Payroll and Benefits Guide Chile
Last updated: Mar 03, 2026
Contribution
In Chile, payroll contribution rates are calculated using Unidad de Fomento (UF), which is an inflation-indexed unit of account set and published by the Central Bank of Chile (BCCh), with a new UF rate set each month. Payroll contribution caps are calculated based on ‘no of UF*rate of UF’.
For July 2025, the UF rate is 38,374.45 CLP.
| Employer Payroll Contributions | |
|
2.40%
|
Unemployment Insurance, capped at 126.6 * monthly UF rate (the rate increases to 3% when using a Fixed Term contract)
|
|
1.5%
|
Disability & Survival Insurance (SIS), capped at 84.3 * monthly UF rate
|
| 0.95% |
Mutual – Work Accident Insurance, capped at 84.3 * monthly UF rate (the rate can increase up to 7.73% for high risk industries)
|
| Varies* |
Gratification (Profit Sharing)*
|
| 4.83% |
Total Employment Cost |
* In Chile, it is mandatory for companies with profits to provide all employees with a statutory bonus annually in addition to the employee’s base salary. This is known as a “legal gratification”. There are two methods that employers can choose to apply regarding the gratification:
- Divide 30% of the total net income of the company among all the employees, proportionate to their income.
- Pay the employee 25% of wages earned during the year, regardless of the total net income obtained by the company. This bonus is capped at 4.75 times of Minimum Monthly Income (IMM). The IMM to be considered is the one in force as of December 31 of the respective commercial year. Most employers opt for this option.
Companies may also lower the employee’s base salary stated in the work contract to compensate for the addition of the legal gratification (as a way not to increase the total costs for the employer). However, if the base salary is already agreed on in the employment contract, it cannot be lowered without the employee’s consent.
| Employee Payroll Contributions | |
|
10.00%
|
Pension (AFP), capped at 84.3 * monthly UF rate (after 2 years workers can choose an alternative private pension provider to enroll in, there are 7 institutions to choose from and the contribution will be 10% + the commission rate of the fund).
|
|
0.60%
|
Unemployment Insurance, capped at 126.6 * monthly UF rate (no charge % is applied when using a Fixed Term contract).
|
|
7.00%
|
Public Health Insurance, capped at 84.3 * monthly UF rate (alternatively, workers can choose to enroll in private health insurance).
|
| 17.60% |
Total Employee Cost |
| Employee Income Tax | |
|
0.00%
|
Up to 13.5 UF
|
|
4.00%
|
13.5 – 30 UF
|
|
8.00%
|
30 – 50 UF
|
|
13.50%
|
50 – 70 UF
|
|
23.00%
|
70 – 90 UF
|
|
30.40%
|
90 – 120 UF
|
|
35.00%
|
120 – 310 UF
|
| 40.00% | 310 UF and Above |
Employer taxes
Employee taxes
Minimum Wage
General
The monthly minimum wage in Chile is
- 539,000 CLP for workers aged 18 to 65
- 402,082 CLP for workers under 18 and over 65
- Gratification – $213,354
MINIMUM WAGE (PER MONTH)
Payroll
Payroll Cycle
Monthly
13th Salary
There are no provisions in the law regarding 13th salaries.
Working Hours
General
A full workweek in Chile is 44 hours over 5 or 6 days. The employer has the right to extend the day by no more than 2 hours a day or 10 hours a week. The Chilean labor code recommends daily rest periods, a midday meal (as part of a break for at least half an hour), a weekly rest day on Sundays, and national holidays.
Employees delivering services providing technical support, working in public shops, or in the entertainment industry and therefore required to work on Sundays and national holidays, are provided with rest days on different days.
In 2023, Chile approved a 40-hour workweek law reducing the length of the working day to improve the quality of life of workers who are governed by the labor code.
This law will be implemented gradually as follows:
One year after implementation: the working week will be reduced from 45 to 44 hours.
Three years after implementation: the working week will be reduced to 42 hours.
5 years (in 2028) after implementation: the working week will be reduced to 40 hours.
Although this law is set to be implemented gradually, many companies have already put a 40-hour work week into effect.
Overtime
Overtime is defined as any time worked in excess of the legal or agreed-upon ordinary workday.
- Maximum Ordinary Hours (Phased Reduction): The statutory weekly limit is currently being reduced from 45 hours to 40 hours over five years, without a reduction in wages.
- Prior to April 26, 2024: 45 hours per week
- April 26, 2024, to April 25, 2026: 44 hours per week (Current Status)
- April 26, 2026, to April 25, 2028: 42 hours per week
- April 26, 2028, onward: 40 hours per week
- Daily Overtime Cap: Overtime is strictly limited to a maximum of 2 hours per day. The total workday, including overtime, cannot exceed 10 hours.
- Consent and Duration: Overtime must be agreed upon in writing and is only permitted for temporary situations or necessities of the company. Agreements are typically effective for a period not exceeding three continuous months.
- Exemptions (Article 22): The 40-hour law restricted exemptions. Only employees in senior managerial roles (directors, administrators, representatives with administrative powers) and those who work without immediate superior supervision due to the nature of their duties remain exempt from the working hours and overtime limitations.
Mandatory Overtime Compensation Rates
Chile mandates a single, non-negotiable minimum premium rate for all standard overtime.
| Day/Condition | Minimum Compensation Rate (Statutory) | Total Pay Rate | Notes |
| Standard Overtime (Working Days) | +50% of the regular hourly wage. | 150% | Applies to hours exceeding the legal weekly limit (currently 44 hours). |
| Weekly Rest Day / Public Holiday Overtime | +50% of the regular hourly wage. | 150% | This premium is paid for hours worked on Sundays or public holidays that are beyond the ordinary weekly limit. |
Important Note on Rest Day/Holiday Work: If an employee’s industry permits working on Sundays or holidays, they are generally entitled to:
- Compensation: The regular pay for the day plus the appropriate overtime premium if the work exceeds the weekly limit.
- Compensatory Rest: The employee must be granted another full day off in compensation within the following week.
Alternative Compensation (Time Off in Lieu)
A key change in the new law allows for a non-monetary compensation option:
- Agreement: By written agreement with the employer, overtime may be compensated with additional paid time off (extra holidays) instead of the premium pay.
- Conversion Rate: For every 1 hour of overtime worked, 1.5 hours of rest time must be compensated.
- Annual Cap: This time-off-in-lieu compensation is limited to a maximum of 5 additional working days per year.
- Usage: The compensated rest days must be taken by the employee within six months following the cycle in which the overtime was incurred.
Leave
Annual Leave (vacation)
Employees who have been employed for at least 1 year are entitled to 15 working days of paid leave. After working for 10 years, an extra day is added for every 3 years of service.
Paid time off
Note:
- For SGF Global, no carryover is permitted.
- For Papaya Direct, no carryover is permitted.
Public Holidays
In Chile, the 17 public holidays are split between ‘Mandatory’ and ‘Non-Mandatory’ days. ‘Mandatory’ means the worker must be given the day off and ‘Non-Mandatory’ means the employer can ask the employee to work, however, the worker will be entitled to receive an additional 50% salary for working on this holiday (calculated as Monthly salary * 0.00875 = amount to paid per hour).
Public holidays that fall on the weekend are usually lost.
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 1 January 2026 | Thursday | New Year’s Day | Standard holiday |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 4 April 2026 | Saturday | Holy Saturday | Standard holiday |
| 1 May 2026 | Friday | Labour Day | Standard holiday |
| 21 May 2026 | Thursday | Navy Day | Standard holiday |
| 20 June 2026 | Saturday | National Indigenous Peoples Day | Standard holiday |
| 29 June 2026 | Monday | Saints Peter and Paul’s Day | Standard holiday |
| 16 July 2026 | Thursday | Our Lady of Mount Carmel Day | Standard holiday |
| 15 August 2026 | Saturday | Assumption of Mary | Standard holiday |
| 18 September 2026 | Friday | Independence Day | Standard holiday |
| 19 September 2026 | Saturday | Army Day | Standard holiday |
| 12 October 2026 | Monday | Day of the Encounter of Two Worlds | Standard holiday |
| 31 October 2026 | Saturday | Reformation Day | Standard holiday |
| 1 November 2026 | Sunday | All Saints’ Day | Standard holiday |
| 8 December 2026 | Tuesday | Immaculate Conception Day | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Sick Days
The first 3 days of sick leave is unpaid. From the 4th day, sick leave is paid by the Social Healthcare system (FONASA/ISAPRE), subject to caps.
Employees are entitled to sick leave if they provide a medical certificate within 2 days from the beginning of sick leave. The employer must then forward the certificate to the health insurance within 3 days. Eligibility is also conditional on the worker having six months of pension affiliation prior to the month in which the leave begins and three months of contributions within the six months prior to the initial date of the medical leave. For workers hired by day, shifts or days, it can be reduced to 1 month of continuous or discontinuous contributions within the 180 days prior to the medical leave.
Maternity Leave
Maternity leave is split between 6 weeks leave before the birth (prenatal) and 12 weeks leave following the birth (postnatal). Following the completion of this leave, a further 12 weeks leave can be requested, which can be extended to 18 weeks where the mother decides to return to work on a half time basis.
Maternity leave is paid for by the the Social Healthcare system (FONASA/ISAPRE), except if in the second period the employee decides to go back to work half time, the employer will be responsible to pay half of the salary for the period of working. During the Maternity leave, workers must provide the “licencia medica” (medical absence certificate) to HR.
During the pregnancy, the woman is not required to participate in activities that would endanger her health (i.e. heavy lifting). If this is a requirement of the job, the employer must reassign her to a different position during her pregnancy without pay reduction. Also during the entire pregnancy and up to eighteen months after the birth, the company may only terminate the employment contract of the mother with authorization of a labor court.
Paternity Leave
Fathers are entitled to 5 days of paternity leave, which is paid for by the the Social Healthcare system (FONASA/ISAPRE)
After the 7th week from the birth, the mother can opt to transfer some or all of her maternity leave to the father.
Parental Leave
Female employees are entitled to 10 days of parental leave for a child under the age of 18. While the employee is entitled to be paid they must make up the time taken off at a later date.
Mothers are entitled to 1 hour per day of breastfeeding breaks, which can be split into two 30-minute breaks, when they have children under 2 years old.
If a child under 1 years old is sick, the mother is entitled to additional paid child care leave, providing the leave is supported by a medical certification.
Other Leave
Marriage Leave – Employers are entitled to 5 business days of leave with full pay; all days must be taken in one go. The days may be before or after the wedding date within 3 days of the wedding.
Bereavement Leave – For the death of an immediate family member (father, mother or sibling) the employee is entitled to 4 business days of paid leave. For the death of a spouse the employee is entitled to 7 calendar days of paid leave. For the death of an unborn child the worker is entitled to 7 business day of paid leave. For the death of a child the employee is entitled to 10 calendar days of paid leave.
PAID MATERNITY LEAVE (DAYS)
Termination
Termination Process
In order to terminate an employee, the cause must first be decided. By law, the following reasons are valid reasons for termination:
The grounds for termination are listed below as “JUST CAUSE TERMINATION” that must be proven by In Country Team with a disciplinary process; this includes gathering proof and initiating an improvement plan with the employee to prove that ICT followed a due process with the employee, especially if the matter should go to court. Some examples of “Just Cause Termination” are grounds that relate to serious fault or misconduct by the employee. If proven, the employee typically does not receive severance pay for years of service. Common reasons include serious misconduct (Lack of honesty (probity), sexual harassment, physical assault, insults against the employer, immoral conduct affecting the company, or workplace harassment.) Conflict of Interest: (engaging in business activities that compete with the employer, if explicitly prohibited in the contract.) Unjustified Absences such as missing work for two consecutive days, two Mondays in a month, or a total of three days in a month. Unjustified absence by a worker in a critical role that disrupts operations. Abandonment of Work: (Leaving the workplace without permission during working hours or refusing to perform agreed-upon tasks.)
Reckless Actions: (Acts or omissions that jeopardize safety, operations, or the health of others.) Intentional Damage: (Deliberately damaging company property.) Serious Breach of Contract: (Any other significant failure to meet contractual obligations. This often covers serious negligence or repeated poor performance that violates the contract’s terms, typically requiring prior warnings and documentation.)
- Mutual agreement, resignation, or expiration of a contract
- Company needs or reorganization (the most common reason for the dismissal of an employee)
- Other grounds for termination include (gross misconduct, acts against the employer, or criminal activity, all of which require specific legal procedures)
- Dismissals without cause (arbitrary) are not permitted.
- Otherwise, if a “Just Cause Termination” cannot be proven a severance fee must be paid to the employee, which is mandatory by law.
The employer must prepare a letter for the employee stating the cause for termination as well as the effective date and it must be signed in person by the employee or sent by certified mail to their home address. The termination letter (Carta de Despido) must include the cause, facts, and legal basis for termination. Delivery of the letter must be in person with receipt or by certified mail to the employee’s address within three business days of the termination. A copy must be sent to the Chilean Labor Authority (Dirección del Trabajo) electronically or in person, also within three business days. It is common that the employee is notified on the last day of work.
After the termination letter is given, the employer must prepare a severance agreement, which must include the cause for termination as well as the amount that will be paid out to the employee. The severance agreement must be signed within 10 days of the termination. In the case of a mutual agreement, both parties must sign a document acknowledging that both parties have agreed that the employment contract is terminated. A severance agreement must also be signed within the first 1-2 weeks following the termination date.
In Chile, mutual termination agreements (MTA) are used, but they’re less common for EOR (Employer of Record) workers than in some other countries. The benchmark for an MTA in Chile for redundancy purposes starts with the statutory severance for “company needs” (1 month per year up to 11 years + 1 month in lieu of notice + accrued vacation). A release can be established in the MTA that the parties have agreed to the termination and will no longer pursue judicial claims, but this is not a 100% guarantee. For the MTA to be legally binding and released from liability, it must be judicially ratified/approved in the country if it comes from a different jurisdiction.
| Salary payment interval / date | Final payment on termination | Bank account/payment-method requirement |
|---|---|---|
| Salaries must be paid at least once a month, with pay-day typically on or before the last working day of the month for the month worked. | Upon termination the employer must pay all wages owed, any accrued leave, and if applicable severance. According to employer-guidance the final payment should be made within 10 working days after termination. | Payment may be made by cash or bank transfer. |
Notice Period
The notice period is 1 month by law. It is common that the notice period is waived, and payment is made in lieu.
Severance Pay
If the employee has completed at least 1 year of employment, they are entitled to severance pay. For every year of service up to 11 years, the employee is entitled to 1 month’s salary. In addition, after one year of employment, the employee accumulates an additional month of severance pay if they have worked for at least half of the following year.
Probation Period
Chilean labor law does not formally establish probation periods and employment contracts are effective from the first day of work with entitlement to all labor rights.
Many employers will use short-term fixed contracts as a de facto probation period to assess an employee’s performance. If the employee meets expectations, the contract can then be renewed or converted to an indefinite-term contract.
Minimal Statutory Termination Costs
If (unilateral termination), the following are paid out:
severance pay for years of service
prior notice (if applicable)
vacations are paid
Notice Period is 30 days
Common Benefits
- Home Office allowance: 30 USD a month
- Private Health: depending on the position approx. 50 USD a month
- Meal allowance (“Colación”): 20 USD a month
- Transportation Allowance
Immigration
Anyone who comes to Chile with the intention to work even if they don’t require a visa to enter must receive a work visa.
There are two kinds of work visas available to foreigners:
Visa Subject to a Contract – for candidates who have secured an employment contract prior to arriving in Chile. It is valid for 2 years and can be renewed for an additional 2 years. After that, a candidate needs to apply for permanent resident status, which would allow the candidate to continue to work in Chile.
The process requires about 20-30 days to complete. The application should be filed 30-60 days before the expected arrival.
To get the permit, the hiring company must be incorporated in Chile, demonstrate that the hiring will help Chile and have their VAT and employee insurance paid for the past 3 months.
Working Holiday Visa
People from Colombia, Mexico, Peru, Germany, Canada, Australia, Czech Republic, and New Zealand who are between the ages of 18 and 35 can apply for a 1-year visa that allows them to work in Chile. The visa cannot be renewed.
VAT
General
19% is the standard rate.
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Payroll and Benefits Guide
in Chile
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
And more...
Public Holidays Calendar
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 1 January 2026 | Thursday | New Year’s Day | Standard holiday |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 4 April 2026 | Saturday | Holy Saturday | Standard holiday |
| 1 May 2026 | Friday | Labour Day | Standard holiday |
| 21 May 2026 | Thursday | Navy Day | Standard holiday |
| 20 June 2026 | Saturday | National Indigenous Peoples Day | Standard holiday |
| 29 June 2026 | Monday | Saints Peter and Paul’s Day | Standard holiday |
| 16 July 2026 | Thursday | Our Lady of Mount Carmel Day | Standard holiday |
| 15 August 2026 | Saturday | Assumption of Mary | Standard holiday |
| 18 September 2026 | Friday | Independence Day | Standard holiday |
| 19 September 2026 | Saturday | Army Day | Standard holiday |
| 12 October 2026 | Monday | Day of the Encounter of Two Worlds | Standard holiday |
| 31 October 2026 | Saturday | Reformation Day | Standard holiday |
| 1 November 2026 | Sunday | All Saints’ Day | Standard holiday |
| 8 December 2026 | Tuesday | Immaculate Conception Day | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Do all employees receive the new basic food basket contribution?
In order to qualify for the Contribution of the Basic Basket, you have to have been receiving Family Allowance, Family or Maternal Allowance, or have belonged to Chile Solidario (Family Ethical Income) during the following dates:
The Basic Basket Contribution can be received from May 2022 to August 2022 if the person had any of these benefits in force as of December 2021 (Family Subsidy or one of the others mentioned).
Those who have any of these benefits in force by April 2022 can receive the Basic Food Basket Contribution from September to December 2022.
The Basic Basket Contribution will be available until April 2023 if the person has one of these benefits as of August 2022.
Are salary increases mandatory or required by law?
Hello,
Workers are entitled to a Gratification bonus as a profit sharing for the work done. There will also be increases to minimum wage at least once per year.