Severance and Unemployment Interests

Severance pay

Severance payments are a social benefit to which every worker who acquires an employment relationship is entitled, regardless of the type or duration of the contract and/or self-employed workers who wish to make this contribution.

The benefit consists of one month's salary for each year of services rendered and proportionally for each fraction of a year.

Workers whose salary type is Integral, the severance payment is included within the 30% of the benefit factor, in this way they are not liquidated or consigned since the payment is made on a monthly basis.

When are severance payments made?

Severance payments must be liquidated annually in the period between January 1 and December 31 of each year or in proportion to the time worked in this period.

Once this liquidation has been made, they must be deposited in the severance fund chosen by the employee, no later than February 14 of the following year.

How are severance payments made?

The last monthly salary earned by the employee is used as the basis for the liquidation of severance payments, provided that there has been no variation in the last three months. Otherwise, the average of the salaries obtained in the last year is calculated.

severance are paid on the basis of the worker’s last monthly salary, provided that there has been no change in the last three months. Otherwise, the average wage earned in the last year is calculated.

Salary x Days Worked

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When the worker receives payments of a wage nature, these must be included in the calculation of the settlement of unemployment:

• Surcharges
• Overtime
• Commissions
• Bonuses and/or salary allowances

 Note:For workers earning up to two SMLV, remember to include the value of the transportation or digital connectivity.

Interest on severance payments

In accordance with Law 52 of 1975:

The employer is obliged to recognize interest equivalent to 12% on the value of the severance payments paid as of December 31 of each year worked. This amount must be paid no later than January 31 of the following year and directly to the employee, since it is a financial recognition of the employer for the withholding of the money during the year.

How is severance interest paid? 

Accrued severance payments x days worked x 12%.

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Penalties for non-compliance in the payment of severance payments:

Therefore, in the event of failure to comply with the obligation to pay severance payments, the penalty for failure to timely deposit the severance payments in the fund consists of one day's salary for each day of delay in depositing the severance payments.

[1]  Article 253 of the substantive labor code.

[2]  Article 1 numeral 3 of Law 52 of 1975.

[3]  Law 1 of 1963, Concept 204944 of 2008.