Hire employees in Chile

Stretching along South America’s Pacific coast, Chile is known for its 4,300 kilometers of coastline. The long, narrow country is edged between the Andes mountains and the sea, and has an average width of only 177 kilometers. Despite its relatively small size, the country has the fourth largest GDP in South America.

With a workforce of around 8.8 million people, Chile offers international employers a considerable talent pool. Corruption levels are low compared to other countries in the region and with Spanish being the local language, hiring an employee in Chile means adding another language to the linguistic skills of your global team.

Chilean law distinguishes between 3 categories of labor agreements, i.e. individual employment contracts, collective contracts and special contracts (i.e. apprenticeship contracts, contracts for domestic help etc.). While collective contracts establish the general conditions of employment between employers and employees, it is the conclusion of an individual contract that marks the beginning of the employment relationship. Individual employment contracts can either be open-ended or temporary.

When hiring employees in Chile, it is mandatory to put a written employment agreement into place, which must be signed by both parties. The employee must receive a copy of the contract in the local language, i.e. Spanish. According to Article 10 of the Chilean Labor Code, employment agreements must include at least the following information:

• Identification of both parties

• Date and place of contract conclusion

• Job description, duties and responsibilities

• Workplace

• Remuneration and terms of payment

• Working hours

• Duration of employment

• Benefits in kind or cash

Probation Period

Employers are not allowed to determine a probationary period – except for some specific cases like for domestic employees.

Working Hours and Breaks

A standard workweek in Chile comprises 45 hours, divided into 5 workdays with 9 hours of each. It is possible to spread an employee’s 45 weekly hours over 6 workdays instead of 5. A normal workday should not be more than 10 hours. Employees must have at least a 30-minute break for lunch – might be longer in certain industries. Sundays are usually days off.

The Congress is currently discussing a reduction of the standard working time from 45 hours to 40 hours. If the changes go through, employers will have to reduce their employees' weekly working hours without reducing their pay rates.

Overtime

Any hour exceeding the employee’s normal 45-hour workweek (or any other workweek that has been agreed upon in the individual employment agreement) is considered overtime and must be paid with a 50% surcharge. Overtime must not exceed 2 hours in one day.

Wages and salaries must be paid at least once a month. Payments must be made in the month in which the employee has rendered his or her services.

Minimum Wage

Employees in Chile must be paid at least the national minimum wage. For 2023, the minimum wage in Chile is set at CLP 410,000 per month.

Sick Pay

Employees suffering from illness are entitled to sick leave, which is paid by Social Security starting from the 4th day of absence. If the employee’s sick leave lasts for longer than 10 days, sickness benefits are paid from the first day of absence. A medical certificate must be provided within 2 days after the beginning of the sick-related absence from work.

Bonuses

There are no legal provisions regarding the payment of a 13th month salary. However, there are rules under which companies may be required to share profits with their employees.

Employees and employers in Chile are subject to the following tax and social security contribution rates (rates valid for 2023):

Taxes

Employers

27%

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• 27% corporate tax rate (lower rates for small and medium-sized companies)

• 19% VAT (standard rate)

Employees

up to 40%

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Individual income tax rates range from 0% to 40%

Social security

Employers

around 5%

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Around 5% of employee salary:

• 2.4% unemployment insurance (3% or fixed-term contracts)

• 1.54% life and disability insurance (SIS)

• 0.93% occupational accident insurance (plus risk-related premium of up to 3.4%)

Employees

17.6%

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17.6% of employee salary: 

• 7% health insurance

• 10% pension fund contribution (AFP)

• 0.6% unemployment insurance (not applicable to fixed-term contracts)

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

After one year of employment, employees earn the right to 15 paid days off per year. At least 10 days of annual leave must be taken in one block. After 10 years of service (regardless of whether the employee has changed employers in the meantime), the employee’s annual leave entitlement increases by 1 day for every 3 years worked for the current employer.

In certain regions, employees are entitled to at least 20 paid vacation days per year. The country observes 16 public holidays on which employees usually don’t have to work.

Maternity Leave and Paternity Leave

Maternity leave in Chile lasts for 18 weeks and is divided into 6 weeks of prenatal leave and 12 weeks of postnatal leave. During maternity leave, the employee receives her full pay from Social Security.

Fathers are entitled to 5 days of paid paternity leave.

Parental Leave

After the end of maternity leave, the mother is allowed to take another 12 weeks of leave on full pay to look after her newborn child. Alternatively, she can request part-time work during this time, which takes the duration of the leave to 18 weeks. In this case, her salary is paid in equal shares by the employer and Social Security.

If both parents agree, the mother may transfer a part of the parental leave to the child’s father. Mothers of children under 18 are further entitled to an additional 10 days of parental leave per year.

Additional Leaves and Benefits

In addition to the above-mentioned leave entitlements, employees can request special leave under the following circumstances:

• Death of a child, spouse or civil partner: 7 days of paid leave

• Marriage: 5 days of paid leave

Fixed-term contracts end automatically upon their expiration, but must be followed with a termination notice no later than 3 days after the employment relationship has ended. Open-ended employment contracts can be terminated by either employee or employer or through mutual agreement.

Employers who wish to terminate the employment relationship need to present a valid reason such as force majeure or economic situation of the business. Other grounds for employment termination include gross misconduct, serious breach of contract, unexcused absence or departure from work, or material damage caused by the employee.

Both employee and employer must respect the statutory notice period, which is 30 days. If the employer fails to give the employee the appropriate notice, the employee is entitled to the equivalent of 1 month’s salary in recompense.

Employees who are terminated for business-related reasons such as downsizing are entitled to severance pay equal to 1 month’s pay for each year of service (capped at 11 months of pay). No severance pay must be paid if the reason for the dismissal is based on the employee’s behavior.