Figures verified 7 October 2026 · Applies to: 2026 payroll figures
Foreign companies hiring in Colombia for the first time usually budget the salary and stop there. In practice, an employee costs considerably more than the salary: social security, payroll contributions and mandatory benefits add a substantial layer on top. With the 2026 minimum wage up 23%, last year’s budgets are out of date too.
The 2026 starting points
- Monthly minimum wage (SMMLV): COP 1,750,905 (Decreto 1469 of 2025)
- Transport allowance (auxilio de transporte): COP 249,095 a month (Decreto 1470 of 2025), paid to employees earning up to two minimum wages
What the employer pays on top of salary
| Item | Employer share | Notes |
|---|---|---|
| Pension | 12% (employee pays 4%) | 16% in total |
| Health | 8.5% (employee pays 4%) | Employer share can be exonerated (see below) |
| Occupational risk (ARL) | 0.522% to 6.960% | Depends on the risk class of the job |
| Family compensation fund (CCF) | 4% | Never exonerated |
| SENA | 2% | Can be exonerated |
| ICBF | 3% | Can be exonerated |
| Service bonus (prima) | 8.33% | Paid in two instalments a year |
| Severance (cesantías) | 8.33% | Deposited annually into a severance fund |
| Interest on severance | 12% of cesantías a year | Paid to the employee |
| Vacations | 4.17% | 15 working days a year |
The Article 114-1 exoneration
Under Art. 114-1 of the Estatuto Tributario, employers that qualify are exonerated from the 8.5% employer health contribution, SENA and ICBF for workers earning less than 10 minimum wages. That covers most hires. The exoneration comes with a special self-withholding (autorretención especial) obligation for the company. The 4% family compensation fund contribution is always payable.
Worked example: one employee on the minimum wage
An illustrative monthly cost for an employer that qualifies for the exoneration, with a low-risk (class I) role:
| Component | COP per month |
|---|---|
| Salary | 1,750,905 |
| Transport allowance | 249,095 |
| Pension (12%) | 210,109 |
| ARL class I (0.522%) | 9,140 |
| Family compensation fund (4%) | 70,036 |
| Prima (8.33%, on salary plus transport allowance) | 166,600 |
| Cesantías (8.33%, on salary plus transport allowance) | 166,600 |
| Interest on cesantías | 19,992 |
| Vacations (4.17%, on salary) | 73,013 |
| Total monthly cost | ≈ 2,715,000 (≈ USD 844) |
That’s about COP 32.6 million a year (about USD 10,100) for a minimum-wage employee. Without the exoneration, add roughly COP 236,000 a month for health, SENA and ICBF. For a salaried employee on COP 5,000,000 a month (no transport allowance, exonerated, class I risk), the same calculation gives a total of about COP 6.9 million, roughly 138% of salary.
These are simplified illustrations. Contribution bases have specific rules, and the real figure depends on the contract, the risk class and the employee’s circumstances.
Other items to budget
- Work clothing (dotación), owed three times a year to qualifying lower-paid employees.
- Solidarity pension fund contributions for higher earners, deducted from the employee above a salary threshold.
- Electronic payroll reporting (nómina electrónica) to the DIAN within the first 10 days of the following month.
- Withholding tax on salaries where the employee’s income is high enough.
Employees, contractors and foreign payrolls
Many foreign companies start by paying Colombian workers as contractors or through a foreign payroll. That can work for genuine independent contractors. A role that looks like employment, with fixed hours, subordination and an ongoing relationship, can be treated as employment regardless of the contract’s label, with back contributions and benefits due. If you are building a team, set up properly from the start. A Colombian SAS is the usual vehicle; see SAS vs. branch.
Payroll is one part of a foreign-owned company’s monthly compliance. See what a foreign-owned company needs from its Colombian accountant.
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This article is general information, not tax or legal advice. Colombian tax law changed materially between December 2025 and September 2026, and some rules described here are subject to pending legislation or litigation. Confirm your situation with a professional before acting.