What are cesantías in Colombia? Complete guide for employees and HR

Cesantías (severance savings) are one of the most important statutory benefits in the Colombian labor system, and yet they still raise questions at the start of every year: how much is owed, on what date it is paid, what happens with the interest, and what the money can be used for. That confusion is not trivial. For the employee, cesantías are real financial backing against unemployment and a legitimate way to finance housing or education. For Human Resources, they are a legal obligation with strict deadlines and concrete penalties for non-compliance. This guide explains, based on the Colombian Labor Code (Código Sustantivo del Trabajo), what cesantías are, who is entitled to them, how they are calculated, when they are paid and how they are withdrawn, so that both the worker and the company understand exactly what is at stake.

What are cesantías?

Cesantías are a mandatory statutory benefit in Colombia equal to one month of salary for each year worked, functioning as forced savings in favor of the worker. Their main purpose is to serve as financial backing when a person becomes unemployed, but the law also allows them to be used for housing and education. Unlike salary, which is received month to month, cesantías accumulate over the year and are deposited into a fund managed by a specialized institution, so the money stays protected until one of the withdrawal grounds is met.

This benefit is regulated by the Colombian Labor Code and is independent of other employer obligations, such as the service bonus (prima de servicios), vacation, or work clothing allowance (dotación). In other words, cesantías do not replace salary or any other benefit: they are added on top of them. The current regime comes from Law 50 of 1990, which changed the way they are settled and managed compared with the previous scheme, a point we return to later.

Who is entitled to cesantías?

All workers hired under an employment contract are entitled to cesantías, whether fixed-term or indefinite. The size of the company or the sector does not matter: if there is an employment relationship with subordination, salary, and personal performance of the service, the obligation to recognize cesantías exists. This includes those who work by the day, by the hour, or part-time, in which case the benefit is recognized proportionally to time and salary.

The most relevant exception is the integral salary. Employees who agreed to this type of compensation —which in Colombia applies from ten monthly minimum wages plus a benefit factor— do not receive cesantías separately, because that payment is already included within the integral salary. Cesantías also do not apply to relationships that are not employment in the strict sense, such as civil or commercial service contracts, where there is no subordination. If a contract is labeled "service" but in practice works as an employment relationship, the worker can claim the benefits owed, including cesantías.

How are cesantías calculated?

Cesantías equal one month of salary for each year of work, and are settled proportionally when the period is less than a year. The basic formula is: (monthly salary multiplied by days worked) divided by 360. For example, if an employee worked the full year, the result will equal one monthly salary; if they worked only part of the year, they will receive the corresponding fraction. The monthly salary is taken as the base, and it includes the transport allowance when the worker is entitled to it, along with other payments the law considers to be part of salary.

In addition to cesantías, the employer must pay interest on cesantías equal to 12% per year on the accumulated balance, also calculated proportionally to the time worked in the year. This interest is not deposited into the fund: it is paid directly to the worker. It is worth keeping an important detail in mind: the exact amount in pesos depends on each person's salary and on the current legal monthly minimum wage (SMMLV) for the relevant year, which changes every January. For that reason, instead of setting figures that quickly become outdated, the recommended approach is to apply the formula to the employee's real salary and verify the SMMLV in force for the current year.

When are cesantías and interest paid?

The cesantías calendar has two key dates worth memorizing. Interest on cesantías is paid directly to the worker no later than January 31 of each year, corresponding to the cesantías accrued during the immediately preceding year. The deposit of cesantías into the fund chosen by the worker must be made no later than February 14 of each year. In other words, first the employee receives the interest in their account and, a few weeks later, the cesantías capital is deposited into the cesantías fund.

The worker is the one who chooses the cesantías fund administrator where the money will be deposited, and the employer must respect that choice. If the person has not indicated a fund, the deposit is made into the fund determined by the regulations. These dates apply while the employment relationship is active. When the contract ends, the logic changes: the cesantías accrued during the current period and not yet deposited are settled and paid directly to the worker along with the rest of the final settlement.

What are cesantías for and how are they withdrawn?

Cesantías fulfill three functions recognized by law, and each has its own withdrawal procedure. The first is to serve as backing against unemployment: when the contract ends, the worker can withdraw the entirety of their accumulated cesantías to cover their needs while finding a new job. The second is housing: the person can withdraw cesantías partially, even while still employed, to buy a home, build, improve the one they already own, or pay the mortgage. The third is education: a partial withdrawal is also possible to finance one's own studies, those of a spouse or permanent partner, or those of children, at education institutions recognized by the State.

For withdrawals for housing or education, the procedure is done before the cesantías fund by submitting the documents that prove the use of the money, such as a promise of sale or the enrollment record of the educational institution. For full withdrawal upon termination of the contract, the fund releases the resources once it receives the corresponding communication from the employer. This design is no accident: cesantías are conceived as purpose-driven savings, which is why the law restricts withdrawals to these grounds and does not allow the money to be used freely as if it were a checking account.

What happens if the employer does not comply?

Failing to comply with cesantías has concrete financial consequences for the company. If the employer does not deposit the cesantías into the fund before February 14, the law provides for a late-payment penalty: it must pay the worker one day of salary for each day of delay in the deposit. This penalty can accumulate and become significant, so meeting the deadline is no minor matter for the payroll area or for financial management. Similarly, the failure to pay interest on cesantías on time may generate the obligation to pay it twice over.

For the worker, this means there are mechanisms to claim. If they detect that their employer did not deposit the cesantías or did not pay the interest on the established dates, they can go to the Ministry of Labor or the labor courts to demand compliance and the corresponding penalty. That is why it is good practice for each employee to review their cesantías fund account statement annually and keep their pay slips: they are the proof that the company met the obligation.

Beyond the legal obligation: the financial wellbeing of the employee

Cesantías, the service bonus, the transport allowance, and the work clothing allowance (dotación) form the legal floor that every Colombian company must meet. Meeting that floor well —on the correct dates, with exact calculations— is the minimum, and also a sign of respect for the team. But the reality is that, on their own, statutory benefits do not resolve all the financial tensions an employee experiences throughout the year: the tight January, school expenses, unexpected health costs, or simply purchasing power eroded by inflation.

That is where financial wellbeing stops being a payroll formality and becomes part of the company's value proposition. The organizations that stand out are not the ones that comply with the law —that is taken for granted— but the ones that complement those obligations with benefits that improve the employee's day-to-day life. Platforms like Maslow allow companies to add flexible benefits, discounts, and recognition on top of the legal base, so each person directs that additional value to what they need most at their stage of life. It is not about replacing cesantías, but about building, on top of them, a wellbeing experience that the team perceives and values all year long, not only in February.

Frequently asked questions about cesantías

What are cesantías?

Cesantías are a mandatory statutory benefit in Colombia equal to one month of salary for each year worked. They function as forced savings in favor of the worker, designed to serve as financial backing against unemployment and also to finance housing or education.

How are cesantías calculated?

They are calculated with the formula (monthly salary multiplied by days worked) divided by 360, which equals one month of salary per full year and the proportional fraction if the period is shorter. The calculation includes the transport allowance when the worker is entitled to it.

When are cesantías and interest paid?

Interest on cesantías (12% per year) is paid directly to the worker no later than January 31. The deposit of cesantías into the fund chosen by the worker must be made no later than February 14, for the cesantías accrued the previous year.

What can I use cesantías for?

Cesantías serve three purposes: as backing when the contract ends and the person becomes unemployed, for housing (purchase, construction, improvement, or mortgage payment), and for the education of oneself, a spouse, or children at recognized institutions.

How do I withdraw my cesantías?

For withdrawal for housing or education, the procedure is done before the cesantías fund by submitting the documents that prove the use of the money. For full withdrawal upon termination of the contract, the fund releases the resources upon receiving the employer's communication.

What happens if the employer does not deposit the cesantías?

If the employer does not deposit the cesantías before February 14, the law provides for a late-payment penalty of one day of salary for each day of delay. The worker can claim before the Ministry of Labor or the labor courts.

Who is entitled to cesantías?

All workers with fixed-term or indefinite contracts are entitled, including those who work by the day, the hour, or part-time (proportionally). They do not apply to those who agreed to an integral salary, because that payment already includes them.

What is the difference between the current regime and the retroactive one?

The current regime, annualized and with deposits into funds, comes from Law 50 of 1990. Workers hired before 1991 who did not switch regimes may be under the retroactive scheme, in which cesantías are settled on the last salary when the contract ends.

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This guide is informational and does not replace professional legal or accounting advice. Figures depend on each person's salary and on the current legal monthly minimum wage (SMMLV) for the year in progress, which changes every January: verify the updated value. For any particular case, consult your legal or accounting area or the Ministry of Labor.