Service bonus in Colombia: how it is calculated and when it is paid

Service bonus in Colombia: how it is calculated and when it is paid

In June, and again in December, the same question returns to the payroll desk: how much service bonus must be paid, to whom, and with what money. The short answer is that the service bonus equals 30 days of salary per year, or 8.33 % of the monthly payroll, and it is paid in two installments: one no later than June 30 and another no later than December 20. The long answer — the one that prevents recalculations, claims and cash-flow scares — lies in the calculation base, in the proration by days worked and in the monthly accrual. That is what the following sections cover, with a full worked example and the accounting entries.

The service bonus is the benefit that sparks the most discussion, and not because of the rule: because of the data that feeds the rule. How the transport allowance was recorded, whether commissions were averaged, from which day the employee's start was counted. When the result does not add up, the error is almost never in the formula.

What the service bonus is and why it is paid twice a year

The bonus is a social benefit: part of the salary the employee earns every day but receives at two points in the year. It is not a discretionary bonus, it is not a reward, and it does not depend on performance or company profits. It accrues from the mere fact of working, and the employer cannot replace it with another payment or tie it to targets.

The equivalent is 30 days of salary per year, that is, 8.33 % of what the employee earns each month. That percentage is the most useful way to look at it: with a monthly payroll of 20 million, the annual bonus comes to roughly 1.67 million, paid in two installments. Seen that way, it stops being a surprise expense and becomes a monthly cost that accrues and can be budgeted.

The reason for two payments is cash flow: concentrating 30 days of salary in a single disbursement would hit any small company's cash. That is why the year is split into two calendar semesters, January to June and July to December, and each has its deadline.

Nor should it be confused with severance (cesantías): both equal the same amount and share the same base, but severance is deposited into a fund while the bonus is paid directly to the employee. That difference explains why the bonus demands cash and severance does not.

Who receives it and from which day it accrues

Everyone hired under an employment contract receives the bonus: indefinite-term, fixed-term, work-or-labor contracts, and also those who work by the hour or by the day with a proportional salary. What defines the right is the nature of the relationship, not the job title or the size of the company.

The point most often got wrong is the start date: the bonus accrues from the first day of work, not after the probation period. If the contract has a two-month probation, the bonus accrues during those two months, and anyone who starts counting at the end of probation underpays between 30 and 60 days for every new hire.

When the relationship is not an employment contract — a service provider, an intern with no employment tie, a partner who invoices — the bonus does not apply through this route, and treating those figures as disguised employment has consequences. If the case sits on the borderline, it is worth reviewing it with your accountant.

The base: what counts and what does not

The bonus is calculated on ordinary salary plus the transport allowance plus habitual salary payments. The base is not the "basic salary" in the contract but a somewhat higher figure: it is the same base used for severance, and if you already calculate severance, you only need to make sure both calculations draw on the same data.

The key word is habitual. Overtime and commissions enter at their average for the period, not the last month's figure or the best month's figure. A salesperson who averaged 400,000 a month in commissions has that figure in the base, even if June was a slow month; and an exceptional month cannot be used to inflate the payment.

The two recurring arguments — whether the transport allowance counts and what to do with variable pay — have the same answer: if the payment is habitual and pays for work, it counts; if it only reimburses an expense, it does not. The right question is what that item is paying for, not what it is called in the contract.

The transport allowance: the mistake of leaving it out

The transport allowance is the costliest and quietest mistake: many companies treat it as a separate payment and leave it out of the bonus base. The result is a lower payment for every employee, semester after semester, with nobody noticing because the payslip looks normal.

When the employee receives a transport allowance, that amount adds to the bonus and also to severance. With a salary of 1,800,000 and an allowance of 200,000, the difference between calculating on 1,800,000 or on 2,000,000 is 100,000 per semester and 200,000 per year per employee. Across a staff of 40, that is eight million a year, underpaid and claimable at any time.

Not everyone receives a transport allowance: it depends on the salary cap the government sets each year. When they do receive it, it counts in the base, and since the amount is updated every year, it is worth checking it in the system before the first cutoff instead of carrying over last year's figure.

The same oversight happens with commissions when the sales team works on a variable scheme and the commission is paid under a code other than payroll: many systems leave it out of the average, the bonus comes out lower, and the gap grows every semester.

The two cutoffs of the year and their deadlines

The year is split into two calendar semesters. The first installment covers January to June and must be paid no later than June 30. The second covers July to December and must be paid no later than December 20. These are deadlines, not suggestions: paying late opens the door to penalties, interest and a claim the company loses in advance.

Note the asymmetry of the second date. Payment is due before the semester ends, so the days from December 21 to 31 have not yet been worked when the cutoff arrives. In practice, companies settle the days accrued up to the payment date and adjust the rest in the following payroll or in the final settlement. It is worth defining this in writing and holding the same criterion every year, so as not to pay the same stretch twice or leave a balance nobody can explain.

One rule surprises many employers: if the company pays the full bonus before the deadline, it cannot deduct it from salary afterwards. A voluntary advance is a payment, not a loan: if the employee resigns in October, that money is not recovered through payroll and cannot be netted against the final settlement.

Proration: how it is calculated when there was no full semester

If the employee did not complete the semester, the bonus is paid in proportion to the days worked. It is not lost, it is not frozen until the following year, and it is not rounded down to zero because "the semester was not completed": it is settled proportionally, both for a mid-period start and for a departure before the cutoff.

The formula, on a monthly base, is simple: bonus = (monthly base salary × days worked in the semester) ÷ 360. The 360 comes from the 30 days of salary per year: a 360-day year, a 180-day semester. With a full semester it returns half the base, which is the 15 days of each installment; with half a semester, a quarter.

Days are counted from the start date to the last day of the semester, or to the departure date if the contract ended earlier. A start on March 15 adds 17 days of March, 30 of April, 31 of May and 30 of June: 108 days. The count must come from the same record that feeds payroll, not from an estimate made from memory.

Full worked example: whole semester, mid-period start and accrual

An employee with a salary of 1,800,000 and a transport allowance of 200,000. The monthly base is 2,000,000, and that is the figure used in every calculation that follows.

With a full semester, the employee receives 1,000,000 in June and 1,000,000 in December; the year closes at 2,000,000, exactly one month of base salary. Starting on March 15, the June installment is 600,000 and, if the employee stays through the second semester, December pays 1,000,000: the year comes to 1,600,000 because only 288 of the 360 days accrued.

The monthly accrual of 166,667 is what funds the payment: six months accumulate practically the June installment and twelve cover the year. Without accrual, June and December come straight out of the month's cash flow, right when the cash is already stretched.

How it is recorded: period expense, liability and accrual

The bonus is an expense of the period in which it accrues, with a liability until it is paid. From that principle comes the monthly accrual: each month one twelfth is recognized and accumulated in a payable account. When June arrives, the payment does not hit the month's result, because the expense was already recognized in January.

Without accrual, the whole expense lands in the month of payment: the June and December results collapse and the other ten months look better than they are. Many companies then conclude that "the bonus is a cash problem" when it is a recognition problem.

Two details prevent last-minute adjustments: the accrual must include the transport allowance and the average of variable pay, and it must be recalculated when a salary changes or when staff join or leave. If it is calculated once a year on January salaries, money will be missing in June.

What happens to the bonus when the contract ends

When the contract ends, the bonus accrued and unpaid is settled in the final payment, in proportion to the days worked in the current semester. It does not wait for June 30 or December 20: it is paid with the settlement, alongside severance, severance interest and pending vacation.

Two rules cross here. The bonus cannot be offset against other payments: it is not netted against a loan, an advance or a pending bonus, unless there is a valid procedure and agreement. And it is not deducted for unjustified absences without due process: deducting on your own turns a minor difference into a bigger claim.

The reverse case is more common than it seems: paying the full bonus in June and then trying to deduct the portion not yet accrued from an employee who resigns in August. That deduction does not stand: if it was paid before the deadline, it was paid, and the cash risk was assumed at the time of payment.

Bonus and social security: the cost that never shows on the payslip

The bonus is salary. It is not an extra payment outside the law, nor a discretionary benefit: it is deferred pay, and that is why it counts as a salary factor in the employment relationship and in the other benefits. A bonus increase is not an isolated expense; it carries the full labor cost and shows up in everything calculated on salary.

The consequence is budgetary: when projecting the year, the bonus does not belong in a loose "contingencies" line, it belongs in the monthly payroll cost along with severance and its interest. The exact treatment for contributions and payroll taxes has rules of its own and depends on current regulation; if you are going to configure a system or project a new headcount, confirm it with your accountant.

That salary nature also explains why the bonus is not negotiated case by case: it is an obligation with a date, and its calculation must be explainable line by line to any employee who asks.

Common mistakes and what they really cost

There is a process mistake that costs more than all the others: calculating the bonus on a separate spreadsheet with no link to payroll. When the spreadsheet and the system do not talk, two truths appear about the same employee, and the one that gets paid is almost never the one that can be supported.

An honest closing before you decide

This text explains the mechanism; it does not resolve particular cases and it is not legal advice. Some situations deserve a pause before applying the general rule: variable salaries with irregular commissions, collective agreements that improve the benefit, employees with several jobs, agency staff and contracts that change type mid-semester. The rule is a starting point, not a final answer.

Nor does it replace an accountant or a labor lawyer. Caps that depend on annual values — minimum wage, transport allowance, the tax unit (UVT) — must be checked at the year's current figure; carrying over last year's is a silent source of differences. And if the calculation already runs in a system, the review should focus on the input data: the base, the days and the average of variable pay.

Kardex Tauro calculates the bonus by accrued days and keeps the accumulated accrual inside its payroll module, so the semester close is reviewed before the deadline rather than after.

Keep reading

• Severance funds in Colombia: how they are calculated, deposited and withdrawn
• Final settlement in Colombia: what is paid and how it is calculated