The Family Subsidy System is the set of political and regulatory institutions aimed at the comprehensive protection of both the workers and their families, which exists in Colombia since 1954. The objective of the Family Subsidy System is to alleviate the economic burden on a worker from supporting a family. The Family Subsidy System includes different stakeholders: workers, employers, the Family Compensation Funds, the Superintendency of Family Subsidy, and the Ministry of Labour.
The Family Compensation Funds (Cajas de Compensación Familiar) are private, non-profit entities, which were created to improve the quality of life of the workers and their families. Their legal mandate is executed through social services oriented to recreation, culture, education, health prevention, housing subsidies, credit, and protection of the unemployed. The Family Compensation Funds are the institutions in charge of administering benefits, such as monetary subsidies (Cuota monetaria), in-kind subsidies (food, clothing, scholarships, school texts, medication, among others), and service subsidies (reduction of service fees, such as recreational parks price admission). The operation is financed by a proportion of the social security contributions made by employers, usually a 4% (in the case of full-time workers).
The Ministry of Labour and the Superintendency of Family Subsidy protect the rights of affiliates and their dependents by inspecting, monitoring, and controlling the resources administered by 43 Family Compensation Funds. This is an important mission because they advocate for a total of 9,245,314 affiliates and 10,436,047 dependents. During 2020, the 43 Family Compensation Funds served over 19.7 million people.
In February of 2021, the Superintendency of Family Subsidy presented a study about the impact of monetary subsidies (Cuota monetaria) on the economic situation of affiliates earning a maximum of four monthly legal minimum wages (COP$ 3,634,104 or USD$973) and their families. In general, the report shows that this monetary transfer, which according to the place of residence ranges between COP$ 31,000 (USD$ 8.3) and COP$ 63,000 (USD$ 16.8) monthly per dependent, has allowed them to cover expenses on basic needs, food, housing, education, and transportation. In addition, it has positive impacts on income distribution: the probability of falling below the poverty line decreases by 11% at a national level and 75% in rural areas, the probability of being considered poor based on income decreases by 0.3%, and the recipient families are 1.3 times more likely to being part and remaining in the middle class. The subsidy also increases school attendance by 2.38% in urban areas and 3.72% in rural areas.
For unemployment assistance, the Family Subsidy System ensures that the workers, and their dependants, do not lose access to protection because they cannot pay for it. Therefore, when in a situation of unemployment, the System assures the following: contribution to health and pension of the worker; monetary subsidies for dependent persons of the worker; monetary benefit of severance savings; training; and job search support.
With the 2020 pandemic caused by the spread of COVID-19, unemployment rose rapidly. In response to that, in March of 2020, the Colombian government modified access requirements, duration and coverage of the Unemployment Protection Mechanism, considered to be an emergency subsidy, which will be in action while the national state of economic, social, and ecological emergency endures. This subsidy is intended for affiliated workers who have lost their job and earned less than four monthly legal minimum wages. This emergency subsidy is also available for unemployed independent workers that have paid contributions to the Family Compensation Fund for 12 months in the last 5 years.
The persons receiving the unemployment assistance will be released from paying contributions to the General Social Security System for health and pensions, and from the payment of the monthly dues of the Family Subsidy during six months. In addition, an economic transfer will be delivered in three phases. In the first and second, workers will receive an amount equivalent to two current legal monthly minimum wages, which will be divided into three equal monthly payments. In the third phase the transfer will be done in three monthly instalments of COP $160,000 (USD$ 42.86) for the people new to the system, and those with an outstanding application. In the first and second phases, the Family Compensation Funds assigned over COP $537,500 million (USD$ 144 million) to 235,871 individuals. Phase three was financed by the Emergency Mitigation Fund (FOME), adding COP $67,452 million (USD$ 18.1 million), and reaching 115,258 people.
Further reading:
- International Labour Organisation (ILO) and Ministry of Labour of Colombia (2014). “Libro Blanco del Sistema de Subsidio Familia”, Oficina de la OIT para los Países Andinos, Ministerio del Trabajo, Despacho Viceministro de Empleo y Pensiones, Dirección de Generación y Protección del Empleo y Subsidio Familiar, Subdirección de Subsidio Familiar, Bogota D.C. Accessed from https://www.ilo.org/global/docs/WCMS_338861/lang--es/index.htm in May 2021.
- Superintendencia del Subsidio Familiar and Proyectamos Colombia S.A.S. (2021). “Cuota monetaria. Estudio de impacto”. Accessed from https://www.ssf.gov.co/documents/20127/748265/PRESENTACI%C3%93N+FINAL+Cuota+Monetaria+25Feb2021.pdf/41608f56-4377-9ba0-c3cb-dd9891d27f49 in May 2021.