If you are employed in Colombia, you have a legal right to cesantías, a form of bonus/unemployment insurance. While the system is somewhat difficult to wrap your head around at first, it’s fairly simply once you understand it. Read on for a guide to cesantías in Colombia and how cesantías in Colombia work.
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What Are Cesantías?
The best explanation of Cesantías I’ve gotten is to compare them to unemployment insurance. The name itself makes it clear. They are for when you cease (or cesa) to work. In this guide to cesantías, we will examine how cesantías in Colombia function.
Essentially, cesantías are a right of employees in Colombia to an amount of money that can be used when they are not employed or no longer employed by their current employer. Like contributions to health insurance and a pension fund, employers must pay you cesantías for the time you are employed by them.
How Do Cesantías Work?
For every 12 months you are employed, your employer should provide you with one monthly salary in cesantías.
If you’re not employed for a full year, you should receive a proportional amount. So let’s say you were only working for 4 months of the year at your present job. Your employer owes you 1/4 of a monthly salary (4 of 12 months). All employees are entitled to this benefit no matter how long they have been employed or rather they fulfill the entire time of their contract or not.
Your employer also owes you interest on your cesantías. They owe you interest to a tune of 12% a year, or 1% a month. So taking the example above, they would have to give you 4% interest on top of the 1/4 a salary for your cesantías for working 4 months of the year.
Note that only the portion of your income that is defined as salary determines your cesantías. So for example, I am paid a housing allowance, but it does not count towards the amount for my cesantías, only the part specifically defined as salary.
When and How Can I Get May Cesantías?
This is where it gets a little bit confusing. So you are accruing cesantías every month, but how do you get the money for the cesantías? This depends on your work contract and your situation. Here a few hypothetical situations:
If you are one a contract that begins and ends within the calendar year:
In this case, you will be paid out your cesantías at the end of your contract. This is usually referred to as the liquidación. For example, I used to work at a place where our contract ran from early January to late December, so I received the cesantías in a payout with my last paycheck of the contract.
If you are on a fixed term contract that runs through the new year or an indefinite contract:
In this case, your employer will deposit the cesantías into an account after the new year for the months you’ve worked in the previous year. The deposit usually occurs in February, and there is only one window a year your employer may deposit them. They will pay you out the interest for the cesantías alone after the new year, most likely in January.
The money for cesantías they deposit into the account will continue to earn interest until you withdraw it.
How Do I Get My Cesantías?
If you’re in the first situation above, and you are paid out your cesantías in a liquidación, and you have nothing to worry about. You just get your cesantías paid out at the end of your contract, and that’s it.
However, if you’re contract runs through the new year and your employer deposits it into an account, there are a few different ways to get the money from your cesantías.
First, you can get your cesantías out early if you prove you will use them to buy a house, improve your house, or will use the money to complete under or post graduate studies.
Otherwise, you can get your cesantías when you are no longer employed, no longer employed by your current employer, or when your contract is up. For example, I have taken out my cesantías from completed contracts even while I have continued to be employed by the same employer.
However, the other option is to let the money sit there and earn interest until you really need it. Your employer should tell you where they have opened an account for cesantías in your name. You can consult there the balance and the interest rate you are earning.
After August, your money for cesantías pass automatically from the short term (plazo corto) to long term (plazo largo) account. You can consult the interest rates for cesantías at this link, where you can see the different companies and their present interest rates.
So how exactly do I get the money for my cesantías?
If you have money in a cesantía account, you will need to go to the office and/or set up an online account at the company you cesantías are deposited. There, you should be able to get the money from your cesantías or have them transfer it into a bank account.
If your contract is up, you should be able to get them out simply by asking for them. They will usually want to know your bank account number to deposit it with a turn around of a couple days.
If your contract is not up, or only recently up, you may need a letter from your former employer stating that you are no longer employed by them. Then you should be able to ask them to deposit it into your bank account.
If you continued to be employed but want to get your cesantías early, you should take some proof you will use the money to invest in housing or education. Look into what exactly you need to prove you will use the money for, rather it be a quote on a home improvement, or a clear bill or estimate for the cost of building or buying a home or registering for university studies.
There you have it, a guide to how cesantías in Colombia work. I have seen numerous expats leave Colombia without taking full advantage of this money. So, I hope you have found this guide useful and it helps you get your cash money rather you are leaving Colombia or using it to invest in property or education.
Interested in learning more about cesantías and your rights as a Colombian employee?
- Check out our guide to Colombian paychecks.
- Check out this page with the rates of interest for cesantías.
- Check out this guide to cesantías.