Last updated: April 14, 2026
Cesantías (Colombia)
GemmWork DefinitionCesantías is Colombia's statutory severance fund, mandated by the Código Sustantivo del Trabajo (Law 50 of 1990). It is the primary cost driver of Colombia's 🟡 Medium Compliance Stickiness score.
How Cesantías Works
- Employers must deposit 1 month's salary per year of service into a designated Fondo de Cesantías
- Contributions are calculated and deposited monthly (not annually)
- The fund earns 12% annual interest on the accumulated balance
- Funds are released to the employee upon termination, or for specific purposes (housing purchase, education)
Cost at Termination: Senior SWE Example
For a Senior Software Engineer earning $42,000/year, terminated after 2 years:
| Component | Calculation | Amount |
|---|---|---|
| Cesantías balance | $42,000 ÷ 12 × 24 months | ~$7,000 |
| Interest (12%/yr × 2 years) | $7,000 × 0.24 | ~$840 |
| Cesantías total | ~$7,840 |
This is in addition to the without-cause indemnización:
- Indemnización: 30 days + 20 days/year after year 1 ≈ $3,850
- Prima de servicios (prorated service bonus): ~$1,750
Total Colombia exit cost estimate: $13,940–$16,140 per engineer at 2 years service.
EOR and Cesantías
EOR providers handle cesantías deposits throughout the employment relationship. However, when employment ends, the US company is still responsible for the accumulated balance plus interest plus indemnización. The EOR administers this; it does not absorb it.
In the GEMM Framework
Cesantías is the primary driver of Colombia's 🟡 Medium Compliance Stickiness score in the GEMM Framework. It makes Colombia more expensive to exit than Mexico (per-year-of-service) but significantly cheaper than Brazil (which adds the FGTS 40% penalty on top).
Related Terms
- Compliance Stickiness— A GemmWork scoring variable measuring how difficult and expensive it is to termi...
- Hotel California (EOR)— The phenomenon where exiting an EOR arrangement triggers mandatory statutory sev...
- FGTS (Brazil)— Brazil's mandatory severance guarantee fund: employers deposit 8% of monthly gro...
- EOR Breakeven Point— The headcount at which establishing a local entity becomes cheaper than paying o...
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Country data based on: August 2025.