Chile is one of the most important economies in South America, with crucial sectors such as mining and manufacturing. Known for being prosperous, Chile continues to play an important role in globalization. It has the region’s highest human development index, as well as some of the best universities in the world.
The Chilean market supplies an abundance of workers in numerous fields, available for all sorts of companies. But if you own a company in Chile and you’re not up to date on employment laws and regulations, employing workers can be challenging.
Here’s everything you need to know about employee compensation & benefits in Chile, including a guide to understanding the country’s labor laws and social security contributions better.
According to the Chilean work code, employers must issue a number of standard benefits to their employees. As an employer, you need to understand the different employee benefits in Chile, so you don’t put your business at risk.
Chilean employees are entitled to benefits when they work full time. Full-time work in Chile encompasses 45 hours per week. Employee benefits in Chile are typically not provided to Chileans who operate independently or are self-employed.
Across the country, Chile has strict laws regarding overtime pay and company cars.
Compensation law warrants a 45-hour work week. Anything over that requires overtime pay. Employers must pay overtime with an additional 50% of the regular salary, or as it’s colloquially known, time and a half.
Company cars aren’t allowed by employers without a tax penalty. However, commuter funds are permitted based on an employee’s wage.
Here are the compensation laws required for employee benefits in Chile, including information about the minimum wage.
As of 1 May 2022, Chile’s minimum monthly income (IMM) was 380,000 Chilean pesos. Together, the government and Central Unitarie de Trabajadores (CUT) Chile agreed on an IMM increase to 400,000 pesos, effective after 1 Aug 2022.
While companies aren’t required to give out a 13th-month bonus, known in Chile as aguinaldos, many employers pay the twice-a-year bonus – once on Sept. 18 (Chile’s Independence Day) and once at the end of the year (usually during Christmas time).
Chile observes the following as paid public holidays:
New Year’s Day
Holiday of St. Peter & Paul
Holiday of Our Lady of Mount Carmel
Holiday of the Assumption of Mary
National holiday, Army Day and Independence Day
All Saints’ Day
Holiday of the Immaculate Conception
Bank holiday (New Years Eve)
Individuals employed for more than one year are entitled to 15 paid working days off for vacation, or 3 weeks of paid vacation.
Sick leave. Employees who are out sick for less than 11 days won’t get paid for the first three days. If the sick leave is 11 days or longer, employees should receive payment for all working days, provided they present a health provider’s note within two days of returning.
Maternity and paternity leave. Employee benefits in Chile allow for six weeks of maternity leave before the expected due date and 12 weeks after birth. Fathers are entitled to five days’ paid leave after a child is born.
Bereavement leave. If an employee experiences the death of a spouse, civil partner, or child, they can go on paid leave for seven days. In the event of a parent’s death, they’re allowed three days.
Pensions. Old-age pensions are entirely financed through employee contributions. The government mandates that 0.9% of employees’ paychecks go towards pensions. Payment is made from the government.
Health Insurance. Public healthcare covers Chilean employees. Each employee contributes 7% of their paychecks monthly to healthcare.
Unemployment insurance. Employees put 0.6% of their paychecks towards unemployment insurance.
To hire and retain the best talent, many employees go above and beyond what is mandated to attract by offer additional perks, including:
Private healthcare coverage
Personal learning and development budget
Therapy or coaching allowance
Flexible working hours
If your business is looking to expand in Chile, or simply just wants to test out the market, you have a few options: open a subsidiary or entity, or partner with a third-party global payroll & benefits provider such as a PEO or EOR.
If you’re looking to substantially build out your business presence in Chile, opening a subsidiary or entity makes sense.
The main difference between a subsidiary and an entity is ownership. Subsidiaries are entirely or partially owned/operated by another company, often referred to as the parent company, which may control its own business units. Entities, on the other hand, are businesses with individual legal rights. They own property, participate in the business, undertake contracts, and pay taxes.
Unfortunately, the process of opening an entity or subsidiary can take months, since you will need to complete paperwork and develop an in-depth understanding of local labor and tax laws. For companies looking to hire as quickly as possible, this path is not the best option.
Partnering with a Professional Employer Organization (PEO) A PEO comes into play if you already own a legal entity in Chile. By partnering with a PEO, your company will enter into a co-employment arrangement with the PEO itself, your company, and your employees. A PEO manages local HR functions such as benefits and payroll, but is not held fully responsible for maintaining compliance with labor laws.
If you decide to partner with an EOR service like Via, you do not need to worry about opening an entity. An EOR service is responsible for onboarding employees, creating employment contracts, administering benefits, running payroll, local HR logistics, and maintaining legal compliance. With an EOR service, you can hire employees quickly, usually in just a few days.
An EOR comes into play when you need to manage your international hiring needs. There’s no need to search for separate HR, payroll, and legal specialists. An EOR can offer all those services and more at a more affordable price. If you’re looking to expand your team into Chile or other countries, outsourcing an EOR to deal with the hiring, compensation, and benefits aspects, along with compliance needs, can take a load off your shoulders.
Both large and small companies want to hire employees in Chile, but are unsure of how to navigate the country’s payroll and labor laws. Via makes hiring Chilean talent and building your global team seamless. Our easy-to-use platform helps you manage the local HR processes for benefits, payroll, background checks, and more. We have a local team of lawyers and on-the ground experts that understand compliance as you expand abroad.
As your employer-of-record/entity in Chile, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Chile with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.
Employees pay the following percentages from each paycheck to cover their benefits. - 7% to health insurance - 0.9% of salary to a pension fund - 2.84% to 3.4% for life insurance - 0.6% to unemployment insurance
Chilean employers must provide employee benefits under the Chilean Labor Code, including paid time off, sick leave, vacation, and contributions to social security.
Chile’s healthcare system is considered one of the best in Latin America. The country sets some of the highest public healthcare standards in the world.
Legal residents of Chile have access to free healthcare through the government with Fondo Nacional de Salud (FONASA) and private insurers. If you’re an employee in Chile, 7% of your monthly income is deducted from each paycheck to help fund your healthcare plan.
Chile has a dual healthcare system. Chileans can opt for coverage by the public National Health Insurance Fund or a private company. The system is funded by a universal income tax deduction of 7% of every worker’s monthly wage.
Costa Rica has the best healthcare system in Latin America. Its universal system, Caja Costarricense de Seguro Social (CCSS), offers full coverage for all medical procedures through the public hospital.