Colombia HR and payroll glossary

Retención en la fuente Withholding tax at source

The income tax the employer withholds each month from salary. Pension, health and solidarity-fund contributions are taken out first, then 25% of the rest is exempt (capped at 790 UVT a year), and the remainder is taxed on a table running from 0% to 39%. For most employees it is close to their final tax. Source

UVT Tax Value Unit

Unidad de Valor Tributario

The unit in which Colombian tax brackets, exemptions and caps are expressed, updated each year by DIAN. It is COP 52,374 for 2026; the monthly withholding table, for example, is tax-free up to 95 UVT. Source

ARL Occupational Risk Administrator

Administradora de Riesgos Laborales

Compulsory work-accident and occupational-disease insurance paid entirely by the employer. The rate depends on the job's risk class: 0.522% of the IBC for class I (office work), up to 6.96% for the highest class. Source

EPS (Salud) Health Promoting Entity; health contribution

Entidad Promotora de Salud

The health insurer each worker joins, and the health contribution of 12.5% of the IBC: 4% from the employee and 8.5% from the employer. Companies are exempt from the employer 8.5% for employees earning under 10 SMMLV. Source

FSP Pension solidarity fund

Fondo de Solidaridad Pensional

An extra employee-only pension contribution of 1% of the whole IBC once pay reaches 4 SMMLV (COP 7,003,620 a month in 2026), rising in steps to 2% from 16 SMMLV. It funds pensions for low-income people. Source

IBC Contribution base income

Ingreso Base de Cotización

The monthly pay on which pension, health and occupational-risk contributions are calculated, capped at 25 SMMLV (COP 43,772,625 a month in 2026). For salario integral it is 70% of the salary. Source

Parafiscales (SENA, ICBF, Caja) Payroll levies

Aportes parafiscales

Employer-only payroll levies: SENA (national training service) 2%, ICBF (family welfare institute) 3% and the family compensation fund (caja de compensación) 4%. Companies are exempt from SENA and ICBF for employees earning under 10 SMMLV, but the 4% caja contribution applies to everyone. Source

Pensión (AFP / Colpensiones) Pension contribution

Cotización a pensión

The pension contribution of 16% of the IBC: 4% from the employee and 12% from the employer. It goes to the public Colpensiones or a private fund (AFP), depending on the worker's choice and the 2024 pension reform rules. Source

Cesantías Severance savings

Cesantías e intereses sobre cesantías

Every employee accrues one month's pay a year as cesantías, which the employer deposits each February in a severance fund chosen by the employee, plus 12% interest paid directly to the employee each January. The money is paid out on any termination; it is a normal labour cost, not a dismissal payment. Source

Prima de servicios Statutory service bonus

A compulsory bonus of one month's pay a year, paid in two halves, by 30 June and by 20 December (pro rata for part-year service). It is one of the prestaciones sociales paid on top of salary, and does not apply to salario integral. Source

Salario integral All-inclusive salary

An option for salaries of at least 13 SMMLV (10 SMMLV plus a 30% benefits factor) in which the prima, cesantías and their interest are folded into the salary instead of paid separately. Contributions are then charged on 70% of the salary. It must be agreed in writing. Source

SMMLV Statutory monthly minimum wage

Salario Mínimo Mensual Legal Vigente

The national minimum monthly wage, COP 1,750,905 in 2026. Many payroll thresholds are set in multiples of it: the contribution cap of 25 SMMLV, the solidarity-fund threshold of 4 SMMLV, the 10 SMMLV line for employer exemptions and the dismissal indemnity scale, and the floor for salario integral. Source

Estabilidad laboral reforzada Reinforced job security

Protection that stops dismissal without Ministry of Labour or court authorisation for pregnant workers and those on maternity leave, workers with health-related limitations, union officials (fuero sindical) and those close to retirement. A dismissal in breach can be voided and the worker reinstated. Source

Indemnización por despido sin justa causa Indemnity for dismissal without just cause

What the employer pays to end an indefinite contract without just cause. For pay under 10 SMMLV: 30 days' pay for the first year plus 20 days for each further year; for 10 SMMLV or more: 20 days for the first year plus 15 days for each further year, pro rata. No notice is required. Source

Jornada máxima (42 horas) Maximum working week

Jornada máxima legal

The ordinary working week was cut in steps from 48 hours and is 42 hours from 15 July 2026. Overtime is limited to 2 hours a day and 12 a week, paid at 125% in the day; night work from 7 p.m. carries a 35% surcharge. Management and trust positions are excluded. Source

Período de prueba Probation period

Up to two months, agreed in writing (for fixed-term contracts under a year, no more than one fifth of the term). Either party may end the contract during probation without notice or indemnity. Source

DIAN National Tax and Customs Directorate

Dirección de Impuestos y Aduanas Nacionales

The tax authority. Employers pay withheld income tax to it monthly, issue electronic payroll documents (nómina electrónica) through its system, and give each employee an annual certificate of income and withholding. Source

Ministerio del Trabajo Ministry of Labour

The labour ministry and inspectorate. It enforces the Labour Code, authorises dismissals of workers with reinforced job security and approves collective dismissals. Source