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Global Payroll

Payroll in Colombia

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Global Payroll Team
Written by Global Payroll Team
Last updated April 24, 2026
Expert Reviewed

Mercans is your go-to partner for top-notch payroll (Managed & SaaS) services in Colombia. Our commitment to delivering exceptional payroll solutions in Colombia is unwavering. With years of experience in the payroll industry, Mercans ensures accurate and compliant payroll services in Colombia, making us the preferred choice for businesses of all sizes. Trust Mercans for timely and accurate payroll transactions, along with the convenience of multi-currency payments in the Colombian market. As your dedicated local payroll provider in Colombia, we boast a team of in-country payroll specialists with deep knowledge of local laws, offering comprehensive support for a seamless payroll experience tailored to your business needs.

Payroll Services in Colombia

At Mercans, our unwavering commitment to local compliance in Colombia goes beyond a mere checklist. We proactively navigate the intricate regulatory landscape, ensuring your business aligns seamlessly with the country’s norms. Here’s an insight into how Mercans expertly manages key activities, safeguarding both compliance and operational efficiency:

Comprehensive Services Include

Payroll Settlement
  • Precise calculations encompassing health, pension, taxes, and other deductions.
  • Inclusion of overtime, bonuses, and transportation allowances where applicable.
  • Monthly file creation for social security contributions.
Payment Processing
  • Generation and delivery of payment slips.
  • Management of social benefits and parafiscal contributions.
  • Handling of payroll receipts and interfaces.
Employee Benefits
  • Maintenance of vacation records.
  • Consolidation of information related to severance and vacations.
  • Generation of electronic files for processing.
Regulatory Compliance
  • Preparation of annual Certificates of Income and Withholdings.
  • Calculation of withholding at source on salaries in accordance with current regulations.
Social Security Management
  • Payroll settlement covering parafiscal and social security contributions.
  • Certificate issuance and payment receipts.
  • Management of social security payments with authorized operators.
Advanced Reporting
  • Generation of legal and statutory reports.
  • Systematization for payroll automation.
  • Processing of payroll reports, including new hire and year-end reports.
Convenient Employee Portals
  • Delivery and processing of employee updates.
  • Access to forms and payroll documentation.
  • Online payroll portal access.
Consultative Approach
  • Continuous consultation through process control platforms.
  • Delivery of payroll and payment files.
  • Consolidated social benefits reporting.

Magnetic Media Reporting Overview

  • Regulatory Compliance: The tax authority (DIAN) requires submission of annual financial information through magnetic media.
  • Efficient Execution: Systems are used to ensure accurate and timely report generation.
  • Format Adherence: Entities must follow formats defined by government resolutions.
  • Default Coverage: Includes payments, withholding taxes, revenues, and balances as required by law.

Additional Offerings

  • Legal Entity Setup
  • Compliance Information
  • Annual Tax Filing Support
  • Advisory Services
  • Benefit Program Administration
  • Technology Integration
  • Training Sessions and Webinars

Count on Mercans to navigate the intricacies of the Colombian business landscape, offering a comprehensive suite of services designed to ensure compliance, operational efficiency, and success for your business.

Minimum Wages

Minimum wage in Colombia is revised annually by the government. Employers must apply the latest officially published minimum wage and transportation allowance rates as set by decree each year.

Payroll Processing in Colombia – How to Calculate Payroll?

Before proceeding with the Payroll Process in Colombia, it is vital to grasp key concepts:

  • Data of the employee to whom the payment will be made.
  • Employee’s monthly base salary.
  • Days worked by the employee.
  • Employee’s eligibility for transportation assistance.
  • Overtime worked by the employee.
  • Consideration of night surcharge in the employee’s settlement.
  • Identification of non-salary income.

Once these concepts are clarified, commence the payroll settlement process.

How to Process Payroll

Payroll Process in Colombia involves calculating accrued values and deductions within a specific period. Employer and employee obligations include contributions to health, pension, and other statutory items.

Obligations

ObligationsDetails
Employee – Deductions4% Pension, 4% Health
Employee – Other DeductionsFSP (1–2% if salary ≥ 4 SMMLV), Loans
Employer – Social Security12% Pension, 8.5% Health, ARL (0.522%–6.96% based on risk)
Employer – Parafiscals4% Compensation Fund; 2% SENA & 3% ICBF (only if salary ≥ 10 SMMLV)
Employer – Accruals8.33% Severance, 1% Interest, 8.33% Bonus, 4.17% Vacation
Additional BenefitsTransportation allowance (if ≤ 2 SMMLV)
  • Earned: Total income including salary, commissions, overtime, and bonuses.
  • Transportation Assistance: Applicable for employees earning up to a threshold defined by law.
  • Social Security: Covers health, pension, and occupational risks.
  • ARL: Contribution rates depend on risk classification.

ARL Colombia Contribution Rate

Risk LevelExample ActivityRate
IOffice/Admin0.52%
IILight industry1.04%
IIIManufacturing2.44%
IVHeavy industry4.35%
VHigh-risk (construction/mining)6.96%
  • Parafiscal Contributions: Mandatory contributions supporting SENA, ICBF, and Compensation Funds.
  • Note: Certain parafiscal contributions may apply based on salary thresholds defined by law.
  • Pension Solidarity Fund (FSP): Applies to employees above statutory income thresholds.

Practical Case on Payroll Process in Colombia

Exercise Data

  • Basic salary: $1,160,000.
  • Commissions: $200,000.
  • Transportation assistance: Based on current legal rates.
  • Days worked: 30 days
  • Release credit: $100,000.
CategoryConceptRateAmount (COP)
AccrualsBasic Salary—1,160,000
Commissions—200,000
Transportation Allowance—140,606
Total Accrued1,500,606
Employee DeductionsHealth4%54,400
Pension4%54,400
Loan / Advance—100,000
Total Deductions208,800
Net Salary to Pay1,291,806
Employer ContributionsHealth8.50%115,600
Pension12%163,200
ARL (Risk I)0.52%6,055
Total Social Security284,855
Compensation Fund (Caja)4%54,400
SENA*2%0
ICBF*3%0
Total Parafiscals54,400
Total Employer Contributions339,255
Employer Accruals (Provisions)Severance (Cesantías)8.33%96,628
Interest on Severance1%11,600
Service Bonus (Prima)8.33%96,628
Vacation4.17%48,372
Total Accrual Provisions253,228
Final Cost SummaryNet Salary Paid1,291,806
Employer Contributions339,255
Employer Accruals253,228
Total Employer Cost2,093,089

Important: Health and pension deductions, and payroll appropriations are calculated based on applicable salary components.

Social Benefits

Social benefits distinguish employment contracts from service contracts. Employees under an employment contract can enjoy:

  • Severance payments: Typically equivalent to one month’s salary per year worked.
  • Interest on severance pay: Applied annually as defined by law.
  • Service premium: Paid periodically in accordance with labor law.
  • Vacations: Paid leave entitlement per year of service.

Provision of Monthly Social Benefits

  • Severance provision
  • Interest on severance
  • Service premium provision
  • Vacation provision

Practical Case on Liquidation of Social Benefits

Exercise Data

  • Basic salary: $2,000,000.
  • Transportation assistance: As per current rates
  • Days worked: 30 days.

Social Benefit Settlement Concepts

AspectValue (COP)
Total days worked30
Salary2,000,000
Transportation assistance140,606
Base Salary for Settlement2,000,000
Total Paid (Cash)2,140,606

Social Benefits

AspectValue (COP)
Bonuses (Prima 8.33%)178,312
Severance (Cesantías 8.33%)178,312
Severance Interest (1% monthly)1,783
Vacations (4.17%)83,333
Total liquidation of social benefits441,740

Ensure a seamless Payroll Process in Colombia with Mercans, where precision and compliance are our top priorities.

Payroll Compliance in Colombia

At Mercans, we prioritize local compliance in Colombia, ensuring adherence to regulatory requirements and proper payroll management processes.

ProcessDescriptionFrequencyDue Date
Employee SetupContract, salary, ARL classificationAt hiringBefore start date
IBC CalculationMonthly base for contributionsMonthlyEach payroll cycle
Payroll ProcessingSalary, deductions, accrualsMonthlyEnd of month
Social Security Payment (PILA)Health, pension, ARLMonthlyBased on NIT schedule
Withholding Tax (Retención)Income tax withholdingMonthlyWith payroll
Annual ReportingEmployee certificatesAnnualFollowing year
Termination SettlementFinal benefits & paymentsAs neededUpon termination

Payroll Cycle and Payslip Components in Colombia

Navigating the payroll cycle in Colombia requires understanding legal requirements under the Colombian Labor Code.

Payroll Cycle

Monthly Cycle

  • Duration: 30 days.

Weekly Cycle

  • Duration: 7 days.

Fourteenth Cycle

  • Duration: 14 days.

Biweekly Cycle

  • Duration: Every two weeks.

Payslip Components

  • Header Information: Employer and employee identification.
  • Earned Portion: Salary and additional earnings.
  • Deductions: Contributions and other deductions.
  • Net Value: Final payable salary.

Employee Data

  • Employee identification details.
  • Tax registration information.

Employer Data

  • Company name.
  • Tax identification number.

Earned Portion

  • Salary and additional earnings.

Deductions

  • Employee contributions to health and pension.
  • Other statutory or voluntary deductions.

Net Salary

Final amount payable after deductions.

Personal Income Tax in Colombia

Colombian tax regulations categorize income into different baskets such as employment, capital, and non-employment income.

Capital Income
Includes interest, royalties, rentals, and other investment income.
Non-Employment Income
Includes income not classified as employment or capital income.
Non-Employment Income
Includes income not classified as employment or capital income.

Tax Rates for Fiscal Residents

Applicable tax rates are determined based on the latest regulations and updated tax unit (UVT) values issued annually by the Colombian tax authority.

From (UVT)To (UVT)Marginal Rate (%)
01,0900%
1,0901,70019%
1,7004,10028%
4,1008,67033%
8,67018,97035%
18,97031,00037%
31,000And above39%

The value of the tax unit (UVT) is updated annually by decree and must be applied accordingly for each fiscal year.

Benefits of Payroll Outsourcing in Colombia – Why to Outsource Payroll to Mercans?

For our Payroll services, we have strategically adopted a robust tool that seamlessly operates across diverse countries, ensuring regional uniformity and meeting the specific requirements of our clients.

High Safety Standards

Incorporating industry-leading security measures to safeguard sensitive data.

ISO 27001 and ISAE3402 certifications ensure adherence to information security protocols.

Adequate and Sustainable Performance

Ensuring consistent and sustainable performance.

Flexibility and Scalability

Offering flexibility and scalability.

Collaborative Cloud Tool

Utilizing a cloud-based platform for efficiency and accessibility.

Key Features of Electronic Payroll Support:

Full Traceability

Traceable process from generation to validation.

Efficiency in Human Resources

Streamlined payroll processes.

Certified Suppliers

Use of ISO-certified suppliers for secure processing.

Mercans ensures high standards of information security and operational integrity.

Employee Benefits in Colombia

Mercans ensures compliance with Colombian labor laws and statutory employee benefits:

A) Monthly Payments for Employee Benefits

  • Health Insurance (EPS): Mandatory employee health coverage.
  • Pension Contributions: Retirement savings contributions.
  • ARL: Occupational risk insurance.
  • Parafiscal Contributions: Contributions to SENA, ICBF, and Compensation Funds.

B) Provisional Costs – (Paid on Termination, Beginning, End, and Mid-Year)

  • Service Bonus: Paid periodically as required by law.
  • Vacation Pay: Paid leave entitlement.
  • Severance: Statutory severance payments.
  • Interest on Severance: Paid annually as required.

Mercans’ meticulous management of these payments and costs demonstrates commitment to compliance and employee welfare.

Start Working with Payroll Company in Colombia

In the dynamic business environment of Colombia, Mercans supports companies with compliant and efficient payroll solutions.

Our commitment to local compliance and expertise in Colombian labor laws ensures businesses can operate smoothly and confidently in Colombia.

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    How do you ensure compliance with Colombia’s mandatory 13th-month salary requirements?

    Our global payroll platform automates Colombia’s 13th-month salary rules, ensuring accurate calculation and timely payment in full compliance with local law.

    What strategies do you employ to manage Colombia’s complex payroll tax structure?

    We use automated tax engines and local expertise to handle Colombia’s layered payroll taxes, ensuring precise withholding, reporting, and compliance.

    How do you handle payroll for remote or international employees in Colombia?

    We ensure remote and cross-border payroll aligns with Colombia’s legal requirements while maintaining consistent processes across global teams.

    What challenges have you encountered when integrating payroll data from various departments and international offices, and how did you overcome them?

    We resolve integration challenges with a unified payroll platform that centralizes data, standardizes reporting, and connects HR, finance, and compliance workflows.

    How do you manage currency conversions and fluctuations in global payroll processing in Colombia?

    We manage multi-currency payroll using real-time exchange rates and strategic safeguards to ensure employees receive accurate, timely payments.

    Related Topics

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    Employer of Record (EOR) in Colombia
    Employer of Record/PEO and Payroll Services in Colombia
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