TL;DR — Hiring in Colombia
- Fully-loaded employer cost: ~50% on top of gross salary (Ley 50 benefits)
- Pension, health, ARL (workers' comp), parafiscales (SENA, ICBF, Cajas)
- 13th-month (prima de servicios) paid in 2 halves: June + December
- Severance auxiliary (cesantías) of 1 month's salary per year, deposited in February
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Statutory employer costs in Colombia
In Colombia, employers add roughly 47–55% on top of gross salary. Statutory contributions: 12% pension (employer share), 8.5% health (capped above 10 SMMLV), 0.5–6.9% ARL (workers' comp by risk class), plus 9% 'parafiscales' (SENA training 2%, ICBF child welfare 3%, Caja de Compensación 4%). Mandatory benefits add the prima de servicios (1 month/year) and cesantías severance fund (1 month/year + 12% interest).
| Contribution | Employer rate | Notes |
|---|---|---|
| Pension (employer) | 12% | Combined into Colpensiones or private fund. Solidarity surcharge 1% for high earners. |
| Health (EPS) | 8.5% | Exempt for employees earning <10 SMMLV at small employers under Ley 1607 |
| ARL (workers' comp) | 0.522–6.96% | Risk-class I (office) = 0.522%; risk-class V (mining) = 6.96% |
| SENA (training) | 2% | Parafiscal contribution |
| ICBF (child welfare) | 3% | Parafiscal contribution |
| Caja de Compensación Familiar | 4% | Family welfare fund — provides subsidies, recreation, healthcare access |
Mandatory employee benefits
Beyond statutory contributions, Colombia law requires the following benefits the employer must fund.
- Prima de servicios
- 1 month's salary per year, paid 50% by 30 June and 50% by 20 December.
- Cesantías (severance fund)
- 1 month's salary per year deposited into a cesantías fund by 14 February. Employer also pays 12% interest on the cesantías balance directly to the employee.
- Vacations
- 15 working days per year, after 1 year of service.
- Auxilio de transporte
- Transport allowance (~$200K COP/mo in 2025) for employees earning under 2 SMMLV.
Termination, notice and severance
Probation
2 months for permanent contracts; 1/5 of contract length for fixed-term (max 2 months).
Notice period
Indefinite-term contracts: 30 days for objective causes. Fixed-term: 30 days before expiry to avoid auto-renewal.
Severance
Without just cause: indemnización ranges from 20 to 45 days' salary per year of service, depending on salary tier and tenure. For employees earning <10 SMMLV with 1+ year tenure: 30 days first year + 20 days per additional year. Higher earners get 20 + 15.
Common compliance pitfalls
- Parafiscales (SENA + ICBF + Cajas = 9%) are sometimes confused with social security. They're separate and add meaningfully to employer cost.
- Salario integrado — for employees earning >10 SMMLV (~$13M COP/mo), employer can offer an 'integrated salary' that bundles benefits at 30% premium and excludes future indemnización on those bundled benefits. Common for executives.
- Cesantías retiradas — employees can withdraw cesantías for housing or education without leaving the job. Employer still owes the 12% interest on the prior year's balance.
- Colombian labor courts heavily favor employees. A 'mutual termination' with signed release can still be reopened by the worker for up to 3 years; pay severance correctly the first time.
Frequently asked questions
How much does an EOR cost in Colombia?
EOR platform fees for Colombia range from $249–$549 per employee per month. On top, employer-side contributions add ~47–55% to gross salary including parafiscales, social security, ARL, prima, cesantías, and cesantías interest.
What are 'parafiscales' in Colombia?
Parafiscales are mandatory employer contributions to three institutions: SENA (national training service, 2%), ICBF (child welfare institute, 3%), and Cajas de Compensación Familiar (family welfare funds, 4%). Total 9% on gross payroll, paid by the employer only.
What is the difference between prima and cesantías?
Prima de servicios is a paid bonus (1 month/year, split June + December) the employee receives as cash. Cesantías is a severance fund (1 month/year) deposited into a fund the employee accesses on termination, or earlier for housing/education. The employer also pays 12% interest annually on the cesantías balance directly to the employee.
Is Colombia good for nearshoring engineering talent?
Yes. Bogotá, Medellín, and Cali have growing engineering talent pools with English fluency, US-Eastern timezone alignment, and salaries 50–70% below US equivalents. Colombia is the #3 LATAM nearshoring destination after Mexico and Argentina.
How much is severance for a Colombian engineer making $60K USD?
At 2 years of service, indemnización for unjustified dismissal is approximately 30 + 20 = 50 days' integrated salary, roughly $8,200 USD. Add accrued prima, cesantías, vacation, and the 12% cesantías interest, and total exit cost is closer to $14–16K USD.
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.