Regarded as a strong trading partner and export market, Chile is recognised for its open market policies, zero tariffs, stable democratic government, solid business practices, and low corruption rates.

For any business looking to operate in Chile, having local knowledge about payroll policies can help understand the challenges and opportunities in the country.

Paying employees

Each company has its own benefits and payroll structures and cycles for employees. However, the unit of time for payment cannot exceed a month. The minimum wage valid as of January 2018 is 276.000.00 CLP for workers between the age of 18 and 65 years. Different rates apply for workers over the age of 65 and under 18 years. Employees with an employment contract  that specifies overtime must receive an additional payment depending on the time and day corresponding to the 50% of their hourly wage.

When a company hires an employee, the employment contract must state the salary, the type of payment and the day that the salary will be provided, this is detailed in Article 10 of the Labour code. The employment contract is a legal and mandatory document. The purpose is to formalize the relationship between the employer and employee with the rights and obligations outlined. The employer is required to pay the salary and benefits stated in the employment contract correctly and on time.

The Chilean Labor Code allows the employer to terminate an employee's contract, based on the organisation's needs. The termination notice must be delivered to the employee 30 days in advance and personally or by certified mail. A copy of such notice must be sent to the appropriate labour inspector. The employer may choose to pay the employee 30 days salary, in lieu of such prior notice. Severance payments in the event of layoffs are capped in both amount of 90 UF's (about 3,800 USD) as well as time (11 years) even if the person makes more money or has been an employee longer. 

Chile has five specific payroll laws that govern and regulate the payroll processes throughout the country.

  1. Labor Code
  2. Income Tax Law
  3. Law No. 16,744, related to accidents at the workplace or work-related ilnesses ("Las Mutualidades")
  4. Law No. 20,255, Social Security reform
  5. Bustos Law

The monthly tax taken out of all paychecks is called "Impuesto único de Segunda Categoría".The tax is determined by applying a progressive chart, with the percentages of effective tax dependant on the employee´s income.

Social Security

The Social Security system in Chile is made up of: 


    • contribution to Survival and Disability Insurance: 1.53%, covered by the employer;
    • contribution to Individual Saving Insurance: 10%, covered by the employee;
    • a commission of between 0.77 and 1.45% charged to each affiliate.
  • health Insurance: paid to either to the state National Health Fund (FONASA), or to a private Health Insurance Institution (ISAPRE), as per the employee's choice. The minimum legal contribution is 7%.
  • labor-related Accident Insurance: This is 0.93% (minimum) of employee's salary depending on the risk of the employment activity.
  • unemployment Insurance: 3% of the employee's salary paid to the Unemployment Fund Administrator (AFC).

The amount of Social Security paid by workers corresponds to the employee´s taxable income, with a maximum amount of 78.3 UF.

Bonuses and legal rewards 

In Chile, there is a benefit, which some global companies include in their employment contracts.  It is usually paid out to employees twice a year- once during Chile's Independence holidays and once at the end of the year around Christmas.

A legal reward is mandatory to give to employees and is related to the utilities obtained by the company. The regulation and calculation is stated in Articles 46,47,48,49 and 50 of the Labour Code.

Paid Leave

Vacation time is regulated in the Labor Code and allows for 15 businesses days per year for vacation. If an employee has worked for ten years and the length of work has been acknowledged by the AFP, the employee will have one additional day during the third year and so on every three years. Within their benefit policies, companies can provide employees additional vacation days besides what is legally stated.

Employees are entitled to sick leave if they get a document called a medical certificate and give it to their employer within two working days from the date of beginning of the sick leave. The employer then has three working days to send the medical leave certificate to the health insurance institution who pays for the sick leave. These are the rules surrounding the sick leave:

  1. 3 days or less of sick leave: employees are not entitled to sick pay;
  2. between 4 and 10 days of sick leave: employees are entitled to sick pay;
  3. greater than 10 days of sick leave: employees are entitled to sick pay for all working days during the sick leave period.
