End-of-service benefits constitute essential additional income for millions of workers in Colombia. These benefits, regulated by the Labor Code, correspond to an annual payment of the accumulated balance in each employee’s end-of-service benefits and must be registered each year. With the 2025 labor reform, the option of obtaining it in another way is being offered.
It is a mandatory social benefit that the employer must pay to his workers, in addition to the salary and end-of-service benefits themselves. Its purpose is to encourage savings and compensate the worker for the time that the end-of-service gratuity remains deposited in the corresponding fund. Unlike severance pay, which can be withdrawn under certain circumstances, the interest is delivered directly to the worker and is not accumulated in the fund. This benefit applies to all employees who have a formal employment contract, whether per job, fixed-term or indefinite-term.
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It should be noted that Law 50 of 1990, specifically Article 99, stipulates that the employer must pay the worker a legal interest of 12% annually, or the pro rata value if the employment relationship does not cover the entire year. The calculation is based on the accumulated end-of-service benefit balance as of December 31 and is adjusted according to actual working days.
The formula is: The value of the end-of-service gratuity is multiplied by the number of working days by 0.12 and divided by 360.
For example, if a worker had $1,423,500 in severance pay (equivalent to the 2025 minimum wage) and worked nine months (270 days) during the year, the calculation would be as follows:
- $1,423,500 x 270 x 0.12 / $360, giving a benefit of $128,115.
- In another case, an employee with $2,000,000 in severance pay and 180 days’ work would receive $240,000 in annual benefits.
Unemployment benefit must be paid no later than January 31 of the year following the year in which it was incurred. The disbursement is made directly into the worker’s salary account. If the business relationship ends before that date, interest is included in the final settlement. The regulations stipulate penalties for employers who do not meet the deadline: for each day of delay, they must pay a fine equivalent to the minimum daily wage.
Likewise, Law No. 2466 of 2025, issued on June 25, introduced a related amendment by allowing the employer and employee to agree in writing on the monthly payment of end-of-service benefits. The amendment included in Article 64 of the Substantive Labor Law provides for this The worker can receive 1% per month of his basic salary, which includes the monthly salary and, in applicable cases, transportation assistance.
In practice, this means that instead of taking the 12% accrued at the end of the year, an employee can opt for monthly payments equivalent to 1% of their base salary. For example, if the base salary is $2,400,000, the monthly benefit would be $24,000, with the same annual amount added as in the traditional system. The alternative does not change the total value received in the year, but it does change the periodicity and can facilitate financial management for both workers and employers.
The option to pay monthly unemployment benefits provides benefits for both parties:
- For workers: It represents the possibility of receiving additional income on a regular basis, which can help with personal financial planning.
- For companies: Especially small and medium-sized, monthly payment breakdown allows you to better manage cash flow and avoid high payments on a single date.
According to data from the National Administrative Statistics Service (Danish), as of August 2025, there were 23.8 million workers in Colombia who were entitled to benefits on severance pay, as long as they had a formal employment contract. The size of this system is reflected in the amounts contributed: From January 1 to February 14, 2025, unemployment contributions exceeded $16.10 billion, demonstrating the importance of this social protection mechanism.
The labor reform also introduces measures to accelerate the withdrawal of end-of-service benefits. The traditional reasons for partial or total withdrawal are maintained to simplify the process. Among them:
- Higher education.
- Purchase or improve housing.
- Pay property taxes.
- Termination of contract.
- death.
- Providing military service.
- Change to comprehensive salary.
Unemployment funds are already adapting platforms to allow applications and viewing of documents through virtual channels, reducing the need for in-person procedures and speeding up access to resources.