If you are interested in entering the Chilean market or are already doing business there, you need to understand and comply with Chile’s labor laws.
Chile’s labor laws are supervised by the Ministry of Labor Ministry of Labor and Social Security, Has many similarities with other countries/regions in the region, but it also contains the peculiarities you need to know when doing business in the market.
If you plan to conduct short-term or limited-scale operations, please recruit employees through the following methods Employer with record in Chile May be your best choice-allowing you to hire employees without having to go through company formation, and get the additional benefits of ensuring compliance with local employment laws.
On the contrary, if you intend to make a deeper commitment to the Chilean market, you will need the following services: Reliable corporate lawyer in ChileTo ensure the correct implementation of all laws related to your business.
Below is a guide to some of the basic elements related to Chile’s employment law, including information on standard working hours, the most commonly used contract types, details related to holidays and other holidays, and information on tax contributions that employers must monitor.
Contact us today Learn more about how we can help you understand and implement Chile’s employment law and the many business support options we can provide.
Working hours stipulated by Chilean labor law
According to Chile’s Employment Law, a standard weekly working time of 45 hours is divided into no less than five days and no more than six days. The average time of a working day is nine hours.
Employees can be exempted from this requirement by being designed as “trusted” in the contract. The clause was originally intended to apply to managers and executives, but over time it has been applied to a wider range of employees.
Please note that in Chile, there are usually 9 to 12 national holidays on working days in each calendar year.
Chilean labor law: main contract types
According to Chile’s employment law, three types of contracts are most commonly used by foreign investors and companies.
- Indefinite employment contract It is the most common type of contract in Chile and can only be terminated by a mutual agreement between the employee and the employer, or when one of the parties can act unilaterally, such as in the case of the employee’s resignation.
- Fixed-term labor contract It can last for days, weeks, or months, but usually does not exceed a year. However, in some cases, they can last up to two years.
- Specific task or project contract — Treated as an “unfinished contract” — There is no specific date for the end of the contract, which means that a clear setter and threshold must be established to eliminate any ambiguity about the completion of the project.
Holidays, vacations and other absences
According to Chile’s Employment Law, employees are entitled to 15 days of paid vacation after serving the same employer for 12 months. The leave can accumulate for up to two years, which means that employees can accumulate PTO for 30 days.
According to Article 70 of the Chilean Labor Code, when an employee accumulates two PTO allowances, the employer is obliged to grant or instruct the employer to use at least one of the allowances (that is, 15 days leave). Complete the third phase and accumulate more holidays.
Employees are entitled to be paid for sick leave, but if the sick leave lasts for less than 11 days, they will not be paid for the first three days. For example, if an employee takes sick leave for five days, they will be entitled to two days’ wages.
If sick leave lasts for 11 consecutive working days or more, the employee is entitled to receive full salary. In all cases, sick leave is paid by the employer’s health insurance provider.
Please note that within two working days after returning to work, employees must present a document certifying their illness signed by a registered doctor.
Maternity leave and paternity leave
According to Chile’s employment law, maternity leave allowances total 12 weeks, starting six weeks before the expected date of delivery. The father is entitled to five days of paid paternity leave. However, if the mother has not used up all her maternity leave allowance, she can transfer it to the father in the seventh week after the birth of the child.
Maternity leave and paternity leave are paid by the government or company health insurance provider.
If the spouse, civil partner or Chile dies, the employee is entitled to a total of 7 days of bereavement leave. If their parents die, they are entitled to a total of three days of paid funeral leave.
Statutory contributions under the Chilean Employment Law
According to Chile’s Employment Law, employers must supervise the deduction of the following expenses from employees’ wages, and employers must make the following contributions:
Employee deduction Usually the total is about 18.6% of the employee’s salary, including a deduction of 11%, which is used for the employee’s chosen pension fund.
In addition, the national public health agency FONASA deducts 7%, and the total unemployment insurance deduction is approximately 0.6%.
Please note that according to the Chilean Employment Law, the minimum wage in 2021 is set at 337,000 Chilean Pesos (approximately US$408).
Employer contributions The total is approximately 5.7% of the employee’s salary, of which contributions equivalent to 2.3% of the salary are used to pay for disability insurance and paid through the employee’s pension fund.
An additional 2.4% must be paid for unemployment insurance and paid through the same pension fund.
Accident insurance is based on the level of occupational risk associated with the role assumed, but usually totals about 0.93%.
Profit sharing It is mandatory under Chilean labor law, which means that any company must share 30% of its net profit with its employees.
Everyone’s share is calculated based on their salary level, and the profit share can be distributed monthly or yearly according to the employer’s preferences.
Biz Latin Hub can help you start your business in Chile
At Biz Latin Hub, our team of multilingual business support experts can help you master and correctly implement Chilean employment laws.
We have a comprehensive back-end service portfolio, including Founded, Visa processing, Accounting and Taxation, Legal services, and Recruitment and PEO, Enabling us to provide tailor-made comprehensive service packages to meet various needs.
In addition to Chile, we also have teams in 15 other markets in Latin America and the Caribbean, and we focus on market access across jurisdictions.
Contact us today Get more information on how we can support your business in Chile.
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Download a snapshot of Chile’s employment law below: