Severance Pay After Dismissal Without Just Cause: How It Is Calculated and What You Are Owed

"Go collect your things": what you need to know first

It is eleven at night and you have just received a letter, a message, or a phone call: the company has let you go, with no real explanation. You were paid "what the law requires" and told everything is in order. This is the most common mistake we see at Consejurídico: the employee assumes that what was settled is everything they were owed. And in many cases, it is not.

Under Colombian law, a dismissal without just cause is not unlawful — an employer may terminate a contract at any time — but it comes at a cost: compensation for unjustified dismissal. That compensation is separate from, and in addition to, your statutory severance settlement (severance pay (cesantías), interest on severance, service bonus (prima de servicios), and vacation pay). Confusing the two is the single most common reason employees walk away with less than they are legally entitled to claim.

Settlement vs. compensation: they are not the same thing

When any employment contract ends — whether you resign or are dismissed — the employer must pay you a settlement, which covers the benefits you had already accrued during employment:

• Severance pay (cesantías): roughly one month's salary for each year worked (pro-rated for partial years).
• Interest on severance pay: 12% per year on that amount.
• Service bonus (prima de servicios): pro-rated for the semester.
• Unused vacation days.
• Outstanding wages and any other amounts owed.

You are entitled to all of the above regardless of how the contract ends, even if you resign. Compensation for dismissal without just cause is different: it is an additional sum the employer pays solely because it terminated the contract without a valid ground under Article 62 of the Colombian Labor Code (Código Sustantivo del Trabajo). In practical terms, it is the "penalty" for ending the contract without cause.

How compensation is calculated (open-ended contracts)

The calculation is set out in Article 64 of the Colombian Labor Code and depends on your salary and length of service. For open-ended contracts (contratos a término indefinido):

If you earn less than 10 monthly legal minimum wages (SMMLV): - 30 days' salary for the first year of service. - 20 additional days for each subsequent year (pro-rated for fractions).

If you earn 10 monthly legal minimum wages or more: - 20 days' salary for the first year. - 15 additional days for each subsequent year (pro-rated).

A real example of how we run the numbers: an employee earning COP 2,000,000 per month with 3.5 years of service, earning less than 10 minimum wages, would be entitled to approximately: 30 days for the first year + 20 days for each of the remaining 2.5 years = 30 + 50 = 80 days' salary, close to COP 5,300,000 in compensation alone — on top of the standard settlement.

One nuance that many people overlook: the base "salary" for this calculation is not always the basic wage. If you regularly received commissions, bonuses, or other payments that the law treats as salary, the figure rises — and this is precisely where companies tend to settle short. For fixed-term contracts, a different formula applies: compensation equals the salaries that would have been earned for the remainder of the agreed term. Project-based contracts follow yet another rule. This is why the correct calculation depends entirely on the type of contract you had.

The mistake that costs people money: signing without reviewing

The typical scenario: you are handed a "peace and release" document (paz y salvo) or a conciliation agreement and asked to sign in order to receive payment. Signing a poorly drafted conciliation agreement may permanently bar you from claiming what was missing. We are not saying never to sign — sometimes it makes sense — but no one should sign without first understanding whether what is being offered actually reflects what they are owed.

Other issues we review that employees rarely spot on their own:

• Dismissal during a period of medical leave, pregnancy, or labor-law protection (fuero): here the discussion goes beyond compensation and may involve a possible reinstatement order through a tutela action (Colombia's constitutional writ for protecting fundamental rights) — a case that crosses labor and constitutional law.
• Wages or benefits not paid on time: this may trigger what is known as the sanción moratoria (statutory late-payment penalty) — one additional day's salary for each day of delay.
• Dismissals that conceal retaliation or workplace harassment, which can sometimes carry criminal implications as well.

That last point is key: a dismissal is rarely "just" a labor matter. At Consejurídico we work across all areas of law under one roof, so if your case has a civil, constitutional, or criminal dimension, you will not need to go looking for a second lawyer halfway through.

Deadlines for filing a claim: do not wait

This is the urgent part. Labor rights in Colombia generally prescribe after 3 years, running from the date the obligation became enforceable (Article 488 of the Colombian Labor Code). After that period, the right still exists in theory, but it can no longer be enforced before a court.

That said, certain claims and circumstances operate under different timeframes (for example, a tutela action seeking reinstatement follows its own immediacy logic). The exact deadlines depend on the specific facts of your case — we will identify them precisely during a full consultation. What matters is this: every month that passes without action brings you closer to losing your ability to make a claim.

What to do now, step by step

• Keep everything: dismissal letter, employment contract, pay stubs, emails, and your settlement statement.
• Do not sign any peace-and-release documents or conciliation agreements without professional review.
• Calculate what you should have received and compare it against what was paid.
• Confirm your contract type: the calculation changes entirely between open-ended, fixed-term, and project-based contracts.
• Act promptly, given the prescription deadlines.

If you have just been dismissed and need to know right away whether your settlement was complete — before signing anything — you can get a real first consultation with no appointment needed through Juri, our digital legal assistant. It will help you understand your situation in minutes, and if the case warrants it, one of our labor lawyers — with a name and a track record — will take it on. #QueremosAcompañarte

Juri, our AI legal assistant, analyzes your specific situation. The initial review is free.