If you are interested to enter Chilean markets or are already doing business in Chile, you will need to be familiar with and adhere to Chilean employment law.
Chile’s employment law is overseen and supervised by the Ministry of Labor and Social SecurityAlthough it shares many similarities to other countries in the region and has particularities that you will need when doing business in this market,
You can hire staff through an employment agency if your operation is short-term or limited in scope. employer of record in Chile could be your best choice — allowing you to hire staff without going through company formation, and coming with the additional benefit of guaranteed compliance with local employment law.
If you prefer to make a deeper commitment to Chilean market, then you will need to purchase the services a reliable corporate lawyer in ChileTo ensure that all laws applicable to your business are properly implemented.
Below is a guide to the basics of Chilean employment law. It includes information about standard working hours, most commonly used contracts, details regarding vacations, and tax contributions that employers must monitor.
Contact us todayTo learn more about how we can help you understand and implement Chile’s employment law, we offer a variety of corporate support options.
Chilean employment law defines working hours
Chile’s employment law states that a standard work week is 45 hours long. It can be divided into five or six days. The average working day lasts nine hours.
An employee can be exempted from this provision by being designed as “trusted” in their contract. This provision was originally intended for executives and managers, but has been extended to include employees of all ages.
It is important to note that Chile has between nine and twelve national holidays that fall on weekdays each year.
Chilean employment law: the main contract types
Three contract types are covered by Chilean employment law that are most commonly used in Chile by corporations and foreign investors.
- Indefinite-term employment contractsThese are the most popular type of Chilean contract. They can only be ended by mutual agreement between the employer and employee, or when one party can unilaterally act, such as in the instance of the employee quitting.
- Fixed-term employment contractsThey can last for weeks, months, or days. However, they rarely last longer than one year. They can, however, last up to two years in some cases.
- Contracts for specific tasks and projects — regarded as an “undetermined contract” — have no specific date for when the contract ends, meaning that clear makers and thresholds must be established in order to eliminate any ambiguities regarding the completion of the project.
Vacations, leave, or other absences
Chilean employment law provides that an employee can get 15 days of vacation leave after 12 months of service to the same employer. The employee can accumulate up to 30 days of vacation leave over a two-year period.
According to Article 70 of Chile’s labor code, if an employee accumulates two periods PTO allowances, the employer is required to grant or direct the employer to use at least one of those allowances (i.e. 15 days leave prior to the expiration of a third period or accrual of more.
Leave for sick
Employees are entitled for payment for sick leave. However, if the sick leave is less than 11 days, employees do not get paid for the first 3 days. An employee who is sick for five days will be paid for two days.
Employees who take sick leave for more than 11 consecutive days are entitled to reimbursement for all of them. In all cases, sick leave is paid for by the employer’s health insurance provider.
Notify your employer that you must present documentation that proves your illness signed by a registered medical professional within two days of returning to work.
Paternity and maternity leave
Chilean employment law provides that the maternity leave allowance covers 12 weeks and begins six weeks prior to the expected due date. Fathers have five days of paid paternity leaves. In the event that the mother has not used all of her maternity allowance, she may transfer it to him starting in the seventh week after the child’s birth.
The government or company’s health insurance provider pays for paternity and maternity leave.
Employees are entitled to seven days of bereavement leave in the event of the death or civil partner of a spouse or chile. Employees are entitled to three days paid bereavement leave if a parent dies.
Chilean employment law: Statutory contributions
Employment law in Chile requires that employers supervise the following deductions from salaries and contributions from employees:
Deductions for employees generally total around 18.6% of the employee’s salary, including an 11% deduction that goes towards the pension fund chosen by the employee.
Additional 7% of the deduction goes to FONASA (the national public health agency) and 0.6% goes towards unemployment insurance.
Notice that the minimum wage in Chile, according to employment law, was set at 337 000 Chilean pesos (approximately US $48) in 2021.
Contributions by employers total around 5.7% of an employee’s salary, with a contribution equal to 2.3% of the salary going towards disability insurance and paid through the employee’s pension fund.
A further contribution of 2.4% must also be made for unemployment insurance, and is also paid through the same pension fund.
Accident insurance is determined by the occupational risk associated with the job, but it typically totals around 0.93%.
Profit sharing Chilean employment law makes it mandatory that companies share 30% of net profits with their employees.
The amount of each person’s share is determined by their salary level. Profit shares may be distributed monthly or annually, depending on the preference of the employer.
Biz Latin Hub can help you do business in Chile
Biz Latin Hub’s multilingual team of corporate support experts is available to assist you in understanding and properly implementing Chilean employment law.
We offer a complete range of back-office service options, including company formation, visa processing, accounting & taxationLegal services, and hiring & PEO, allowing us to offer tailored packages of integrated services to suit every need.
We have teams that operate in Chile as well as in 15 other Latin American and Caribbean countries. Our specialization is in multi-jurisdictional market entry.
Contact us today to receive more information about how we can support you doing business in Chile.
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This is a snapshot from Chile’s employment law.