Guide to employment, payroll and benefits in

Chile

Rivermate offers complete payroll, benefits and compliance services for

Chile

01. Overview

Last updated: 

August 19, 2021

Currency
Chilean Peso
Capital
Santiago
Ease of doing business
72.6
Language
Spanish
Population
19116201
GDP growth
1.49%

02. Grow your team in

Chile

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Chile

, particularly if you don't have established local relationships. You can hire employees in

Chile

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Chile is a nation in western South America, officially known as the Republic of Chile. It is located between the Andes to the east and the Pacific Ocean to the west on a long, narrow strip of land. Chile has a population of 17.5 million people and occupies 756,096 square kilometers. Chile is the world's southernmost nation, with boundaries to Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage to the far south. In Oceania, Chile also has possession of Juan Fernández, Isla Salas y Gómez, Desventuradas, and Easter Island. Under the Chilean Antarctic Territory, it also says around 1,250,000 square kilometers of Antarctica. Santiago is the country's capital and largest city, and Spanish is the official language. In the mid-16th century, Spain invaded and colonized the area, displacing Inca rule, but failing to conquer the independent Mapuche who lived in what is now south-central Chile. Chile became a relatively prosperous authoritarian republic in the 1830s after declaring independence from Spain in 1818. Chile experienced substantial economic and territorial development in the nineteenth century, putting an end to Mapuche opposition in the 1880s and winning its new northern territories in the Pacific War after crushing Peru and Bolivia. The nation endured extreme left-right political division and instability in the 1960s and 1970s. This resulted in the 1973 Chilean coup d'état, which deposed Salvador Allende's freely elected left-wing government and installed Augusto Pinochet's 16-year right-wing military dictatorship, which killed or disappeared over 3,000 people. After a referendum in 1988, the dictatorship came to an end in 1990, and was replaced by a center-left alliance that governed until 2010. Chile is a middle-income country with a high Human Development Index score. It is one of South America's most economically and socially prosperous countries, leading the region in competitiveness, per capita income, globalization, state of stability, economic freedom, and low perceptions of corruption. Chile is also a regional leader in terms of state sustainability, democratic growth, and homicide rates, second only to Canada in the Americas. It is a founding member of the UN, the Community of Latin American and Caribbean States, and the Pacific Alliance, as well as the OECD, which it joined in 2010.

04. Public holidays

05. Types of leave

Paid time off

Employees who have worked for at least a year are entitled to 15 days of paid vacation.

Public holidays

Chile recognizes 16 public holidays.

Sick days

Employees in Chile have the right to sick leave provided they can have a medical report within two days of the start of the leave. Within three days, the contractor must submit the certificate to the health care company.The person is not entitled to pay for the first three days of sick leave.Employees are entitled to sick leave until the fourth day, although there could be a limit.

Maternity leave

In Chile, a mother is entitled to 30 weeks of paid maternity leave, split into six weeks prior to the delivery and twenty-four weeks after the birth, and is covered by health insurance.The woman is not expected to engage in any actions that would jeopardize her health during her pregnancy (i.e. heavy lifting). If this is a work condition, the boss must reassign her to a new role without wage loss during her pregnancy.

Paternity leave

Paternity leave is compensated for five days for fathers.The mother may choose to pass any or all of her maternity leave to the father after the seventh week of childbirth.

Parental leave

For a child under the age of 18, female employers are entitled to ten days of maternity leave. Although the employee is entitled to compensation, the days off must be made up at a later date.

Other leave

Bereavement Leave: Employees are entitled to three days of paid leave if a member of their immediate family dies.

06. Employment termination

Termination process

To fire an employee, the reason for termination must first be determined. According to the legislation, the following reasons for termination are valid: mutual consent, resignation, or contract expiration, breach of contract (employer must be able to demonstrate), or the company's necessity for restructuring (the most common reason for the dismissal of an employee).


The employer must write a letter to the employee explaining the reason for termination and the effective date, which must be signed in person or delivered certified mail to the employee's home address. Additionally, the identical letter must be filed with Chile's Ministry of Labor. It is customary for employees to be told on their final day of employment.


Following the termination letter, the employer must draft a severance agreement that details the reason for the termination and the amount to be paid to the employee. Within ten days of termination, the severance agreement must be executed.


In the event of a mutual agreement, both parties must sign a document stating that they have decided to end the employment contract. Additionally, during the first 1-2 weeks following the termination date, a severance agreement must be signed.

Notice period

One month's notice is required by law. It is not unusual for employers to waive the notice period and make payment in lieu of notice.

Severance pay

If the employee has worked for the company for at least one year, they are eligible to severance pay. Each year of service up to 11 years entitles the employee to one month's compensation. Additionally, after one year of employment, the employee is entitled to an additional month of severance pay if they work for at least half of the subsequent year.

Probation period

The probation period is fixed at 12 months.

07. Working hours

General

The standard workweek is 45 hours, with a maximum of ten hours per day. The employer may extend the day by no more than two hours per day or the week by no more than ten hours per week. Employees aged 15 to 18 may work no more than eight hours per day.


Night work is compensated at 50% of the standard rate. Employees who are under the age of 18 or who are pregnant are not permitted to work at night.


Between workdays, employees are entitled to 11 hours of rest and are not permitted to work on Sundays (with certain exceptions depending on the sector, such as retail for example). Each employee is entitled to one rest day per week.

Overtime

Overtime is compensated at 150 percent of the regular rate of pay, unless the collective bargaining agreement or employment contract provides for a higher rate. On a typical workday, the rest period is at least 30 minutes. No more than ten hours of overtime per week, or two hours per day, should be worked.

08. Minimum wage

General

Chile's minimum monthly wage is 320,500 Chilean pesos (as of 2020). This equates to approximately $460 at the moment. Employers are encouraged to evaluate an employee's performance annually and to compensate them appropriately. While Chile does not require a 13th month bonus, any bonuses agreed upon must be paid in local currency.

09. Employee benefits

General

Employees must contribute to a private health insurance plan known as "Isapres," for which the employer is required to withhold up to a monthly cap of about USD 214 pre-tax. Any additional money supplied for health insurance is considered supplemental and is deducted from the employee's net pay after taxes. The employer might choose whether or not to reward the employee for the difference with a taxable bonus.

In some situations, employers may decide to provide a benefit equivalent to two years' pay in the form of life insurance. This may be the best option to provide this benefit if your organization has worldwide umbrella coverage that can be extended to international coworkers.

Car allowances are uncommon in Chile, except for executive positions and staff who are forced to utilize their personal vehicles for business purposes. Employees cannot be given with company cars without incurring a substantial tax penalty.

Another approach to provide tax-advantaged remuneration to employees who commute to work is to provide a monthly commuting allowance subject to specific limits based on gross wage.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Chile

to hire a team takes time, money, and effort. The labor law in

Chile

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Chile

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Chile

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Chile

via our Employer of Record / PEO solution.

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