All domestic employees are entitled to receive severance and severance interest payments even if they work daily or hourly. These payments must be made annually, and employers must pay these benefits within the deadlines established by law. Otherwise, they will be exposed to paying the penalty.

What are severance payments?

Severance payments are a social benefit to which all workers are entitled. Its primary purpose is to provide monetary help when a person is unemployed or laid off. All employers should make annual severance payments to all their employees, including domestic workers.

Suppose the labor relationship is terminated and the contract is to be liquidated. In that case, the worker is entitled to be paid the severance payments accrued at the contract’s termination date.

How do I liquidate my employee’s severance payments?

Severance payments must be settled annually as of December 31 and based on the last salary earned by the employee. If the employee rendered services during the whole year, the severance payment corresponds to one month’s salary. If the worker generated services for less than one year as of the cutoff date, severance payments must be liquidated proportionally to the time worked using the following formula:

(Monthly salary X number of days worked) / 360.

So that you don’t get confused, calculate your severance payments by clicking here.

How should I make the severance payment to my employee?

Severance payments must be deposited only in the pension fund to which the employee is affiliated. The deadline to make the payment is February 14 of each year.

What happens if I do not pay my employee’s severance payments correctly?

According to article 99 of Law 50 of 1990, the penalty for not paying severance payments within the term established by law is one day’s salary for each day of delay.

What is severance interest?

They are a profit on the value of severance payments that households and companies must pay to their workers directly. According to Law 525 of 1975, all employers are obliged to pay their workers a legal interest of 12% per annum on the value of the severance pay that each worker has accumulated as of December 31 of each year.

Suppose the labor relationship with the employee is terminated, and the labor contract is to be liquidated. In that case, the employee is entitled to be paid the severance interest accrued up to the contract’s termination date.

How do I pay my employee’s severance pay interest?

Severance interest is calculated based on the value of the employee’s accumulated severance payments as of December 31 of each year. It can be calculated using the following formula:

(Accumulated severance payments X days worked X 0.12) / 360.

So that you don’t get confused, calculate your severance pay interest by clicking here.

How should I pay severance interest to my employee?

The payment of severance interest must be made directly to the employee. The deadline for this payment is January 31 of each year.

What happens if I do not pay severance interest to my employee?

Suppose the employer does not pay the severance interest to the employee within the term established by law. In that case, they must pay an additional amount equal to the severance interest caused.