Severance interest: January deadline, 12% calculation, and penalties

Short answer: severance interest is 12% per year that the employer pays directly to the employee in January. Severance pay (cesantía), on the other hand, is deposited into the fund before February 15. These are two deadlines, two recipients, and two different penalties, and almost all payroll errors stem from mixing them up.

If you handle payroll for a small business or your household, you've likely seen how in January, the payment of interest, the calculation of severance, and the deposit into the fund all come together. Here, we separate them, with the corresponding regulations side by side.

Two dates that are not the same

These are the two year-end obligations for an employee with an active contract:

• Interest (12%): paid to the employee in the month of January of the following year, based on the severance balance as of December 31 (Law 52 of 1975, Article 1). The Public Service Department (Función Pública) interprets that month as a deadline until January 31.
• Severance (Cesantía): deposited into the fund chosen by the employee before February 15 (Law 50 of 1990, Article 99, numeral 3). Note: the last day to comply is February 14; it does not expire "on the 15th."

Interest is never paid into the fund. If you include it in the severance deposit, you would be calculating interest on interest, something that Decree 116 of 1976 prohibits and that the Public Service Department has flagged as an error (Concept 83161 of 2019). For calculating the base severance, you have our guide on severance and labor liquidation.

Who must pay it and who is excluded

The obligation falls on the private employer who must pay severance to employees with fixed-term or indefinite-term employment contracts. This guide does not apply to:

• Service provision contractors: they do not have an employment contract.
• Public servants and members of the National Savings Fund (FNA): they fall under a different regime.
• Those with an integrated salary agreed upon in writing: in this case, severance and interest may already be compensated within the factor, provided the ordinary salary exceeds ten minimum wages and the benefit factor is not less than 30% (Law 50 of 1990). Before settling an additional 12%, review the agreement.

Interest is non-renounceable and non-attachable. Even if the employee says they do not need it, the right still remains.

How the 12% is calculated

The law sets 12% per year, proportional to the time worked. It does not dictate an algebraic formula, but the following operation is standard in payroll:

Interest = (period severance × days worked × 0.12) ÷ 360

This is a practical application based on a 360-day year, not a literal quote from Law 52. For a full year, it reduces to severance × 12%.

Illustrative example (rounded figures, not an official liquidation): If the year's severance was $1,200,000 and 360 days were worked, the interest is $1,200,000 × 12% = $144,000. If only half a year was worked, the period's severance is already halved and the interest is again prorated by the days: do not apply the full 12% or use the old balance from the fund as if it all belonged to this employer.

A common error is to prorate twice or not at all. To see how this fits into a complete liquidation, take a look at the step-by-step labor liquidation example; here we focus on interest and dates.

Three payment moments

According to Law 52 and Decree 116 of 1976, the timing depends on the status of the contract:

1. Active contract: in January of the following year, on the balance as of December 31.
2. Employee resignation/termination: on the same day of departure, in proportion to the time elapsed since the previous December 31. No need to wait for January. This applies, for example, in a voluntary resignation.
3. Partial severance withdrawal: within the following month, also proportional. If there are multiple partial payments in the same year, count the segment from the previous liquidation (Decree 116, Article 2).

With the payment, you must provide a receipt showing three data points: the base severance amount, the period that caused the interest, and the value of the interest (Decree 116, Article 6). I did not find any official source that moves the deadline to the next business day if January 31 falls on a weekend, so do not count on that extension.

And to avoid mixing calendars: work uniforms (dotación) have their own dates, explained in the uniform guide.

Two penalties, two different obligations

This is where blogs get most confused. These are two separate buckets:

If you do not pay the interest

Except for retention authorized by law or agreed upon, the employer must pay, as an indemnity, an additional sum equal to the interest accrued (Law 52 of 1975, Article 1, numeral 3). The law says "only once." Decree 116, Article 5, mentions "each time they fail to comply"; neither regulation creates a day of salary for every day of delay regarding interest. This indemnity applies to private employees.

If you do not deposit the severance on time

That is a different obligation: the employer who does not deposit the severance before February 15 must pay one day's salary for every day of delay (Law 50, Article 99). But it is not automatic: according to Public Service Department Concept 148821 of 2022, the Supreme Court examines the good or bad faith of the employer. Do not promise or fear the punishment as if it were automatic.

I did not find in the reviewed sources a specific peso-amount fine from the Ministry of Labor for failing to pay this interest, so be wary of anyone giving you an exact figure.

The monthly option of Law 2466 of 2025

The labor reform, in its article 64, opened a voluntary—not mandatory—path:

• The employer may deposit 8.33% of the base liquidation salary (monthly salary plus transportation allowance where applicable) into the fund each month as an advance severance payment. It is not a partial payment: the employee cannot withdraw it earlier than the law permits.
• Only by written agreement can the parties move to monthly interest payments by paying the employee 1% of that same base.

Without a written agreement, the January payment and deposit before February 15 remain. Furthermore, the adjustment of the PILA (Integrated Contribution Settlement Form) depends on a regulation from the Ministry of Health; in 2026 a draft decree is circulating, but a draft is not valid law, so do not treat it as an operational rule. When comparing with other costs of having an employee, the real cost of a minimum wage employee helps you locate these items.

If you are an employee and were not paid

Without drama and without assuming you have already won:

1. Request the receipt with the base, period, and value, as well as the payment.
2. File a claim in writing. Labor claims expire three years from the date the obligation becomes enforceable; the Public Service Department opines that interest becomes enforceable on February 1, and that a written claim interrupts the statute of limitations for an equal period. The payment, however, still takes place in January.
3. If there is no response, go to the labor inspection office or consult with a labor lawyer, who will be able to assess your specific case.

Frequently asked questions

❓ By what date must severance interest (intereses de las cesantías) be paid?

They are paid in January of the year following the December 31st cutoff, and Función Pública takes January 31st as the deadline for that month. It is not the date on which the severance payment enters the fund, which is a different obligation (check the official source).

❓ Do the severance funds deposit that interest?

No. The employer pays them directly to the worker. Only the severance payment itself goes to the fund before February 15th. Including interest in that deposit would create interest on interest, which is not permitted by regulation (check the official source).

❓ How is the 12% calculated if I didn't work the full year?

It is proportional to the days worked. In payroll, severance for the period × days × 0.12 ÷ 360 is applied; this is a common operation and not a formula written into the law. Illustrative example: with severance of $1,200,000 for 360 days, interest would be $144,000 (check the official source).

❓ What is the penalty if the employer does not pay interest in January?

They must pay an additional sum equal to the interest accrued, except for deductions authorized by law or agreed upon. Law 52 states this is a one-time payment. It is not equivalent to one day of salary for each day of delay (check the official source).

❓ What if they didn't deposit the severance payment before February 15th?

In that case, a one-day salary penalty applies for each day of delay, but it applies to the severance deposit, not the interest. According to Función Pública, the Court reviews whether there was good or bad faith, so it is not automatic (check the official source).

❓ Can interest now be paid every month?

Only if the employer and employee agree in writing, according to Article 64 of Law 2466 of 2025, paying 1% of the calculation base. Without an agreement, the January payment remains the standard. The PILA (Social Security Contribution form) depends on pending regulations (check the official source).

❓ If I am laid off in March, do I have to wait until January?

No. Upon withdrawal, interest is paid on the same day, proportional to the time elapsed since the previous December 31st. You must also receive a receipt showing the base, period, and value (check the official source).