On many occasions, when faced with the termination of a Labor Contract, I realize that workers in general do not know the rights they have and do not know if the settlement they are going to be paid is well prepared or if there is any payment calculated incorrectly.

With this article, I intend that anyone, without legal or human resources knowledge, can quickly identify what aspects should be taken into account when reviewing your settlement and check if there is any inconsistency or irregularity. I do not intend to explain in detail the exact calculation of each settlement, but to shed light on the items that can be paid and deducted and how to calculate them without too much complication.

First of all, I would like to let you know that the content of this article only applies to workers who are bound by a labor contract and who do not have a full salary. With that clarified, there are four aspects that I believe should be taken into account when reviewing the settlement of a labor contract:

  1. Social benefits
  2. Wages owed
  3. Discounts
  4. Compensation for dismissal without just cause

The main Social Benefits are: Severance Payments, Severance Interests, Service Premium and Vacations. Severance and Service Premium are equivalent to one monthly salary per year each, the first is paid to the Severance Fund once a year and the second is paid to the worker as follows: one half until June 30 and the other half until December 15, then, depending on the time of the year you can quickly verify if they are calculating them correctly, that is, if your contract ends in the middle of the year before June 30, they should pay you half monthly salary as Severance Pay and another half monthly salary as Bonus, on the other hand, if they already paid you your Bonus with the salary of June, they should pay you more or less half monthly salary as Severance Pay and a very low value of Bonus because they already paid you the first half. In the same sense, if they pay you at the end of the year, they would have to pay you almost the monthly salary as severance pay and only half a monthly salary as bonus.

The Severance Interests are 12% of the Severance Payments, it is easy to calculate, only that, unlike the Severance Payments, this value is not deposited annually to the Severance Payments Fund but it is paid directly to the worker. Although severance payments are not normally paid directly to the worker, they are paid in this way when it comes to the liquidation of the contract.

Regarding Vacation, it must be kept in mind that an employee is entitled to fifteen days of Vacation for each year worked, therefore, in money, each year is equivalent to (15 days) half a monthly salary and in that sense, you have to review the days of Vacation due to you and make the following calculation: “daily salary (monthly salary divided by 30) * days of Vacation due”.

The Wages Due are a regular item in the settlements, since, unless the contract ends just after the Wages are paid at the end of the month, the payment of some days of work will be pending, together with overtime, commissions or bonuses. In this regard, you should be aware that if you work all week and resign on Friday, you must be paid wages through Sunday.

The Deductions or Deductions that can be applied are related to social security contributions that correspond to the worker or other types of Deductions where there is a prior authorization, the most usual are the Deductions for health and pension contributions, which are 4% of what you will receive as salary, both for health and pension, but depending on the salary and compensation, you can make withholdings at source and discounts for the Pension Solidarity Fund, this second case, for example, occurs when the salary paid exceeds four minimum wages.

They can also make deductions for loans that you have requested, however, they cannot deduct values that you have not authorized, for example: inconsistencies in the cash register, loss of money caused by your work or fines that are not covered by law or in the internal work regulations, because in order to be deducted in the liquidation, the Employer must initiate a process so that a judge is the one who authorizes the collection of these values.

Finally, we must consider the payment of some compensation for dismissal without just cause, which of course has a place only when the dismissal is made without just cause, in indefinite term contracts, is calculated depending on the salary, if you earn less than 10 minimum wages, This corresponds to 30 days of salary for the first year worked plus 20 days for each extra year and proportional, for example, if you worked a year and a half, would have to pay 30 days for the first year and for the other half year 10 days (if you had worked the entire second full year would be 20 days, but as it was only half a year are only 10), which in total add up to 40. If you earn more than 10 minimum wages you would have to pay 20 days for the first year and 15 days for each extra year and proportional. In fixed term contracts, the severance payment is equivalent to the wages that you will not receive until the termination date of the contract, that is to say, if there are still 6 months left until the termination, the severance payment is 6 months of salary.

If the Dismissal is made with just cause, in accordance with the regulations or employment contract and with the procedure to guarantee your right to defense, there would be no place for this indemnity, even if you resign.

Remember, Gestiones Empresariales López & James through its Advisory and Consulting Services in Legal matters, especially in Labor Law and Human Resources issues, can provide solutions to all your concerns on the subject. Likewise, we can provide specialized advice in the areas of Commercial or Corporate Law, Immigration Law, Tax Law, Intellectual Property Law, Family Law, Recruitment, Selection, Evaluation and Due Diligence of personnel, as well as Payroll issues. We have multidisciplinary professionals around the world, mainly in Latin America and Asia, but also in Europe and the United States, which allows us to support you in any location through all the services we can offer you or your company.

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About the author:

Guillermo Sánchez is a member of the López & James Colombia team. He is a lawyer from the Universidad Nacional de Colombia, a specialist in Business Law from the Universidad del Rosario, with extensive experience in Trademark Law, Habeas Data and specialist in the areas of Corporate Law and Family Law.

November 26, 2021