What Severance Pay Rules Must Employers Follow in Colombia?

Which Employees Qualify for Severance Pay?

• Employees with indefinite-term contracts dismissed without just cause are generally entitled to statutory severance.
• Employees on fixed-term or specific-task contracts may receive severance if the employer ends the contract early without just cause.
• All employees, including those on fixed-term and indefinite contracts, accrue annual severance savings (cesantías) regardless of termination.
• Part-time employees and those earning variable pay qualify for severance and cesantías on a pro-rated basis.
• Employees who resign for a legally recognized constructive dismissal may be treated as dismissed without just cause for severance purposes.
• Senior managers and high earners remain covered by statutory minimums, though individual or collective agreements can grant higher severance.

What Are the Legal Timelines for Paying Severance?

In Colombia, you must distinguish between severance savings (cesantías) and dismissal severance (indemnización). Cesantías accrued during the year must be calculated as of December 31 and deposited into the employee’s severance fund by February 14 of the following year. When you terminate an employee, any indemnización for dismissal without just cause is typically due at the time of termination or on the next regular payroll run, according to local practice and contract terms. You should also settle outstanding wages, unused vacation, bonuses, and any prorated benefits at the same time. Delays can trigger interest, indexation, and potential labor claims, so plan internal approvals and cash flow to pay everything promptly.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance or cesantías correctly in Colombia, you risk financial, administrative, and litigation exposure. Labor judges tend to interpret doubts in favor of the employee, so underpayment or late payment can quickly become more expensive than full compliance.

• Late or missing cesantías deposits can trigger default interest and additional surcharges.
• Courts may order payment of unpaid severance plus monetary indexation and moratory interest.
• Employees can file labor claims or complaints with the Ministry of Labor, leading to inspections.
• The Ministry of Labor may impose administrative fines for repeated or serious non-compliance.
• Non-compliance can damage your employer brand and complicate future hiring or audits.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the underlying obligation to respect Colombian severance rules. In a compliant EOR model, the EOR is the legal employer and is responsible for calculating and paying cesantías and any dismissal indemnización. However, your company typically funds these costs through service fees and remains the economic decision-maker behind terminations. If authorities consider the arrangement a sham or find joint employment, they may pursue both the EOR and your company. Clear contracts, transparent cost allocations, and proper documentation of just cause are essential to manage severance risk.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing Colombian severance means tracking cesantías accruals, salary changes, and contract types for every employee, then applying the correct formula when a termination occurs. Playroll helps your team automate these calculations, align them with the Substantive Labor Code, and keep documentation ready for audits or disputes. You get clear visibility into projected severance costs before you make workforce decisions.

When you hire through Playroll as your global employment partner, we handle local payroll, mandatory benefits, and severance compliance end to end. Our in-country experts keep up with regulatory changes, from deposit deadlines to new case law on unjust dismissal. That lets your company focus on performance and growth while staying confident that every termination in Colombia is handled legally and consistently.