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.
Payroll in Chile is the management of onboarding, payment, benefits, deductions, compliance, taxes, terminations, severances, for full-time employees and contractors.
Companies can either open an entity and partner with a PEO, or skip the process of opening an entity and use a global EOR service like Via.
Performing payroll in Chile, including calculating deductions, can be complicated, as employees and employers have a variety of social tax obligations that must be paid.
Here, we break down the legal requirements of payroll procedures in Chile and offer useful tips for global employers who are seeking to establish a Chilean labor force.
Employers are required to withhold Chile payroll taxes from employee pay and remit payment to the SII (Servicio de Impuestos Internos) and Social Security Institutions monthly, between the 10th and 12th of the month. Required deductions include employee contributions and employer contributions.
As in most countries, employees must receive certain benefits. Employers are required by law to offer the following mandatory benefits:
Employees receive an annual “legal gratification” bonus that is paid monthly.
There are 14 public holidays that fall during the work week each year, and employers are required to offer paid time off for these days.
Employees receive 15 days of paid leave each year, which must be offered after the employee has completed one year of service.
Expecting mothers must be given 6 weeks of paid leave before their child’s birth and 12 weeks after the birth. The employee must get full pay for this time off.
Employers must provide overtime pay for any hours worked over the typical 45-hour work week.
Some employers choose to offer additional benefits to employees. These benefits are not required but may prove useful for recruiting and retaining professionals in certain high skilled or high-demand careers, and for employees in upper management positions. Many of these added perks are taxable, such as:
While not required, many employers give out bonuses twice a year called Aguinaldos. Most employers give these once on September 18 and again around Christmas.
As in many countries, in Chile it is customary for employers of high-skilled workers to offer a health insurance stipend to cover private health insurance. For some industries, this may range up to CLP100,000 monthly.
Company cars can be provided but come with a stiff tax penalty. Automobile or commuting allowances are more common and are limited by employee’s gross salary.
A housing or living allowance is typically awarded only if appropriate for the type of work being performed.
Some employers will offer free or reimbursed tuition, or training to advance employee career opportunities.
Some competitive employers will offer a childcare benefit to assist parents, such as school tuition payment or a childcare allowance.
Employees offer benefits more along the lines of reimbursable expenses and are not taxable, such as meal allowances, transportation stipends, expenses for job-related travel and job skills training, like necessary certifications or language training.
Register your business. To begin processing Chile payroll, you first need to register your business and obtain a Tax Identification Number, known as RUT (Rol Único Tributario). This is done through the online taxpayer system SII (Servicio de Impuestos Internos). Once you have registered with SII, you will need to begin making monthly tax statements online through the SII portal.
Open a payroll program account. Make sure you have an online tax payment account set up with SII. To register a new taxpayer account, you will follow the process called Inicio de Actividades.
Register with workplace safety boards, if necessary. Employers are required to present notice to employees regarding the risks of their employment. Additional safety registrations may be required for certain high-risk industries such as mining or construction.
Set up new employees. Employers are required by law to register new employees within 60 days of hiring with Dirección del Trabajo, and to notify within 60 days upon an employee’s separation from work. Any final payments must be paid to employees within 10 working days. Information you will need from employees includes their RUT or RUN number, home address and date of birth. To check whether a potential hire is authorized to work in Chile, you can use the government system to validate their taxpayer ID.
Calculate deductions and contributions. Once you have employees, you will need to calculate their monthly Chile payroll. Be sure to include all appropriate payroll deductions, including the mandatory Legal Gratification and Social Security deductions. You will want to decide whether your company will participate in the custom of Aguinaldos and plan your employee payments appropriately. If you desire to issue electronic payment receipts, this is permitted in Chile; however, it is good practice to have a signed copy on hand for each employee. By law, Chile payroll reports must be kept for five years.
New companies in Chile need to register their business with the Public Commerce Registry and follow the Inicio de Actividades process with Servicio de Impuestos Internos (SII).
To obtain an RUT number, which is the official tax ID for the business, you must first publish a notice in the Official Gazette of Chile. Once the publication has run, visit the SII website to register your taxpayer account.
Alternatively, there is an online service under the Chilean Government Ministry of Economy, Development and Tourism called Tu Empresa En Un Dia (which translates as “your company in one day”). This portal will assist you with all necessary filings to establish a business in Chile, including opening a company bank account, applying for a commercial patent, and registering to compete for public tenders.
The payroll cycle in Chile is monthly.
The tax year in Chile is from the 1st of January to the 31st of December.
0-40%: Income tax
10% Pension fund
7: Health insurance
0.60%: Unemployment insurance
Total contributions: 17.60%
2.40%: Unemployment insurance
1.85%: Life and disability insurance
0.93%: Accident insurance
Up to 3.4%: Illness insurance
Total contributions: 5.8%
Note that: 1 Monthly Tax Unit = approximately $51,500 CLP
0.00%: Up to 13.5 Monthly Tax Units
4.00%: 13.5 – 30 Monthly Tax Units
8.00%: 30 – 50 Monthly Tax Units
13.50%: 50 – 70 Monthly Tax Units
23.00%: 70 – 90 Monthly Tax Units
30.40%: 90 – 120 Monthly Tax Units
35.00%: 120 – 310 Monthly Tax Units
40.00%: 310 + Monthly Tax Units
Maintaining compliance with Chilean Labor and Employment Laws can be complex and costly. Operations which are planning to employ a small number of employees in Chile may benefit from using a third-party payroll processor and/or an employer of record (EOR) service. An Employer of Record serves as your Chilean business entity and handles all legal compliance and tax obligations for your operations in Chile, including payroll activities.
If you choose to perform payroll in Chile internally for your business, you must be sure to follow all applicable labor and tax laws.
Companies of all sizes want to hire employees in Chile, but don’t know how to navigate the international local labor laws. Via makes hiring Chilean talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity abroad, 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 across borders 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.
We’re here to help streamline your expansion and maintain compliance with a complex network of global regulations.
In Chile, it is required that employers pay employees from a bank in the country. Electronic pay receipts can be provided to employees, as long as the employer maintains a copy on file which is signed by each employee. Deductions must be made for social security and income taxes, and those withholdings must be paid to SII between the 10th and 12th of each month.
Employees in Chile are typically paid monthly. Additionally, it is common for an annual bonus to be paid at Christmas or divided between Christmas and the National Independence Day holiday on September 18th. This bonus is equivalent to a 13th month of pay.
Employers will typically pay between 5% and 8% of an employee’s salary for mandated employee benefits in Chile. Some employers may choose to offer additional benefits, which could range from an additional 2% to 5%.
If you are closing your business in Chile, you must file a notice with SII and pay all outstanding tax debts. A 35% end of business tax is assessed on all closing businesses.