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A clear summary of severance payments, what they are, how they work and what they can be used for.

Some of the most praiseworthy purposes pursued by Colombians are those related to the acquisition of their own home, remodeling of the one they already own or the pursuit of university studies, either their own or those of close relatives. For this reason, the Colombian government, in its attempt to help its citizens, has a type of social benefit called “cesantías”, which are savings exclusively to meet these objectives.
Severance payments are a social benefit that the employer must pay to its employees in addition to the regular salary. The amount of this compensation is equivalent to one month’s salary for each year worked by the employee, if it is a fixed salary; in the case of a variable salary, the average of the salary earned in the last year of service or in all the time served if less than one year. In the event that the employee does not complete a full year of work, severance payments must be made proportionally.
This benefit is paid annually as of December 31 and must be deposited in a severance fund before February 15 of the following year. In other words, if an employee works from January 1, 2018 until December 31 of the same year, with a salary of one million pesos, the employer will be obliged to deposit in a severance fund, in the name of the employee, the amount of one million pesos as severance pay, no later than February 14, 2019.
The choice of the severance fund is made freely by the employee, who has until December 31 of the current year to decide and communicate to the employer the fund he/she has chosen.
It is of great importance to deposit the severance payments in the fund before the due date, since failure to comply with this obligation generates a moratorium penalty for the employer, which consists of the payment of one day’s salary for each day of delay in favor of the employee. This money must also be deposited in the severance fund to which the employee is affiliated.
It is also relevant for employees that severance savings cannot be freely withdrawn from the fund. Only in certain situations or for certain specific purposes, severance funds are authorized to disburse monies to employees.


  1. In case the person is unemployed and these are used to provide insurance and monetary assistance.
  2. To finance the enrollment in higher education of the employee, spouse or children in educational institutions recognized by the State.
  3. For the acquisition, construction and improvement of housing.

The foregoing assumptions are exhaustive, i.e., only in these cases or for these purposes, the severance funds are expressly authorized to disburse the money to the workers or unemployed.
Finally, in the event that the labor contract terminates before February 15 of the year following the year in which the severance payments were liquidated and the employer has not deposited such severance payments in the respective fund, it will be the employer’s obligation to deliver them directly to the employee at the time of the liquidation of the labor contract, being this the only case in which it is recommended to deliver the severance payments directly to the employee.
If you would like advice for your company on this subject, do not hesitate to contact us by clicking here. One of our attorneys will be happy to assist you with your request.
Author: Pedro Pablo Henao Cardona
Publisher: Santiago Pinzon Sosa

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