Wrongful Termination Severance Pay in Colombia: How It Is Calculated

The Most Costly Mistake Made by Someone Who Has Just Been Fired

The day nobody wants arrives: you are called into Human Resources, handed a termination letter, and asked to sign a settlement document. Right there, under pressure, most people sign without checking whether the figures are correct. Some because they trust the company; others because they do not know they have the right to review the numbers. That mistake — signing without reviewing — is the one we see most frequently at Consejurídico, and it is usually the hardest to fix afterward.

This article explains how wrongful termination severance pay works under Colombian law, how it is calculated, and what warning signs you should look for before putting your signature on any document.

What Is Wrongful Termination Severance Pay?

When an employer ends an employment contract without a legally valid cause — that is, without any of the reasons recognized as just cause under the Código Sustantivo del Trabajo (CST, Colombia's substantive labor code) — the employee is entitled to receive severance pay. This is not a favor or a bonus: it is a legal obligation.

Just cause exists when the employee has committed a serious misconduct (assault, theft, repeated insubordination, among others, listed in Article 62 of the CST). If the company cannot prove one of those grounds, the termination is wrongful and the right to severance pay arises.

Important: do not confuse severance pay with the final settlement. The final settlement (liquidación) is what every employee is always entitled to upon termination of their contract (outstanding vacation, bonuses, severance fund contributions). Severance pay (indemnización) is an additional amount, and it only applies when the termination was wrongful.

How Is It Calculated? The Formula by Contract Type

Article 64 of the CST establishes the formula. It depends on two variables: the type of contract and the employee's salary.

Open-Ended (Indefinite-Term) Contracts

Here the formula has two brackets based on salary:

If the salary is up to 10 times the current monthly legal minimum wage (SMMLV): - 30 days of salary for the first year of employment. - 20 additional days of salary for each additional year worked, or proportionally for any fraction of a year.

If the salary exceeds 10 SMMLV: - 20 days of salary for the first year. - 15 additional days for each additional year, or proportionally for any fraction.

Fixed-Term Contracts

If the company terminates the contract before the agreed expiration date without just cause, the severance pay equals the total salary that would have been earned through the end of the agreed term.

Contracts for a Specific Project or Task

The severance pay corresponds to the salary for the time remaining until the project or task was expected to be completed. This calculation tends to be more complex because it requires estimating the remaining time.

A Practical Example to Show Real Figures

Assume an employee has worked 3 years and 4 months under an open-ended contract, earning COP $3,500,000 per month (below 10 SMMLV). The company terminates the contract without just cause.

• For the first year: 30 days of salary = COP $3,500,000
• For the remaining 2 years and 4 months: 2.33 years × 20 days = 46.6 days of salary = approximately COP $5,437,000
• Total severance pay: approximately COP $8,937,000, in addition to the standard final settlement.

Now consider this: if that same employee signed an agreement receiving COP $4,000,000 as a "full and final settlement," they left nearly COP $5,000,000 on the table — not counting any errors that may also have been present in the standard final settlement.

What Happens When the Employer Alleges a Just Cause That Did Not Actually Exist?

This is another common scenario: the company manufactures a disciplinary ground just before dismissing the employee — or inflates a minor infraction to avoid paying severance. In Colombian labor practice, these cases are litigated every day.

In such situations, the burden of proof lies with the employer: the company must demonstrate that the just cause genuinely existed and that it followed the proper internal disciplinary process. If it fails to do so, a judge may order payment of the full severance amount plus litigation costs.

For this reason, if you were dismissed on disciplinary grounds that you believe were unjust or exaggerated, do not assume the company is right. That is precisely the type of case where a professional review can change the outcome.

The Most Common Warning Signs in a Final Settlement

• The company does not itemize the severance calculation, or simply does not include it at all.
• You are asked to sign a document containing the phrase "paz y salvo por todo concepto" (full release of all claims) — this can bar you from making any further claims afterward.
• The base salary used in the calculation does not include regular bonuses or commissions you received on a routine basis (variable pay also counts toward the settlement).
• The calculation of cesantías (severance fund contributions) or interest on cesantías contains arithmetic errors.

Failing to Act in Time Has a Real Cost

The labor action for claiming wrongful termination severance pay is subject to a statute of limitations. The general limitation period in labor matters is 3 years (CST, Article 488), but the exact deadlines depend on the specific circumstances of each case: when the contract ended, whether a prior claim was made, and whether you signed any release documents.

Waiting — or worse, signing without reviewing — can turn a valid right into one that can no longer be exercised.

Before Signing Any Document, Seek Advice

At Consejurídico, we have assisted employees and companies in these situations for years. We know that in many cases the labor dispute involves more than just the numerical calculation: prior workplace harassment, irregularities in the disciplinary process, or extra-legal benefits agreed upon that the employer prefers to overlook at the time of settlement.

If you have just received a termination letter — or if you signed one recently and something does not add up — the first step does not have to be expensive or slow.

Juri, Consejurídico's digital legal assistant, is available right now at Juri to give you real guidance on your situation, with no prior appointment and no initial cost. This is not a generic chatbot: it is the first point of contact with a firm whose labor attorneys know how these cases are actually resolved in practice.

Take action before that signature on the document becomes the hardest problem to solve.

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