Severance payment interest: term and investment advice

According to Law 52 of 1975, every company is obliged to pay severance payments to its employees and other related provisions, recognizing and paying interest at 12% per annum as of December 31. Therefore, January 31 is the maximum term for the payment of this interest to all workers who have a permanent or indefinite labor contract with the company.

For example, if you have a salary of $2 million per month and you worked the whole year in the company, you can calculate the value of the severance payments as follows:

Severance interest= 360 (days worked) X 0.12 X 2.000.000 (Monthly salary) /360

Therefore, the value of interest would be $240,000.

Considering this, the money has to be paid directly to the company’s employees. However, in the event that the employer refuses to pay the interest, the worker has the right to go to a labor judge and demand payment and compensation.

How can this money be properly used?

According to experts, it is suggested to make a good financial management, so that they do not end up in personal expenses.

Due to the fact that the world is attentive to the possibility of falling into an economic recession, analyst Andrés Moreno and Banco Caja Social recommend saving this money to be used in emergency cases, such as unemployment or family problems.

Likewise, one can also choose to channel these savings in investment funds or bonds, in view of the high inflation rates in the country.

And even, one of the most recommended tools at the moment by the experts are the CDTs, as Moreno indicates: “The first thing is that to cover inflation you have to invest, for example, in the Fixed Term Deposit Certificates, CDT, in the Voluntary Pension Investment Funds and in the collective portfolio funds, fixed income portfolios, where you can have rates of 12% to 14%, which is above inflation which is at 13%″.

Although, The vice president of research at Solidus Capital, Diego Valencia, indicated that “specialized savings, such as severance interests, should be part of emergency cushions and should be housed in a long-term investment fund, or be transferred to accounts with tax benefits”.

Ultimately, it is suggested to use this money to pay debts and thus avoid paying high values, due to the fact that the Banco de La República has increased interest rates.

Source: La Republica.

https://www.larepublica.co/finanzas/intereses-de-cesantias-se-deben-consignar-hasta-el-31-de-enero-consejos-para-su-uso-3524303