If you are interested in entering the Chilean market, or are already doing business there, you need to understand and comply with employment law in Chile.
Employment Law in Chile: A map of Chile and some of its major cities
Employment law in Chile, which is overseen by the Ministry of Labor and Social Security, shares many similarities with other countries in the region, but also contains particularities that you will need to navigate when doing business in the market.
If you are planning a short-term or limited-scale operation, hiring staff through an 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, instead, you are set on making a deeper commitment to the Chilean market, you will need to acquire the services of a reliable corporate lawyer in Chile, in order to guarantee the proper implementation of all laws related to your business.
Below, a guide to some of the essentials related to employment law in Chile is offered, including information on standard working hours, the most frequently used types of contracts, details related to vacations and other leave, and information on tax contributions that employers must oversee.
Contact us today to find out more about how we can assist you in understanding and implementing employment law in Chile, among a host of corporate support options that we can offer.
Working hours according to Chilean employment law
Under employment law in Chile, a standard working week is 45 hours long and divided into no less than five and no more than six days. An average working day is nine hours long. An employee can be exempted from this provision by being designated as “trusted” in their contract. This provision was originally intended to be applied to managers and executives, but over time has been used for a broader range of employees. Note that in Chile there are generally between nine and 12 national holidays that fall on weekdays per calendar year.
Employment law in Chile: main contract types
Chilean Employment Law – There are three main types of employment contract
There are three contract types under employment law in Chile that are most commonly used by foreign investors and corporations.
- Indefinite-term employment contracts are the most common type of contract used in Chile, and can only be terminated by mutual agreement between the employee and employer, or when one of the parties can act unilaterally, such as in the case of the employee resigning.
- Fixed-term employment contracts can last for days, weeks, or months, but they generally do not exceed more than one year. However, in certain cases they can last for up to two years.
- Specific task or project contracts — regarded as an “undetermined contract” — have no specific date for when the contract ends, meaning that clear markers and thresholds must be established in order to eliminate any ambiguities regarding the completion of the project.
Vacations, leave, and other absences
According to employment law in Chile, after 12 months of service with the same employer, an employee is entitled to 15 days of paid vacation leave. That leave can be accrued for a period of up to two years, meaning an employee can build up 30 days of PTO. Under Article 70 of the Chilean labor code, when an employee accrues two periods of PTO allowance, the employer is obliged to grant or instruct the employee to use the allowance from at least one of those allowances (i.e. 15 days of leave) prior to the completion of a third period and accrual of more leave.
Sick leave
Employees are entitled to payment for leave due to illness, however when that sick leave lasts for less than 11 days, they do not get paid for the first three days. For example, if an employee is off work sick for five days, they will be entitled to payment for two of those days. If sick leave lasts for 11 consecutive work days or more, the employee is entitled to payment for all of them. In all cases, sick leave is paid for by the employer’s health insurance provider.
Maternity and paternity leave
According to employment law in Chile, maternity leave allowance totals 12 weeks, and begins six weeks before the expected date of birth. Fathers are entitled to five days of paid paternity leave. However, in the event that the mother did not use all of her maternity leave allowance, she is able to transfer it to the father from the seventh week after the birth of the child. Maternity and paternity leave are paid for by the government or the company health insurance provider.
Bereavement leave
In the event of the death of a spouse, civil partner, or child, employees are entitled to bereavement leave totalling seven days. In the event of the death of a parent, they are entitled to paid bereavement leave totalling three days.
Statutory contributions under Chilean employment law
According to employment law in Chile, employers must oversee making the following deductions from employee salaries and contributions from employers must be made:
- Employee deductions generally total around 18.6% of the employee’s salary, including an 11% deduction that goes towards the pension fund chosen by the employee.
- Additionally, a 7% deduction goes to the national public health agency FONASA, and a deduction that goes towards unemployment insurance and totals approximately 0.6%.
Note that the minimum wage according to employment law in Chile was set at 337,000 Chilean pesos (approximately US $408) in 2021.
Employer contributions 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 based on the level of occupational risk associated with the role being undertaken, however it generally totals around 0.93%. Profit sharing is obligatory under Chilean employment law and means that any company must share 30% of net profits with its employees. The share received by each individual is calculated based on their salary level, and profit shares can be distributed on a monthly or annual basis, based on the preference of the employer.
Frequently Asked Questions about Labor Laws in Chile
In our experience, these are the common questions and doubtful points of our Clients.
1. What are the labor laws in Chile?
The labor laws in Chile stipulate that the working time should be 10 hours a day for no more than six days a week or no fewer than five days a week. According to Chilean labor law, the total working hours per week should not exceed 45 hours. It is also specified that the standard working time should be no more than six days and no fewer than five days a week.
2. What are the working conditions in Chile?
The working conditions in Chile are regulated by labor laws. According to these laws, employees are allowed to work for a maximum of 10 hours a day, for no more than six days a week or no fewer than five days a week. This means that the total working hours in Chile are limited to 45 hours per week. It is important to note that the standard working time is typically divided into no less than five and no more than six days a week. Additionally, employees are entitled to a one-hour lunch break and can only work a maximum of two hours of overtime per day. Furthermore, all workers are guaranteed at least one 24-hour rest period during the workweek. While employers have the option to schedule employees to work six days a week, including Saturdays, they are not allowed to require work on Sundays. It is also worth mentioning that the minimum age requirement for employment in Chile is 18 years old, except for those who are at least 15 years old and have written permission from their parents. Lastly, probationary periods…
