2025 and 42 from 15 July 2026. The final step is now in force. Crucially, the law prohibited reducing pay to match, so the effect was to raise the hourly rate: the divisor used to derive an hourly rate from a monthly salary fell from 220 to 210, which lifted every hourly rate by about 4.8% on 15 July. Any payroll still running the 220 divisor is underpaying overtime and surcharges.

The maximum ordinary day remains eight hours, and the week may be distributed over five or six days by agreement, provided a rest day is given and pay is not affected. Two flexible arrangements exist: a jornada flexible of daily blocks between four and nine hours with no overtime premium, provided the weekly average is 42 hours; and successive shifts of six-hour days and 36-hour weeks without night or holiday surcharges. Overtime is capped at two hours a day and twelve a week.

The surcharge stack is now: 35% for night work between 7pm and 6am, 90% for Sunday and holiday work rising to 100% in July 2027, 25% for daytime overtime and 75% for night overtime, with the Sunday and holiday multipliers compounding on top. For a business running evening or weekend shifts, the combined effect of the wider night window and the rising Sunday rate is a materially higher hourly cost than in 2024, with no change in headcount or salary.

The Ministry of Labour is actively inspecting the working-hours reduction and unpaid overtime under its 2025 inspection framework, and fines run from one to 5,000 minimum wages. That upper bound is COP 8,754,525,000 in 2026, which is not a realistic assessment for a routine breach but does indicate the range the inspectorate has available.

Income tax withholding runs on the UVT, a tax unit revalued each year – COP 52,374 for 2026, set by DIAN Resolución 000238 of 15 December 2025. The monthly table under article 383 of the tax code exempts the first 95 UVT of depurated base, which is COP 4,975,530 a month, then runs at 19%, 28%, 33%, 35%, 37% and 39%. Employers may use Procedimiento 1, computing on each month’s actual earnings, or Procedimiento 2, applying a fixed percentage set twice yearly in June and December from the previous twelve months’ average – which is materially better for employees with variable pay, but must be elected and kept for the semester.

The base is heavily deductible before the rate applies: 25% of employment income is exempt, capped at 790 UVT a year; dependants relief is 10% of gross capped at 32 UVT a month; mortgage interest up to 100 UVT a month; prepaid health up to 16 UVT; and mandatory health and pension contributions are fully deductible. All of it is then subject to a global cap of 40% of gross income and 1,340 UVT a year.

Filing has two channels. Social security and parafiscales go through the PILA, a single monthly electronic return via a licensed operator, on a deadline set by the last two digits of your NIT – from the second business day of the following month for 00–07 through to the sixteenth for 94–99. Separately, the electronic payroll document must be generated and transmitted to DIAN within the first ten business days of the month following the payroll period, twelve times a year regardless of how often you actually pay. Non-compliance risks the payroll cost being disallowed as a deduction, which is a far larger exposure than the penalty itself. The annual certificado de ingresos y retenciones is due to each employee by 31 March.

On termination without cause, indemnity for an indefinite contract depends on which side of ten minimum wages the employee sits: below it, 30 days’ salary for the first year and 20 days for each additional year; at or above it, 20 days for the first year and 15 for each additional year. Fixed-term contracts pay out the remainder of the term. Beyond that, several categories cannot be dismissed without prior authorisation – pregnancy and lactation require a labour inspector’s approval, with 60 days’ salary as an additional indemnity if breached; employees with a limiting health condition require Ministry authorisation, with 180 days’ salary; union officers require a judge’s permission. And failing to pay wages and prestaciones at termination triggers the sanción moratoria of one day’s salary for every day of delay, for up to 24 months.