How to Calculate Final Labor Settlement in Colombia in 2026: Step by Step with a Practical Example

Calculating labor settlement (liquidación laboral) in Colombia often raises questions for both workers and employers when an employment contract ends. Whether due to voluntary resignation, the end of the agreed term, or dismissal, Colombian law requires that the amounts accrued during the time worked be settled and paid on time.

For 2026, the Legal Monthly Minimum Wage (SMMLV) is temporarily set at COP 1.750.905 through Decree 159 of 2026, issued after the Council of State provisionally suspended Decree 1469 of 2025. As of August 6, 2026, COP 1.750.905 remains the temporary value in force while a final decision is pending. The transportation allowance (auxilio de transporte) is COP 249.095 according to Decree 1470 of 2025 for those who meet its conditions. These are the figures I use in the example in this guide.

Quick answer: What payments make up the labor settlement?

A standard labor settlement when an employment contract ends in Colombia includes:

• Pending wages: Days worked in the last period that have not yet been paid.
• Cesantías (severance pay): One month's salary for each year worked, or a proportional amount for the time worked (includes transportation allowance if applicable).
• Interest on cesantías: 12% per year on the accumulated cesantías balance (or proportional).
• Service bonus (prima de servicios): 30 days of salary per year, payable in two semiannual installments or proportionally for the current semester (includes transportation allowance if applicable).
• Vacation: 15 business days of paid rest for each year worked (calculated on the basic salary, without transportation allowance).
• Compensation for dismissal without just cause: Applies only if the employer terminates the contract unilaterally without a proven legal cause.

Settlement Base Salary (SBL) and transportation allowance

The essential first step is determining the Settlement Base Salary (Salario Base de Liquidación, SBL). For most workers with a fixed salary, this is the regular monthly pay plus the items that constitute salary (commissions, night surcharges, Sunday and holiday pay, and overtime).

If you need to check how overtime affects your monthly income before settling, you can consult our guide on how to calculate overtime and night surcharges in Colombia.

There is a fundamental rule regarding the transportation allowance (COP 249.095):

• It is INCLUDED in the SBL for calculating cesantías y service bonus (prima de servicios) for workers earning up to 2 SMMLV (COP 3.501.810).
• It is EXCLUDED from the SBL for calculating the vacation pay and social security contributions.

Legal formulas for calculating the labor settlement

Below are the formulas set out in labor regulations and validated by the Ministry of Justice (LegalApp) for labor calculations based on 360 days per year:

To go deeper into cut-off periods and the specific rules for the semiannual service bonus, see our guide on the service bonus in Colombia for 2026.

Practical example of a settlement in 2026

Let's consider a practical case based on the values in force for 2026:

• Position: Operations assistant
• Salary: 1 SMMLV = COP 1.750.905
• Transportation allowance: COP 249.095
• SBL with transportation (Cesantías and Bonus): COP 2.000.000
• SBL without transportation (Vacation): COP 1.750.905
• Start date: January 1, 2026
• Exit date (voluntary resignation): August 30, 2026
• Time worked in the year: 240 days
• Time worked in the 2nd semester (for the bonus): 60 days (July and August)
• Vacation previously taken: None (240 days pending)

Step 1: Calculation of Cesantías

(COP 2.000.000 × 240 días) / 360 = COP 1.333.333

Step 2: Calculation of Interest on Cesantías

(COP 1.333.333 × 240 días × 0,12) / 360 = COP 106.666

Step 3: Calculation of Service Bonus (2nd semester)

(COP 2.000.000 × 60 días) / 360 = COP 333.333

Step 4: Calculation of Vacation

(COP 1.750.905 × 240 días) / 720 = COP 583.635

Total Settlement Result

Adding the four concepts, the worker will receive an estimated total of benefits and vacation pay of COP 2.356.967 (plus any salary days earned in the last month of work that are still unpaid).

Compensation for dismissal without just cause

When the contract ends unilaterally by the employer and without a proven just cause (according to articles 62 and 64 of the Substantive Labor Code (Código Sustantivo del Trabajo)), the employer must pay additional compensation.

The amount depends on the type of contract:

• Fixed-term contract: The salaries corresponding to the time remaining to complete the agreed term.
• Contract for a specific project or task (obra o labor): The salaries corresponding to the time remaining to finish the contracted project or task (with a minimum of 15 days of salary). If your contract falls into this category, check the specific details in our guide on the contract for a specific project or task in Colombia.
• Indefinite-term contract (salaries below 10 SMMLV): 30 days of salary for the first year worked and 20 additional days for each following year (or proportionally for a fraction of a year).

Frequently asked questions

❓ What does the labor settlement include when a contract ends?

It includes unpaid wages, proportional cesantías, interest on cesantías, the service bonus for the current semester, and compensation for unused vacation. If the dismissal was without just cause, the corresponding legal compensation is added.

❓ Is the transportation allowance added when calculating vacation pay?

No. The transportation allowance is only included in the calculation base for cesantías and the service bonus. For vacation pay, only the ordinary basic salary earned by the worker is used.

❓ When must the employer pay the labor settlement?

Payment of the settlement must be made when the contract ends. A delay may have consequences under article 65 of the Substantive Labor Code, depending on the circumstances of the case; if there is a disagreement, it is advisable to seek guidance or labor conciliation.

❓ How is the settlement calculated if I worked less than a year?

All social benefits and vacation pay are calculated strictly in proportion to the days actually worked during the calendar year or semester, applying the same formulas divided by 360 or 720 depending on the concept.

❓ Am I entitled to a settlement if I resign voluntarily?

Yes. Voluntary resignation does not deprive the worker of accumulated social benefits (cesantías, interest, service bonus) or of pending vacation. The only thing that does not apply in case of resignation is compensation for dismissal without just cause.

❓ What is the current 2026 minimum wage decree for calculating the settlement?

Decree 159 of 2026 temporarily sets the SMMLV at COP 1.750.905. It takes effect following the Council of State's provisional suspension of Decree 1469 of 2025 and, as of August 6, 2026, remains the valid basis while the case is decided.