How is Payroll Calculated in Colombia?
In Colombia, payroll is governed primarily by the Código Sustantivo del Trabajo (Substantive Labour Code), the Estatuto Tributario (Tax Statute), and Ley 100 de 1993, which established the social security system. Salaries are commonly paid monthly or twice a month (quincenal). The employer acts as the withholding agent: each pay run it deducts income-tax withholding (retención en la fuente) and the employee's share of health and pension contributions from gross pay, then remits everything through the unified PILA return. On top of salary, the employer also pays its own social security share, occupational-risk insurance (ARL), parafiscal contributions, and statutory benefits (prestaciones sociales).
Net pay: from gross salary to take-home
An employee's net (take-home) pay is the gross salary minus the employee's mandatory deductions. In simplified terms:
Net pay = Gross salary − Employee health (4%) − Employee pension (4%) − Retención en la fuente (if applicable)Payment of wages
Under the Substantive Labour Code, wages must be paid in Colombian pesos at regular, agreed intervals — most employers pay monthly or in two fortnightly instalments. Employees who earn up to two minimum wages and are not paid an all-inclusive "integral" salary are also entitled to the auxilio de transporte (transport allowance). Base salary for a full-time worker cannot fall below the annually decreed salario mínimo legal mensual vigente (SMMLV), which is COP 1,750,905 in 2026.
Overtime and premium pay
Work beyond the ordinary schedule, or on nights, Sundays, and public holidays, attracts statutory premium rates that must be added to payroll. The main surcharges (recargos) are:
Surcharge over the hourly wage
Night-shift surcharge (ordinary hours)
+35%
Sunday / public holiday work
+90%
Type of work
Surcharge over the hourly wage
Daytime overtime
+25%
Night-time overtime
+75%
Night-shift surcharge (ordinary hours)
+35%
Sunday / public holiday work
+90%
Income Tax — Retención en la Fuente
Colombia taxes employment income under a progressive scale from 0% to 39%. Employers withhold tax at source each month (retención en la fuente) using the table in Article 383 of the Tax Statute, which is expressed in UVT (Unidad de Valor Tributario) — an inflation-indexed tax unit that DIAN resets every year. The UVT for 2026 is COP 52,374. Each rate applies only to the slice of income within its band, not to the whole salary.
Tax is charged on the withholding base, which is gross pay minus mandatory contributions, a 25% exempt-income deduction (renta exenta, capped), and certain deductions such as dependents and mortgage or prepaid-health interest. In practice, an employee only starts to have tax withheld once the monthly base exceeds 95 UVT (about COP 4.98 million in 2026).
Monthly withholding table (Art. 383)
The table is set in UVT, so the peso thresholds move every year with the UVT. The UVT was COP 49,799 in 2025 and COP 52,374 in 2026. Always apply the UVT value for the payroll year you are running, and re-check whether an employee crosses the 95 UVT withholding threshold after that update.
Monthly withholding base (UVT)
Marginal rate
Monthly withholding base (UVT)
Marginal rate
0 – 95
0%
> 95 – 150
19%
> 150 – 360
28%
> 360 – 640
33%
> 640 – 945
35%
> 945 – 2,300
37%
> 2,300
39%
Deductions and exempt income
Before the rates are applied, the withholding base is reduced by mandatory contributions and a set of allowances. The most common are:
- Mandatory health and pension contributions: the employee's 4% + 4% is subtracted from the base
- 25% exempt income (renta exenta laboral): 25% of net employment income, capped at 790 UVT per year
- Dependents deduction: up to 10% of gross income (subject to a UVT cap), plus an additional per-dependent amount
- Interest and prepaid health: mortgage interest or prepaid-medicine payments, within statutory limits
Colombian tax residency is triggered by presence of more than
183 days in any 365-day period. Because UVT-based caps change annually, employers should confirm the current figures when configuring withholding.
Social Security Contributions
Every employee must be enrolled in Colombia's integrated social security system: health (salud/EPS), pension, and occupational-risk insurance (ARL). Health and pension are shared between employer and employee, while ARL is paid entirely by the employer. Contributions are calculated on a base (Ingreso Base de Cotización, IBC) that excludes the transport allowance and is subject to a floor of one minimum wage and a ceiling of 25 minimum wages. All contributions are declared and paid monthly through the PILA system.
Monthly contributions at a glance
ARL is set by the employer's risk class (I–V), from 0.522% for office work up to 6.96% for the highest-risk activities. The Solidarity Pension Fund (FSP) is an extra employee-only levy that applies from 4 SMMLV upwards (rising with salary). A pension reform effective 1 July 2025 introduced a dual public/private pillar for higher earners — confirm the current routing before running payroll.
Contribution
Employer
Employee
Total
Occupational risk (ARL)
0.522% – 6.96%
0%
0.522% – 6.96%
Solidarity pension fund (FSP)*
0%
1% – 2%
1% – 2%
Contribution
Health (EPS)
Employer
8.5%
Employee
4%
Total
12.5%
Contribution
Pension
Employer
12%
Employee
4%
Total
16%
Contribution
Occupational risk (ARL)
Employer
0.522% – 6.96%
Employee
0%
Total
0.522% – 6.96%
Contribution
Solidarity pension fund (FSP)*
Employer
0%
Employee
1% – 2%
Total
1% – 2%
Parafiscal Contributions & Exoneración de Aportes
On top of social security, employers pay parafiscal contributions (parafiscales) equal to 9% of payroll. These fund vocational training, family welfare, and family-subsidy funds, and are borne entirely by the employer. They are declared and paid through PILA alongside social security.
The three parafiscales
SENA
2% — National Training Service, funding vocational and technical education.
ICBF
3% — Colombian Family Welfare Institute, funding child and family programs.
Caja de Compensación Familiar
4% — Family compensation fund, giving employees access to subsidies, recreation, and services.
SENA
2% — National Training Service, funding vocational and technical education.
ICBF
3% — Colombian Family Welfare Institute, funding child and family programs.
Caja de Compensación Familiar
4% — Family compensation fund, giving employees access to subsidies, recreation, and services.
Exoneración de aportes (Art. 114-1)
Under Article 114-1 of the Tax Statute, most corporate income-tax payers (and natural persons employing two or more workers) are exempt from the employer 8.5% health contribution, the 2% SENA, and the 3% ICBF for each employee earning less than 10 minimum wages (SMMLV) per month. The 4% Caja de Compensación contribution is not covered by the exemption and is always payable. For employees earning 10 SMMLV or more, the employer must pay all contributions in full. Because the threshold is tied to the minimum wage, the peso cut-off changes every year.
Prestaciones Sociales & Transport Allowance
Beyond salary and social security, Colombian employers must fund a set of mandatory statutory benefits known as prestaciones sociales. These are a defining feature of Colombian payroll and add roughly a further 20%+ to the cost of employment. They are calculated on salary (plus the transport allowance, where it forms part of the base).
Mandatory statutory benefits
Prima de servicios
A 13th-month-style bonus of one month's salary per year, paid in two halves — by 30 June and by 20 December.
Cesantías
Severance savings of one month's salary per year, deposited into the employee's fund by 14 February of the following year.
Intereses sobre cesantías
12% per year on the cesantías balance, paid directly to the employee by 31 January.
Vacaciones
15 paid working days of annual leave for each year of service.
Prima de servicios
A 13th-month-style bonus of one month's salary per year, paid in two halves — by 30 June and by 20 December.
Cesantías
Severance savings of one month's salary per year, deposited into the employee's fund by 14 February of the following year.
Intereses sobre cesantías
12% per year on the cesantías balance, paid directly to the employee by 31 January.
Vacaciones
15 paid working days of annual leave for each year of service.
Auxilio de transporte (transport allowance)
Employees earning up to two minimum wages are entitled to a monthly transport allowance (auxilio de transporte), set at COP 249,095 in 2026. The allowance is not part of the base for health and pension contributions, but it is included when calculating prima de servicios and cesantías. Like the minimum wage, the transport allowance is re-decreed each year.
Colombia Payroll Processing
Because payroll in Colombia ties together DIAN (retención en la fuente and the electronic payroll document, nómina electrónica), the social security system and PILA (health, pension, ARL, and parafiscales), and the Substantive Labour Code (wages, prestaciones sociales, and the transport allowance), many companies outsource processing to a local expert or an Employer of Record. A specialist provider can enrol employees, run the monthly cycle, calculate and remit withholding tax, social security, and parafiscales, fund the statutory benefits, and keep the business compliant as the UVT and minimum wage change each year.
How can Glints help you?
You can streamline your company's payroll in Colombia by outsourcing to Glints, your expert PEO and EOR solution. With our cross-border payroll expertise, we ensure compliance with Colombia's Substantive Labour Code, Tax Statute, and social security rules, and handle salary calculations, retención en la fuente, social security, parafiscales, and prestaciones sociales — delivering smooth and efficient payroll management for your business.
Book a schedule with our team to discover how we can manage payroll and tax for your team in Colombia.
Social Security Contributions