Did you know more than 90% of employers must file monthly withholdings and submit electronic payroll support documents within 10 days after each run? That single rule shapes cash flow, reporting, and audit readiness for every company we manage.
We map out how withholding, income tax rates, and allowed exemptions influence net pay and obligations. Our guide covers the routine steps employers take to calculate and remit amounts for social security, AFP, EPS, and ARL.
We explain key caps, like the 25-times-minimum-wage base and the 10-times threshold for parafiscal levies, so we can budget total employment costs. Clear distinctions between gross and taxable salary, and timely electronic submissions, keep our business compliant and reduce penalties.
Over the course of the year we issue annual certificates by March and reconcile with DIAN. Staying aligned with electronic reporting and correct deductions makes operations smoother and protects our employees and company.
Key Takeaways
- Monthly withholding and electronic payroll support must be filed within 10 days to maintain compliance.
- Progressive income tax and UVT limits affect net pay and allowable exemptions.
- Employers and employees both fund social security and pension systems, following contribution caps.
- Parafiscal levies to SENA, ICBF, and Family Funds depend on income thresholds and alter total cost.
- Annual income and withholding certificates are due by March for the previous calendar year.
How we approach payroll taxes in Colombia today
To stay compliant, we run a disciplined process that produces the electronic payroll support within ten days of payment. This keeps us aligned with DIAN and reduces corrective notes.
Understanding present-day compliance expectations
We build a repeatable system that applies UVT-based withholding rules and calculates progressive income correctly. Our setup minimizes manual errors and audit exposure.
We coordinate EPS, AFP, and ARL enrollment and submit monthly remittances via PILA. We also verify ARL risk classes so employer rates match real activities.
- We prepare and file the electronic support document after each pay cycle and issue adjustment notes when needed.
- We integrate time and attendance to capture hours and allowances so income, withholdings, and contributions are accurate.
- We retain payslips and records for statutory periods and issue annual income certificates by March.
Strong controls and clear management of the process help us protect employees and meet legal requirements without disrupting business operations.
Choosing the correct salary scheme: ordinary vs. integral salary
Choosing the correct salary model shapes how we budget benefits and calculate social contributions. We review who qualifies and the contract language we must use to document the chosen scheme.
Who qualifies for integral salary
Only employees earning more than ten times the minimum wage may receive an integral salary. We must verify this at hiring and when raises push compensation near the threshold to avoid misclassification.
Why integral salaries can’t be below 13 times the minimum wage
An integral salary bundles statutory components via a 30% factor. That embedding means the integral amount cannot be below 13 times the minimum wage, since the law treats the added factor as part of total remuneration.
How the 70% contribution base applies
For integral salary, social contributions for EPS, AFP, and ARL use a 70% contribution base. This reduces the declared base for contributions but changes how we report and how the employee and employer share costs and tax treatment.
- Ordinary salary includes base pay plus severance, interest, overtime, and service premiums reported separately.
- Integral scheme must be written in the contract and affects benefits and contribution calculations.
- We compare both options to select the most compliant and cost-accurate model for specific roles.
Mapping tax residency and income tax withholding
We confirm presence and nationality data to calculate withholding accurately and protect net pay. Residents face tax on worldwide income; nonresidents are taxed only on income sourced here. Individuals become residents after more than 183 days within any 365-day period, and Colombian nationals have extra criteria we also review. Además, es importante tener en cuenta cómo el trabajo remoto en Colombia puede afectar la situación fiscal de los individuos, ya que el período de residencia puede influir en el tipo de impuestos que se aplican. Aquellos que trabajan de forma remota y permanecen en el país durante el tiempo determinado deben estar preparados para cumplir con las obligaciones fiscales correspondientes. Por lo tanto, es recomendable consultar a un experto en impuestos para evitar sorpresas al momento de declarar.
Progressive rates, UVT thresholds, and exempt income caps
We apply progressive rates monthly, from 0% up to 39%, and respect the 1,090 UVT threshold where no tax is due. This prevents over-withholding and avoids disputes about net pay.
Up to 25% of employment income can be treated as exempt subject to the monthly cap. Mandatory pension contributions are excluded from the taxable base. We also consider voluntary pension payments, AFC deposits, charity, mortgage interest, certain medical costs, and dependent deductions where valid.
Resident vs. nonresident taxation and withholding at source
We determine residency by counting days in a rolling 365-day window and then configure withholding to meet DIAN requirements. For nonresidents we withhold at source only on Colombian-source income.
- We document employees earning patterns and residency to justify withholding in an audit during the year.
- We standardize the tax base to include salaries, allowances, benefits in kind, commissions, and bonuses so reported income is complete.
- We train teams to track status changes—such as crossing the 183-day threshold—and adjust withholding prospectively.
We coordinate with staff to collect deduction evidence securely and keep auditable records that support our monthly calculations and annual reconciliations.
Breaking down social security contributions (EPS, AFP, ARL)
We break down social security costs so managers can forecast monthly obligations with confidence.
Employer rates are fixed for health and pension: 8.5% for EPS and 12% for AFP. ARL is set by risk class and ranges from 0.348% to 8.7% as an employer insurance cost.
Employee rates and the Solidarity Pension Fund
We withhold 4% from the employee for health and 4% for pension. The Solidarity Pension Fund applies 1%–2% for higher earners. Workers below four times the minimum wage are exempt; the rate rises progressively until 2% between 20 and 25 times the minimum.
Caps, bases, and special cases
The contribution base uses the ordinary salary. For an integral salary we use 70% of the integral amount. No contributions apply above 25 times the minimum wage.
- Foreign employees may be exempt if covered by a home-country system; we document any exceptions.
- All contributions are remitted monthly via PILA and reconciled with our ledger.
Parafiscal contributions that employers must plan for
We monitor parafiscal levies closely to prevent surprises in total compensation costs. These contributions are mandatory and affect monthly cash flow and reporting.
Rates and scope. Employers fund SENA at 2%, ICBF at 3%, and the Family Compensation Fund at 4%, for a combined 9% obligation. We include this rate in our monthly calculations and PILA submissions.
SENA, ICBF, and Family Compensation Fund rates and thresholds
We apply parafiscals to ordinary salary. For employees earning more than ten times the minimum wage, SENA and ICBF are due. For integral salaries, we use a 70% contribution base so the levy aligns with social security reporting.
When 10 times minimum wage changes what we must pay
We monitor threshold changes monthly. When an employee crosses the 10-times-minimum-wage line we recalibrate settings, adjust bases, and notify HR and finance so the correct contributions and taxes are withheld.
- Budgeting: Treat parafiscals as 9% of the applicable base in forecasts.
- Controls: Assign ownership to validate earnings and thresholds each cycle.
- Compliance: Transmit payments via PILA and store confirmations for audits.
payroll taxes colombia: what employers must pay
We outline the direct costs employers face at national and municipal levels so budgeting reflects real labor expenses.
National contributions and local levies
National rates cover social security and parafiscal funds. These typically total between 4% and 9% of the declared base and include EPS, AFP, ARL, and SENA/ICBF/Family Compensation.
Local levies can increase that burden. Municipal charges differ by site, so a company with multiple offices must model costs by location.
- We separate national components from municipal charges so each work site is budgeted correctly.
- We apply caps tied to the minimum wage—contribution bases rarely exceed 25 times that amount.
- We produce a monthly employer cost summary that combines wage, pension, health, risk insurance, and parafiscal amounts by location.
- We confirm payment cycles, including bi-weekly cases, to avoid missed filings during the year.
- We implement controls so employer and employee components reconcile with PILA and bank confirmations.
Payroll setup essentials with DIAN, EPS, AFP, and ARL
Securing a NIT and choosing compliant providers lays the foundation for accurate monthly contributions and reports. We treat setup as a checklist so our company meets legal requirements from day one.
Registering NIT and selecting providers
We register with DIAN to enable withholding and electronic support submissions. Then we enroll staff with EPS for health and AFP for pension coverage.
We decide whether to run payroll in-house or use a vendor based on scale, control needs, and vendor SLAs.
Classifying risk and operational controls
Accurate ARL risk classification sets the employer rate. We document classifications and keep contracts current when operations change.
- Configure system for minimum wage thresholds, caps, and the 70% base for integral salaries.
- Establish bank accounts and internal controls for monthly PILA payments and reconciliations.
- Define the process for data collection, approvals, and DIAN submissions within ten days after each run.
| Step | Owner | Frequency |
|---|---|---|
| DIAN NIT registration | Legal | Once |
| Provider enrollment (EPS/AFP/ARL) | HR | Once / update as needed |
| PILA payments & reconciliation | Finance | Monthly |
| Risk classification review | HR & Ops | On change |
Strong documentation and clear roles keep our management aligned and reduce compliance risk for employers colombia operating today.
How to calculate payroll step by step
Accurate pay begins when we validate attendance, apply caps, and compute statutory contributions.
From hours worked to gross salary and statutory deductions
We collect approved time and attendance to total hours worked and build gross salary. That amount includes allowances, commissions, and bonuses that form taxable income.
We then compute employee deductions: EPS 4% and AFP 4%, and add the Solidarity Pension Fund where the employee crosses thresholds tied to minimum wage. Employer contributions for EPS, AFP, and ARL are calculated and reconciled to our ledger.
Applying caps, minimums, and the income tax withholding table
We apply the 25-times minimum wage cap and use a 70% base for integral salary when relevant. Then we run income tax withholding per the UVT-based table, factoring in documented exemptions.
- Produce itemized payslips and deliver them to employees by the agreed day.
- Archive supporting schedules and finalize the DIAN electronic payroll support within 10 days.
- Issue adjustment notes promptly if we detect post-run errors.
| Step | Responsible | Output | Deadline |
|---|---|---|---|
| Collect time & attendance | HR | Hours worksheet | Pay period end |
| Compute gross salary & deductions | Payroll team | Payslip draft | 2 days before pay |
| Reconcile contributions & parafiscals | Finance | Ledger entries | Pay day |
| Submit electronic support | Legal/Finance | DIAN submission | Within 10 days |
Electronic submissions: DIAN and the PILA payment flow
We synchronize electronic reporting and payment cycles so submissions and bank transfers happen on schedule.
Every month we generate the DIAN electronic payroll support document within 10 days after each run. When errors occur, we send adjustment notes promptly so filings remain accurate.
Electronic payroll support document and adjustment notes
We ensure our system exports DIAN‑ready XML and stores receipts. The team validates records and confirms employees paid before transmission.
Monthly remittances via PILA and record-keeping timelines
All social security (EPS, AFP, ARL) and parafiscal remittances are sent through PILA on the standard month‑end cadence. We align DIAN and PILA calendars to cut late filings and penalties.
- Archive payslips, DIAN XML/receipts, PILA confirmations, and bank proofs for audits.
- Train staff on contingency steps and required file formats.
- Confirm income tax and social security entries match filings before submission.
| Action | Owner | Deadline |
|---|---|---|
| Transmit DIAN electronic support | Legal / Finance | Within 10 days |
| Submit PILA remittances | Finance | Month‑end |
| Archive filing proofs & payslips | HR / Records | Retain per law; annual certs by March |
We link our practices to an electronic payroll service that supports local formats and strengthens our management controls.
Key dates, cycles, and payments we cannot miss
We keep a tight calendar so every filing and payment lands on the right day. Clear deadlines protect cash flow and prevent penalties.
Monthly cycle, 13th-month salary, and annual certificates
Our default cycle is monthly, though some sectors run bi-weekly. We set cutoffs to lock hours worked and finalize gross pay before each run.
The 13th-month salary is mandatory. We plan the first half within the first 15 days of June and the second half within the first 20 days of December. These benefits are built into budgets and cash forecasts.
Each year we issue income and withholding certificates by March so employees can complete personal filings on time.
Withholding, parafiscales, and social security due dates
We submit the electronic payroll to DIAN within 10 days after each run. Remittances for social security and parafiscales go through PILA, generally by month-end.
- Calendars: We set monthly and bi-weekly schedules to meet DIAN and PILA deadlines every month.
- Controls: A deadline checklist tracks filings, deductions, and changes tied to minimum wage thresholds.
- Accuracy: Tracking attendance and inputs reduces post-payroll adjustments and keeps withholdings and taxes aligned with records.
Risk management: audits, changes in wage rules, and ARL classification
We treat classification and audit readiness as active controls that reduce exposure when rules change. Our management approach ties ARL class, salary bases, and electronic records into a repeatable routine.
ARL contributions range from 0.348% to 8.7% based on risk class, so we verify job roles and update categories when operations evolve. We monitor the 70% base rule for integral salaries and the 25-times minimum wage cap so calculations remain correct.
DIAN electronic reports and PILA remittances create a clear audit trail. We keep full records of submissions and bank confirmations so we meet legal requirements and respond quickly to reviews.
- We treat ARL classification as a core compliance control and verify it regularly.
- We test our payroll process end-to-end to validate DIAN and PILA flows across critical days.
- We run exception reporting and variance analysis to catch anomalies in contributions, pension, and health charges before filings.
- We update provider agreements and train managers on work changes that affect insurance and contribution rates.
Set your payroll on the right track in Colombia
We close with a clear, action-first roadmap to keep our system reliable and audit-ready every year.
Checklist: register with DIAN, select EPS/AFP/ARL providers, classify ARL risk, and configure bases and caps for ordinary vs. integral salary.
We build a validation system that calculates tax and pension contributions, records hours, and flags anomalies before each run. Embed controls for benefits, leave, the 13th-month payment, and statutory payments so employees and employer obligations stay on schedule.
Schedule periodic reviews of wage thresholds and times-based rules, run quarterly audits, and escalate complex tax questions early. Use this guide to map roles, responsibilities, and workflows so filings and payments are timely, accurate, and defensible.
