Hire and manage employees in Chile 

Complying with labor and employment laws in Chile

Chile's labor laws are primarily governed by the Labor Code (Código del Trabajo), which outlines the rights and obligations of employers and employees. Understanding and adhering to these laws is essential for maintaining compliance and fostering a positive work environment.

No matter where in the world you hire, learning the ins and outs of labor and employment laws in new jurisdictions can be a complex compliance maze, and Chile is no exception. If you’re looking to hire in Chile, simplify your compliance work by partnering with Rippling EOR, which can offer expert HR support on local employment regulations so your business is always up to date on the latest laws in Chile and beyond.

Employment contracts in Chile

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of the employment relationship. In Chile, employment contracts must be in writing and executed within 15 days of the employee’s start date. The Labor Code requires individual labor contracts to include certain provisions, including:

• The employee’s position

• A job description

• The place of work

• Salary or wage information, including payment frequency

If the employer fails to provide a written employment contract within 15 days, the law presumes that any work conditions alleged by the employee are valid. While employers can extend offer letters to new hires, this doesn’t exempt them from employment contract requirements.

Labor unions in Chile

The Chilean Constitution guarantees the right to unionize, and labor unions play a significant role in workers’ rights in the country. Collective bargaining is common, and many workers across industries, especially blue-collar trades and public service, belong to trade unions.

Further statutes regulate the processes and procedures around the formulation and management of unions, as well as union activities, such as:

• Freedom of association: Employees can freely join or form unions without prior authorization from their employer.

• Collective bargaining: Unions negotiate with employers on wages, working conditions, and other employment terms. Employers must engage in good faith during negotiations and respect the rights of unionized employees.

• Strike rights: While strikes are permitted, they are subject to regulations, especially in essential services.

During collective bargaining, claims, and other union actions, unions only represent their members; they cannot act on behalf of any non-unionized employees.

Mitigating permanent establishment risk in Chile

In international tax law, a permanent establishment (PE) refers to a stable, physical location in a foreign country where a business carries out its operations. Whether or not a company has a PE is a crucial factor in determining its corporate tax obligations abroad. If a company establishes PE, it may be required to pay tax on the income earned through its activities in that jurisdiction.

The definition of permanent establishment can vary depending on tax treaties and local laws. Under Chile’s tax laws, the definition of a PE includes:

• Fixed place of business PE

• Agency or dependent agent PE

Unlike many jurisdictions, Chilean law doesn’t cover construction or project PE. Similarly, PE is not triggered in Chile if a business only engages in auxiliary or preparatory activities.

Businesses expanding to, doing business in, or hiring in Chile can mitigate their PE risk by:

• Keeping employees in supportive roles only and avoiding direct contract signings in Chile

• Concluding major sales or signings outside Chile

• Documenting staff tasks carefully to show no final authority for contract closures

• Consulting a local tax advisor for clarity about the risk of inadvertently forming a PE in Chile

Probationary period in Chile

Employers typically use probationary periods to assess and monitor the performance of new employees. However, Chilean labor law does not recognize probationary periods in employment contracts. Instead, employers may use fixed-term contracts as de facto probationary periods, typically up to 12 months, to assess an employee's suitability. In rare cases, a 24-month term is allowed for managers or employees with professional or technical qualifications from a higher education institution.

After the fixed term, the contract is converted into an indefinite-term contract, and the original start date is honored for all purposes. Contracts can also be converted before the fixed term is over, if the employee’s performance is satisfactory. If the employer ends the contract before the date set in the contract, they must pay the employee the full amount due under the contract.

Local laws in Chile

Beyond the Labor Code, employers in Chile must understand and follow other rules and regulations. Observing the entire landscape of Chile's employment laws fosters trust among employees and ensures your business doesn’t hit compliance snags during its expansion into the country.

Here are some key areas of Chilean law relevant to foreign employers:

• Anti-discrimination: Chilean law expressly forbids conditionally hiring an employee based on the absence of pregnancy, HIV, cancer, genetic mutations or alterations, and/or financial debts. The law also prevents discrimination based on protected characteristics, including race, color, sex, maternity, breastfeeding, age, marital status, union membership, religion, political opinion, citizenship, ethnicity, socioeconomic status, language, beliefs, participation in professional trade associations, sexual orientation, gender identity, family situation, personal appearance, illness, disability, and social origin.

• Data protection: Chile has enacted laws to protect personal data, requiring employers to handle employee information safely and responsibly.

• Work policies: Companies with 10 or more employees are required to implement internal rules (Reglamento Interno de la Empresa) covering a number of mandatory issues:

  • Termination procedures

  • Rest periods and leave

  • Rules regarding remuneration

  • Employees’ duties and prohibitions

  • How executive staff handles employee questions and complaints

  • Rules regarding issues related to employees’ age, sex, disability status, sexual harassment, and equal pay for men and women

  • Rules regarding social security obligations, military service, and hygiene and safety in the workplace

  • Penalties if any of these internal rules are violated

• Termination procedures

• Rest periods and leave

• Rules regarding remuneration

• Employees’ duties and prohibitions

• How executive staff handles employee questions and complaints

• Rules regarding issues related to employees’ age, sex, disability status, sexual harassment, and equal pay for men and women

• Rules regarding social security obligations, military service, and hygiene and safety in the workplace

• Penalties if any of these internal rules are violated

Worker classification and misclassification in Chile: Contractors vs. employees

When hiring new talent in Chile, you need to decide which type of working arrangement—independent contractor or full-time employee—is better suited for your business needs. 

In Chile, distinguishing between employees and independent contractors is vital, as misclassification can lead to significant legal and financial repercussions. Employees are governed by the Chilean Labor Code, which mandates benefits such as paid leave, social security contributions, and protections against unjust dismissals. In contrast, independent contractors operate under civil or commercial contracts and are responsible for paying their tax and social security obligations.

Learn more about the key differences between the two worker classifications in the chart below.

Worker classification in Chile: Key differences between contractors and employees

Chilean law does not provide a precise definition of an independent contractor, but the courts have established a number of key characteristics to distinguish between contractors and employees.

It’s important to note that, in Chile, a company is ultimately responsible for making sure its independent contractors comply with legal and tax responsibilities. This is different from many jurisdictions, where this responsibility ultimately falls on the contractor.

Companies are also required to maintain an up-to-date list of all contractors and subcontractors they engage with. Any independent contractors or subcontractors who work on their premises count toward thresholds for workplace safety compliance—for example, 25 workers to institute a committee on health and safety, and 100 workers to institute a workplace risk department.

Consequences of misclassification in Chile

Misclassifying employees as independent contractors can result in severe penalties. Some of the potential risks include: 

• Labor court fines for “simulation”

• Labor court penalties for fraud in hiring

• Back payments, including retroactive social security contributions, benefits, and taxes

• Legal action—misclassified workers can file claims for labor rights violations, leading to potential lawsuits and additional compensation

• Reputational damage—legal disputes can harm the company's reputation, affecting future hiring and business opportunities

Take our FREE misclassification analyzer quiz

Misclassification risk can come out of the blue. Ensure you’re classifying workers correctly through a series of questions.

Learn more

Wages and payroll in Chile

When expanding into (or hiring in) a new, foreign jurisdiction, managing wages and payroll is one of the most complex parts of the process. Understanding Chile's wage and payroll regulations is crucial for compliance and fostering positive employer-employee relationships. By adhering to payroll regulations, businesses can establish a strong foundation for successful operations in Chile.

Just know that calculating your new employee’s salary is only the first step—you still need to comply with labor and tax laws and make proper withholdings for each employee you hire in the country. Here’s what employers need to know about wages and payroll in Chile.

Minimum wage in Chile

Chile’s minimum wage depends on the employee’s age:

• Workers between ages 18 and 65: CLP 510,500

• Workers under 18 or over 65: CLP 382,875

These minimum wages have been in effect since Jan. 1, 2025. Like in many jurisdictions, the minimum wage in Chile is subject to periodic adjustments based on inflation and economic conditions. Employers are responsible for making sure that salaries meet or exceed these thresholds to remain compliant.

Payroll frequency in Chile

Chilean labor law mandates that employees be paid at least once a month. While monthly payments are standard, employers may opt for more frequent pay cycles, such as biweekly, provided they pay their employees at least once a month to stay in compliance with the law.

13th month pay in Chile

13th month pay is an additional payment given to employees, usually equivalent to one month’s salary. Employers commonly give this payment as a holiday or year-end bonus. In Chile, 13th month pay is not required by law. However, many employers offer "aguinaldos," which are bonuses employees receive in September (around Independence Day) and December (as a Christmas or end-of-year bonus).

While not obligatory, if any bonus payments are stipulated in employment agreements or collective bargaining agreements, they become enforceable, and employers are then obligated to pay them. To avoid disputes and maintain trust and transparency with their employees, employers in Chile should:

• Clearly define bonus terms in employment contracts. Specify the conditions and amounts of any bonuses you plan to pay.

• Be consistent. Apply bonus policies uniformly across your workforce in Chile. This will help you avoid potential discrimination claims.

Run payroll compliantly in Chile

Complying with payroll and wage laws in Chile means paying at least the minimum wage to all full-time employees, withholding the correct personal income tax, paying employees at least monthly, and remitting social contributions (which we’ll cover in the next section). Employers should also stay informed about legislative changes affecting payroll and labor laws.Hiring and paying employees abroad can be tricky, especially when it comes to running payroll. But partnering with an EOR allows you to offload critical compliance work, like figuring out deductions, following wage laws, and accurately paying employees. Rippling EOR helps you hire and pay global employees faster than ever before.

Employer and employee taxes in Chile

For any organization with a global team, navigating payroll tax regulations across international borders is a crucial part of expanding your business. Chile’s tax framework blends progressive income taxation with mandatory social security contributions, overseen by the Servicio de Impuestos Internos (SII) and various social security institutions. Employers are responsible for withholding and remitting certain taxes and contributions to stay compliant, and penalties for noncompliance (even unintentional) can be steep.

Unlike other countries in South America (and around the world), Chile calculates payroll contribution rates using Unidad de Fomento (UF). UF is an inflation-indexed unit of account set and published by the Central Bank of Chile (BCCh) each month. The UF rate determines each payroll tax, so employers will need to know every month’s rate to ensure they accurately calculate withholdings and stay compliant.

Employer taxes in Chile

Here are the mandatory employer payroll taxes in Chile:

Employee taxes in Chile

The following contributions must be deducted from employees’ paychecks as a percentage of their income:

Chilean employees also pay progressive income tax, meaning they pay higher tax rates the more they earn. Tax brackets are calculated as multiples of the UF:

Penalties for not paying taxes in Chile

Failure to comply with tax and social security obligations can result in significant penalties:

• Late payments: Interest is calculated daily based on the current interest rate for long-term operations, plus an additional 3.5%, divided by 360. The SII updates this rate semi-annually.

• Fines: Late payment of social security contributions can incur fines of up to 50% of the unpaid amount.

• Reputational damage: Noncompliance can harm a company's reputation, affecting employee trust and business operations in Chile.

A robust global payroll system or local accounting support can help you navigate taxes in Chile, or you can mitigate international tax compliance problems by letting an EOR handle payroll taxes on your behalf. The EOR ensures all your local taxes are paid correctly and on time, allowing you to focus on growing your business in Chile and beyond.

Employee benefits in Chile

Chile's labor laws require companies to provide certain employee benefits. But combining mandatory entitlements with optional perks can help attract and retain talent.

Here’s an overview of the mandatory and optional benefits in Chile.

Mandatory benefits in Chile

Mandatory benefits (also called statutory benefits) are legally required. Under the Chilean Labor Code, employers must provide the following benefits:

• Unemployment Insurance: Employers are required to provide Unemployment Insurance for their employees, which helps them cover their living expenses if they lose their jobs.

• Disability and Survival Insurance: Employers are also required to contribute to Disability and Survival Insurance, which provides their employees and their dependents with payments in cases of disability or death. This insurance comes out of the social security pension fund.

• Workers’ Compensation: Workers’ Compensation Insurance is mandatory in Chile, meaning employers are required by law to insure their employees in case they are injured, become ill, or are killed while performing their job duties.

• Profit sharing: Profitable companies must share 30% of net profits with their employees as a statutory bonus, also known as legal gratification.

Optional benefits in Chile

Investing in optional and fringe benefits improves your chances of attracting top talent, but choosing which ones to offer can feel overwhelming. While not legally required, many employers in Chile offer additional benefits. Here are some of the most common ones:

• Private health insurance: Supplemental to the mandatory health insurance, employers may offer private health plans for broader coverage.

• Private pension plans: Private pensions are common for employees seeking more robust retirement options than the public pension fund.

• Meal vouchers: Providing meal vouchers or subsidies is a common practice to support employees' daily expenses.

• Flexible work arrangements: Offering flexible schedules or remote work options can improve work-life balance.

• Professional development: Investing in employees' education and training can lead to higher retention rates and skill development.

While not mandated by law, these types of perks can set your employer brand apart in tough hiring landscapes, particularly if your business’s industry has fierce competition for top talent.

Working hours, overtime, and leave in Chile

Understanding standard working hours, overtime regulations, and Chilean leave laws is crucial, as these requirements vary significantly from country to country. Chilean employment law—primarily the Labor Code—outlines the standards for working hours, overtime, rest periods, and various types of leave. Recent legislative changes have introduced gradual reductions in the standard workweek, aiming to improve work-life balance for employees over time.

Below, learn what employers need to know about Chile’s laws so you can follow them to protect employees from overwork and ensure restful breaks.

Standard working hours in Chile

The standard workweek in Chile is in flux. As of April 26, 2024, a working week cannot exceed a maximum of 44 hours per week, distributed over no more than six days and no fewer than five. An ordinary workday cannot exceed 10 hours.

In 2026, the maximum number of hours in a workweek will go down to 42. In 2028, it will be reduced again to 40. With these changes ahead, many employers have already adopted 40-hour workweeks, both to get ahead of the new maximum and to more closely adhere to global standards.

Overtime laws in Chile

If an employee works more than 45 hours in a workweek or 10 hours per day, they’re entitled to overtime pay in Chile. The overtime rate is 50% more than the employee’s normal rate for each additional hour of work. A maximum of two hours of overtime is allowed per day. Both the employer and employee must agree to overtime in writing, and the agreement is only valid for up to three months at a time, at which point a new agreement must be reached and signed.

Certain types of workers are exempt—employees who are excluded from the work hour limitations are not entitled to overtime pay. To determine if a worker is eligible for overtime, each role must be reviewed individually. Managers who supervise teams are generally exempt from overtime.

Rest period and break laws in Chile

Under the Labor Code, Chilean employees are entitled to certain rest and break periods to help prevent overwork and burnout:

• Daily breaks: Employees working more than six hours daily are entitled to a minimum 30-minute unpaid meal break.

• Weekly rest: Employees are entitled to at least one continuous 24-hour rest period per week, typically on Sundays. If employees are asked to work on their rest day without taking a substitute day off, they’re entitled to a 50% higher pay rate.

• Daily rest between shifts: A minimum of eight consecutive hours of rest between workdays is required.

Leave laws in Chile

In addition to daily and weekly rest, the Labor Code in Chile entitles employees to various types of leave. These leave entitlements include:

• Annual leave: Employees who have at least one year of service are entitled to a minimum of 15 working days of paid vacation per year. After 10 years of service, they earn an additional day off for every three years of service.

• Sick leave: The first three days of sick leave are unpaid. From the fourth day, the social healthcare system pays for sick leave, subject to caps.

• Maternity leave: Employees are entitled to 18 weeks of paid maternity leave—six weeks before the birth and 12 weeks after. After taking this leave, the employee can request an additional 12 weeks of full-time leave, followed by six weeks of part-time leave. The social healthcare system pays for maternity leave. If the employee decides to extend their leave the full amount, the employer is responsible for paying half their salary during the part-time leave.

• Paternity leave: Fathers are entitled to five days of paternity leave, paid for by the social healthcare system. Mothers can transfer some or all of their maternity leave to the father following the seventh week after birth.

• Parental leave: Female employees are entitled to 10 days of parental leave for each child under 18 years of age. While these days must be paid, the employee is also required to make up the time taken off on a different date. Mothers with children under the age of two are entitled to breastfeeding breaks, and mothers with children under the age of one are entitled to childcare leave if their child becomes ill and has a medical certificate.

• Marriage leave: Employees who get married are entitled to five days of paid leave, which they may take before or after the wedding, as long as all leave days are within three days of the wedding date.

• Bereavement leave: Employees are entitled to:

  • Four working days of paid leave for the death of an immediate family member (father, mother, or sibling)

  • Seven working days of paid leave for the death of a spouse or an unborn child

  • 10 calendar days of paid leave for the death of a child

• Public holidays: Chile observes 16 public holidays. These include:

  • New Year’s Day

  • Holy Friday

  • Holy Saturday

  • Labor Day

  • Glorias Navales Day

  • Indigenous Peoples’ Day

  • Saint Peter & Pablo

  • Carmen Virgin’s Day

  • Mary’s Assumption

  • Independence Day

  • Army Day

  • Race’s Day

  • Church’s Day

  • All Saints Day

  • Immaculate Conception

  • Christmas Day

• Four working days of paid leave for the death of an immediate family member (father, mother, or sibling)

• Seven working days of paid leave for the death of a spouse or an unborn child

• 10 calendar days of paid leave for the death of a child

• New Year’s Day

• Holy Friday

• Holy Saturday

• Labor Day

• Glorias Navales Day

• Indigenous Peoples’ Day

• Saint Peter & Pablo

• Carmen Virgin’s Day

• Mary’s Assumption

• Independence Day

• Army Day

• Race’s Day

• Church’s Day

• All Saints Day

• Immaculate Conception

• Christmas Day

Work permits in Chile

As you expand your business, your goal may be to hire Chilean employees, or you may need to bring in foreigners to help meet your business goals. Either way, you’ll need to ensure your candidate can legally work in Chile before they start their new job. 

Chile's visa system is designed to accommodate a range of employment scenarios, from short-term assignments to long-term residencies. The primary authority overseeing immigration matters is the Servicio Nacional de Migraciones (SERMIG). Employers and foreign workers must navigate the appropriate visa categories to ensure compliance with Chilean labor and immigration laws.

Here’s what employers need to know about work permits in Chile.

Who needs a work visa in Chile?

Generally, any foreign national intending to engage in remunerated activities in Chile is required to obtain the appropriate work visa. Exceptions exist for citizens of countries with specific agreements with Chile, such as member states in the Southern Common Market (MERCOSUR), who may have alternative pathways. However, it's up to employers to verify the specific requirements based on the individual's nationality and the nature of the work, since compliance ultimately falls on them.

How long does it take to get a work visa in Chile?

In 2022, Chile put new immigration laws into effect. Under the new system, applicants submit visa requests through the Immigration Service’s website. It takes four to six months for visas to be issued once all the application requirements are met.

Visa applicants need to submit the required documents online, including:

• A scan of a valid passport

• A police certificate issued within 60 days certifying they have no criminal history

• A full medical report issued within 60 days certifying they are in good health

• A notarized employment contract from their Chilean employer

Applicants are also typically required to appear at their local Chilean consulate for an interview and pay a visa fee (which varies based on their country of origin) before their application is processed.

Types of work visas in Chile

While Chile offers several types of work visas and permits, most full-time employees coming to the country to work for a Chilean company seek a temporary residence visa, which is valid for up to one year initially and can be renewed before it expires. Here are the main types of work visas employers should know about:

• Visa Sujeta a Contrato (Subject to a Work Contract Visa): Designed for foreign workers with a fixed-term employment contract from a Chilean employer. This visa is directly tied to the employer and the specific job role.

• Visa Temporaria (Temporary Residence Visa): This visa is suitable for professionals intending to stay in Chile for up to one year (or longer if they renew).

• Visa de Residencia Definitiva (Permanent Residence Visa): After holding a temporary visa for a certain period (usually a minimum of two years, depending on the visa holder’s specific circumstances) and meeting other specific criteria, visa holders can apply for permanent residency, allowing them to live and work in Chile indefinitely.

Termination and redundancy in Chile

When making your first hire in Chile, termination policies might be far from your mind. But if you don’t understand the legal framework surrounding employment termination in Chile, you could be setting yourself up for trouble when it’s time to part ways with an employee down the road.

The Chilean Labor Code is rigid and detailed about processes employers need to follow when terminating an employment relationship, with or without cause. This includes resignations, mutual agreement, redundancy, and more.

Here’s what to know about termination and redundancy rules in Chile.

Does at-will employment exist in Chile?

At-will employment is a legal doctrine in which either the employer or the employee can terminate the employment relationship at any time, for any reason (or no reason), and without prior notice, as long as the reason is not illegal (such as discrimination). Unlike some jurisdictions where at-will employment allows termination without cause, Chilean labor law requires that terminations be based on specific grounds as stipulated in the Labor Code. Employers must provide a valid reason for dismissal, which falls under one of the following categories:

• Mutual agreement (Article 159): Both parties consent to end the employment relationship.

• Resignation (Article 159): The employee voluntarily terminates the contract.

• Expiration of contract (Article 159): The agreed-upon term or specific task concludes.

• Dismissal for cause (Article 160): This includes serious misconduct, such as dishonesty, harassment, or abandonment of duties.

• Company needs (Article 161): Economic or organizational reasons necessitate staff reductions.

Employers must document the reason for termination and follow the appropriate procedures to ensure compliance with the Labor Code.

Notice periods in Chile

A notice period is the amount of time an employee or employer is required to give before ending an employment relationship. During this period, the employee continues to work while preparing for their departure, and the employer has time to find a replacement or manage the transition.

The standard notice period for terminating an employment contract due to company needs or without cause is 30 days. Alternatively, employers may opt to provide payment in lieu of notice, equivalent to one month's salary, known as "indemnización sustitutiva del aviso previo."

In cases of dismissal for cause, no notice period or payment in lieu is required. However, the employer must have substantial evidence to support the justification for immediate termination.

Severance pay in Chile

Severance pay is compensation provided to an employee when they are laid off, terminated, or leave a company under certain conditions. In Chile, employees dismissed due to company needs or without cause are entitled to severance pay, provided they have completed at least one year of continuous service. The severance payment is calculated as one month's salary for each year of service, capped at 11 years. And the monthly salary used for this calculation is subject to a maximum limit of 90 UF.

Employees dismissed for cause are not entitled to severance pay.

How to terminate employees compliantly in Chile

All employees in Chile are protected by termination laws, which makes it vital for employers in the country to know how to end employment relationships compliantly, preferably well before getting to that stage. Key steps in the process include:

• Documenting the reason for the termination: Clearly identify and record the justification for dismissal, ensuring it aligns with the grounds specified in the Labor Code.

• Providing the employee with written notice: Deliver a written termination letter to the employee, detailing the reason for dismissal and the effective date.

• Observing the statutory notice period: Offer a 30-day notice as required by the Labor Code.

• Settling all dues owed to the employee: Calculate and pay any outstanding wages, accrued vacation, and severance pay, if applicable.

• Report to authorities: Notify the Dirección del Trabajo (Labor Directorate) of the termination, as required by law.

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries. An alternative is to hire through an EOR, which can monitor termination requirements for you, ensuring you compliantly onboard and offboard employees every time.