Impact of the Increase in the Minimum Wage and Transportation Allowance on Labor Costs

Increase in the Minimum Wage and the Transportation Allowance

For the year 2026, the Statutory Monthly Minimum Wage in force (SMLMV) was set at the amount of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND NINE HUNDRED FIVE PESOS (COP $1.750.905) and the Transportation Allowance at TWO HUNDRED FORTY-NINE THOUSAND NINETY-FIVE PESOS (COP $249.095).

It should be recalled that the statutory transportation allowance must only be granted to those employees who earn up to two (2) SMLMV, except for certain exceptions, such as when the employer provides transportation to and from the employee’s home to the workplace, or when the employee lives at the same place where the service is rendered, as is the case for live-in domestic service workers.

Likewise, for those employees who perform their activities under the work-from-home or telework modality, and who are granted the transportation allowance, during the time they render their services under any of these modalities, such payment must be recognized as a connectivity allowance and shall have the same salary effects as the transportation allowance.

With said increase, the value of the ordinary work hour, as well as the corresponding surcharges, was also modified, as indicated below:

It is important to bear in mind that Law 2466 of 2025 introduced a modification to the remuneration for work performed on mandatory rest days and holidays, establishing a surcharge equivalent to one hundred percent (100%) of the ordinary wage, calculated proportionally to the hours worked. However, such increase does not operate immediately; rather, a phased implementation scheme was provided: as of July 1, 2025, the surcharge shall be eighty percent (80%); as of July 1, 2026, it shall increase to ninety percent (90%); and only as of July 2027 shall it be applied in full.

Payroll of an employee earning the minimum wage

In accordance with the foregoing, the approximate monthly payroll cost for a company of an employee who earns a minimum wage would be as follows:

Employers that are legal entities whose employees earn less than ten (10) SMLMV shall be exempt from payment of health and parafiscal contributions (SENA and ICBF). Natural persons may also apply such exemption, provided they employ more than one employee (Article 114-1, Tax Statute).

Total monthly cost = $ 3.039.380

It is necessary to bear in mind that the transportation allowance must be considered for purposes of calculating social benefits (service bonus, severance, and interest on severance), pursuant to Article 7 of Law 1 of 1963. As regards the calculation of vacation and contributions to Social Security, the amount of said allowance does not constitute a basis for the calculation of these two items.

Integral salary for 2026

Considering that the minimum wage for 2026 was set at the amount of COP $1.750.905, the value of the integral salary shall be TWENTY-TWO MILLION SEVEN HUNDRED SIXTY-ONE THOUSAND SEVEN HUNDRED SIXTY-FIVE PESOS (COP $22.761.765), of which COP $17.509.050 shall correspond to the salary component and COP $5.252.715 to the benefits component.

It should be recalled that the integral salary:

• Must be agreed in writing.
• May not be less than ten (10) SMLMV, plus the benefits factor, which may not be less than 30% of such amount.
• Compensates ordinary work, benefits, surcharges, and allowances (such as night work, overtime, Sunday and holiday work, statutory and extra-statutory bonuses) and, in general, all those that the parties include in the stipulation, except for vacation.

In accordance with the foregoing, the approximate monthly payroll cost for a company of an employee with an integral salary would be as follows:

Total monthly cost = $ 28.653.420

It must be taken into account that Social Security contributions in these cases are calculated on 70% of the total comprehensive salary (Article 18, Law 100 of 1993), that is, the amount of FIFTEEN MILLION NINE HUNDRED THIRTY-THREE THOUSAND TWO HUNDRED THIRTY-SIX PESOS (COP $15.933.236), as is also the case for parafiscal contributions (Article 49, Law 789 of 2002), and not on the benefits component.

With respect to the exemption from payment of health and parafiscal contributions (SENA and ICBF) set forth in Article 114-1 of the Tax Statute, the same is not applicable to employers who hire employees under the comprehensive salary modality, since it only applies to those employees who earn less ten (10) SMMLMV.

How can we help you?

At Forvis Mazars, we have professionals with expertise in compliance with each of these obligations. Should you require support in the implementation or compliance with the obligations contained in this bulletin, or in the structuring of new compensation schemes that allow for reducing the impact of these regulatory changes, please contact us, and we will gladly analyze the best way to support you in meeting such obligations.

Value calculated considering the maximum legal working week of 44 hours in force until July 14, 2026. The daily value is calculated based on a maximum working day of 8 hours.

Values calculated with the 80% surcharge in force until June 30, 2026. As of July 1, 2026, the surcharge will be 90% in accordance with Law 2466 of 2025.

Risk Level II: 1.044%, Risk Level III: 2.436%, Risk Level IV: 4.350%, Risk Level V: 6.960%