Colombia: Temporary Changes to the Pension System During COVID-19 Pandemic

Colombia: Temporary Changes to the Pension System During COVID-19 Pandemic

On 15 April 2020, President Iván Duque issued Decree 558, implementing new measures to temporarily decrease the percentage paid to the General Pension System, in order to lower the benefit burden on businesses and employees.

Under normal circumstances, the pension contribution is 16%, with the employer contributing 12% and the employee contributing the remaining 4%. As of now, anyone who wishes to receive the benefits from the Decree, the payment will decrease from 16% to 3% of the Base Income of Contribution (IBC). The employer will contribute 2.25% and the employee will only contribute the remaining 0.75%.

These new contributions have been in place since the decree was published on 15 April 2020. The 3% contribution rate is applied for the pension contributions of the months April and May 2020, with payments due in May and June 2020. Self-employed individuals must contribute the full 3% pension contribution.

If a business made payments and discounts for the month of April 2020, before the issuance of decree 558, the highest discounted value must be calculated and returned to the employee. If a business made FSP payments, the highest discounted value should be calculated and returned to the employee and withholding must be recalculated at the practiced source, since its base is modified with this change.

For more information on Colombia’s labour laws, tax, and payroll landscape, browse activpayroll’s Colombia Global Insight Guide: find background on Colombia’s global economic profile, major industrial sectors and common business practices.

For more news and information on how the coronavirus pandemic is impacting payroll across the globe, check out our News Section.

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