Payroll in Colombia: A Comprehensive Guide for 2026

Introduction

Payroll in Colombia involves two monthly filings that the authorities reconcile against each other. Contributions are declared and paid through the Planilla Integrada de Liquidación de Aportes (PILA), while a separate electronic payroll report goes to the Dirección de Impuestos y Aduanas Nacionales (DIAN).

Before either can be filed, every worker has to be enrolled with a health provider, a pension fund, an occupational risk carrier, and two further statutory funds.

A missing enrolment stops a filing from processing, and registering the worker later leaves a permanent gap in their contribution record. Where part of a pay package has been agreed as non-salary, the UGPP (Unidad de Gestión Pensional y Parafiscales, a mandatory public fee collected from employers to fund social welfare) can reject that treatment and reassess contributions across the whole engagement.

Both problems surface months after the payroll they relate to, once the correction costs more than the original contribution.

In this guide, we walk through the payroll process step by step, what decides payroll compliance, the statutory components from minimum wage to income tax withholding, and when a global payroll platform is worth using.

How to run payroll in Colombia step by step?

The payroll process in Colombia includes three main phases: pre-payroll, payroll calculations, and post-payroll.

Pre-payroll phase

During the pre-payroll period, you'll need to focus on gathering documentation, confirming HR policies, and ensuring your business is ready to pay employees while staying compliant.

Let's look at the setup tasks you need to take before salaries are processed.

• Register your business: Your company should have a registered business tax number, called a NIT (Número de Identificación Tributaria; it is the country's official tax identification number used for businesses), along with registration in the RUT (Registro Único Tributario; it is Colombia's official tax identification and registration system). You’ll need these to issue tax forms, payslips, and other payroll documents.
• Identify your employees' work location: Even if the locations are all in the same country, requirements can differ locally or regionally. Each workplace should have its own set of policies.
• Set leave policy: Make clear policies about leave. Employees are legally entitled to some categories of leave in Colombia, including parental leave, sick leave, and paid holidays. Every employee in Colombia is entitled to 15 paid days off per year for all employees who have worked at least a year at the company, in addition to public holidays. Colombia has 18 public holidays for which employees must be paid and take off.
• Define attendance policy: For attendance, you'll need to document timesheets, doctor’s notices for sick leave, or supervisor permission for requested time off. Biometric devices can help keep track of hours worked.
• Review statutory components: Account for all statutory payroll components such as income tax deductions, contributions to social insurance, benefits, or other perks, and everything you need to pay or provide your employees by law.
• Design salary components: When structuring compensation packages, make sure to be compliant with Colombian labor law. Flexible benefits plans can be offered based on a policy that you set. Designing a package in Colombia takes two inputs. Labor law settles what you must pay, and the local market settles what you need to pay to fill the role. Foreign employers usually have the first and are estimating the second. Skuad's salary insights tool supports salary benchmarking by role and country, returning a gross minimum and maximum range, viewable monthly or annually. The figures are estimates drawn from Skuad's own research and reviewed by industry specialists, so use them to set a band and confirm the detail before an offer goes out.
• Decide on the pay schedule: The payroll frequency in Colombia is typically monthly, with payments on the last day of the month. Some companies elect to pay bi-weekly. Employers must pay Colombian employees a 13th month salary, with the first half paid by June 15th and the second half paid by December 20th. Make sure the date of every payday is clearly communicated to employees so they know when they'll get paid and can plan accordingly.

Payroll calculation phase

The main component of the process is the Colombia payroll calculation phase. Data from the pre-payroll phase is now input into a system to calculate each employee's paycheck. The result is the salary paid after considering deductions, withholding, and taxes.

Post-payroll phase

The post-payroll phase is the last step in the payroll cycle. This is when companies pay salaries, file taxes and required reports, and reconcile the accounting records after payroll calculations are done.

• Salary payments: Once payroll calculation is complete, you can send your bank advice to your corporate bank for salary disbursements. You may have a system in place for direct deposits. This is when employees will be paid.
• Payroll accounting: After payments have been sent out, make sure to balance the accounts and keep track of the total expenditure of payroll funds.Disbursing salaries closes the accounting side of the cycle. The statutory side stays open. Contributions still have to be declared and paid through PILA (Planilla Integrada de Liquidación de Aportes translates to Integrated Contribution Settlement Form) on a date set by the last two digits of the company's tax identification number, and the electronic payroll document still has to reach DIAN for the same period. Skuad supports this reporting load through its global payroll platform, so your team does not have to track disbursement, filing, and reconciliation on three separate schedules.

Here is what Skuad helps with:

• Processing payroll in 70+ currencies with statutory deductions and tax withholding applied at source
• Supporting statutory contribution workflows across supported markets, covering applicable social insurance, pension, and parafiscal obligations
• Generating payslips and payroll records in line with local documentation requirements
• Supporting year-end reconciliation and statutory benefit accruals across supported markets
• Keeping payroll calculations aligned with rate and threshold changes as local legislation is updated

Book a demo to see how Skuad supports Colombian payroll filing and reconciliation.

What are the payroll components in Colombia?

Payroll in Colombia is built from a fixed set of statutory components: base salary, the transport allowance, working hour surcharges, employer contributions, employee deductions, and income tax withheld at source. Each one carries its own base, rate, and due date.

Minimum wage and transport allowance

The monthly minimum wage is COP 1,750,905, set by Decreto 1469 de 2025. Employees earning up to two minimum wages, or COP 3,501,810, also receive a transport allowance of COP 249,095, which brings the minimum monthly income to COP 2,000,000.

Ordinary salary and integral salary

Colombia recognises two salary structures, and the choice changes how payroll is calculated. Under an ordinary salary, base pay, overtime, surcharges, and prestaciones sociales (mandatory additional financial benefits that employers must pay to employees on top of their regular salary) are calculated and paid as separate items.

Under an integral salary, available by written agreement to employees earning at least 13 minimum wages, or COP 22,761,765, prestaciones sociales are folded into one agreed figure.

Working hours, overtime, and surcharges

The maximum working week in Colombia is 42 hours, spread across five or six days. Work outside ordinary daytime hours carries a surcharge.

Overtime is limited to two hours per day and twelve hours per week. Employers must keep a daily record of every overtime hour and give each employee a detailed report of it.

Employer contributions

Employer contributions are calculated on the employee's contribution base and filed monthly through PILA.

Contribution breakdown

• Pension (AFP): The employer pays 12%, and the employee pays 4%.
• Health (EPS): The employer pays 8.5% for employees who earn more than 10 minimum wages. Employees who earn less than that may be exempt by law. The employee pays 4%.
• Work risk insurance (ARL): The employer pays between 0.52% and 6.96%, depending on how risky the job is.
• Parafiscal contributions: The employer pays 4% to family compensation funds, plus 3% to ICBF (Instituto Colombiano de Bienestar Familiar, translates to Colombian Institute of Family Welfare ) and 2% to SENA (Servicio Nacional de Aprendizaje, it is a public institution offering free vocational and technical training, employment services, and business support) when not exempt.

Employee deductions and income tax withholding

Employees contribute 4% for health and 4% for pension, both withheld by the employer and remitted through PILA. Employees earning four minimum wages or more also contribute to the Solidarity Pension Fund, starting at 1% and rising to 2% at higher income levels.

Income tax is withheld at source on the taxable base, which is what remains after mandatory contributions, deductions, and exempt income.

Brackets are set in tax value units (UVT), and one UVT is COP 52,374 in 2026.

Rates are marginal, so each rate applies only to the portion of the base that falls inside that bracket. An employee on the minimum wage stays below the withholding threshold.

Paid leave that affects payroll

Two kinds of leave change the payroll calculation. For sick leave, the employer pays the first two days at two-thirds of ordinary salary against a medical certificate, and the health provider takes over from the third day.

For parental leave, the employer pays 18 weeks of maternity leave and 2 weeks of paternity leave at full salary and then claims reimbursement from social security, so each leave payment is booked as a cash outflow first, with reimbursement coming later.

Every rate above applies to a different base, and several switch on or off at salary thresholds. Adding them up for one employee means tracking which exemptions apply, which accruals fall outside the contribution base, and how the integral salary option changes the calculation. Most finance teams arrive at the real number after the offer has already gone out.

Skuad supports upfront cost modelling through its employee cost calculator, so finance teams can price a Colombian hire before a contract is drafted.

How to manage payroll compliance in Colombia?

Payroll compliance in Colombia is decided by four things that happen before a filing is submitted: the registrations, the contract type, the classification of each payment, and the statutory leave built into the calendar. Errors in any of them surface later as contribution shortfalls.

Complete every registration before the first payroll run

An employer needs a NIT (Número de Identificación Tributaria, translates to national tax identification number) and a RUT (Registro Único Tributario, it’s Colombia's official tax identification and registration system) registration with DIAN (Dirección de Impuestos y Aduanas Nacionales translates to the National Directorate of Taxes and Customs), plus separate affiliations with a health provider, a pension fund, an occupational risk carrier, a cesantías fund (mandatory savings account where employers deposit one month of salary for each year worked to act as a safety net during unemployment), and a family compensation fund.

Each affiliation carries its own recurring obligation once it is live, and a missing enrolment blocks a PILA submission from processing with no warning beforehand.

Make sure every person is properly enrolled in the system before the first payroll cycle starts, because enrolling them later does not fill the gap in their contribution record.

Get the contract type right from the start

Indefinite-term contract is the default for core business activities. Fixed-term and task-specific contracts remain available, though they are capped at four years including renewals, and a contract that fails the formal requirements is treated as indefinite from the start of the relationship.

The payroll effect goes back in time, because benefit accruals, notice obligations, and severance exposure must all be recalculated under the new reclassified basis.

Build the new statutory leave into the payroll calendar

Colombian employers must grant several categories of paid leave, covering urgent medical appointments, specialist consultations, school obligations for guardians, and legal or administrative summonses.

Employees who commute by bicycle also gain a rest day every six months. These are paid absences, so each one has to be set up as a separate pay item in the payroll system before it can be reported.

Classify salary and non-salary payments correctly

This is the item the UGPP (Unidad de Gestión Pensional y Parafiscales, a national government agency under the Ministry of Finance) examines most closely.

Where an employer and employee agree to treat part of the remuneration as non-salary,  which lowers the contribution base. Those agreed payments are capped at 40% of total remuneration, and anything above the cap goes back into the base.

The cap covers only what you agree to reclassify. Payments that are non-salary under the law, such as the transport allowance, are outside the calculation. Employers who apply the cap to the wrong set of payments contribute on the wrong base.

Skuad supports ongoing compliance monitoring through its Shield platform. Each of these four items is set once and then tested repeatedly, so Shield flags classification and contribution exposure across a workforce as rates, thresholds, and working patterns change, and keeps employment and payment records in an audit-ready format.

Why should businesses use a global payroll platform in Colombia?

Businesses should leverage a payroll processing platform like Skuad in Colombia because the statutory parameters move more than once a year, every pay or deduction must be set up correctly in the payroll system before filing, and salary is settled in local currency.

So, the right global payroll platform helps teams stay compliant and avoid manual payroll errors.

Customer story: how PureRED consolidated payroll across six countries with Skuad

PureRED, a marketing and advertising agency serving major retail and consumer brands, needed to pay staff compliantly across six countries, including Colombia, each with its own contribution base, statutory benefit accruals, and filing calendar. Reconciling six payroll cycles and six sets of local rules in parallel was absorbing time the team needed for client delivery. Skuad supported localised contract generation, multi-currency payroll, and ongoing compliance across all six markets, bringing 65 employees onto a single HR and payroll dashboard.

"Skuad made our team expansion possible, handling the complex onboarding and payroll processes across six different countries with ease. Their local expertise ensured our compliance, letting us focus on what we do best - serving our clients."- Brian Butcher, EVP Corporate Development, PureRED

Read the full PureRED case study.

Ready to set up payroll in Colombia?

Payroll in Colombia involves multiple obligations, including salary calculations, statutory deductions, social security contributions, income tax withholding, transport allowance, and mandatory benefits such as cesantías.

Employers must also track overtime, variable pay, and leave entitlements while staying current with changing labor and tax rules to remain compliant.

Managing these processes manually can increase administrative workload and the risk of payroll errors and compliance issues.

Skuad supports payroll management in Colombia through a single platform that helps handle salary processing, statutory deductions, compliance requirements, and payroll reporting.

Book a demo to see how Skuad supports payroll management in Colombia.

FAQ

What is payroll in Colombia?

Payroll in Colombia covers gross salary, mandatory social security and parafiscal contributions, income tax withheld at source, and statutory benefits such as cesantías. Employers generally file contributions monthly through PILA and report each pay period to DIAN through electronic payroll.

Is the 13th-month salary mandatory in Colombia?

The 13th-month salary is a mandatory statutory payment which is equal to one month of salary per year of service, generally paid in two instalments. The first is usually due by June 30 and the second by December 20, regardless of contract type.

How much does it cost to outsource payroll in Colombia?

Pricing usually depends on headcount, salary bands, and whether the provider also acts as the legal employer. Providers typically quote a fixed monthly fee per employee, charged on top of statutory employer costs such as pension, cesantías, and family compensation fund contributions.

Can a foreign company run payroll in Colombia without a local entity?

Foreign companies can typically pay Colombian employees through an employer of record, which holds the employment relationship and files contributions through PILA. Running payroll directly generally requires a local entity, a NIT, and registration with DIAN alongside health, pension, and occupational risk providers.

What are the penalties for payroll non-compliance in Colombia?

Penalties vary by severity, though Ministry of Labour fines can reach up to 5,000 monthly minimum wages, roughly COP 8.75 billion. The UGPP also cross-checks electronic payroll filings against PILA declarations, and mismatches can trigger back contributions plus late payment interest.

Is payroll outsourcing or an employer of record better in Colombia?

This usually depends on whether a Colombian entity already exists. Payroll outsourcing generally suits companies that already have a Colombian entity and just need support with PILA filings and statutory calculations, while an employer of record acts as the legal employer for companies without a registered presence