Chile employer of record (EOR)
Chile Employer of record (EOR)
Europortage’s Chile Employer of Record (EOR) solution allows your company to quickly and compliantly hire talent in Chile—without setting up a local entity.
An Employer of Record is a third party that legally employs your talent in Chile, handling all employment obligations such as payroll, taxes, social security, and statutory benefits. Your company manages the employee’s day-to-day work while Europortage ensures full legal compliance.
Below, we outline the key aspects of employment laws in Chile, covering everything from employment taxes to termination policies.
The Chile Employer of Record (EOR) is responsible for:
✔️ Drafting local compliant contracts
✔️ Process payroll accurately and on time
✔️ Provide the best employee experience
✔️ Seamlessly handle global mobility
✔️ Pay your talent in local currency
Employment taxes in Chile
Hiring in Chile comes with specific employer obligations. These include contributions to social security, unemployment insurance, and professional illness insurance. Employers must calculate and remit these amounts monthly, ensuring full compliance with Chilean law.
Social Security
Employers contribute 2.78% of the employee’s salary toward Chile’s social security system. This amount funds programs like pensions, public healthcare, and disability protection. In addition, companies must pay 1.85% to the SIS (life and disability insurance). These payments are mandatory and must align with a capped base defined in Unidades de Fomento (UF), a Chilean inflation-indexed unit that ensures contribution values stay aligned with the economy.
Unemployment Insurance
Unemployment insurance is also required. For permanent contracts, employers pay 2.4% of the employee’s gross monthly salary. However, for fixed-term contracts, the employer must cover the entire cost at 3%. Employees contribute a smaller share when on permanent contracts, but not when fixed-term.
Professional Illness Insurance
Employers must also contribute to workplace risk insurance, also known as occupational hazard coverage. This rate varies depending on the company’s industry and risk classification. The maximum rate is 3.4% of the employee’s salary. High-risk sectors may be subject to extra charges. The goal is to ensure injured employees receive proper compensation, while reducing employer liability in case of workplace accidents.
Employee taxes in Chile
Employees in Chile face their own tax responsibilities. These include income tax, social insurance contributions, and the taxation of benefits in kind. All contributions are withheld by the employer and reported monthly.
Social security contribution
Employees contribute 17.6% of their gross salary to social insurance programs. These include:
Pension fund (AFP): 10%
Public health (Fonasa or Isapre): 7%
Unemployment insurance: 0.6% (only for permanent contracts)
Each of these contributions has a monthly salary cap of CLP 1,876,049 (81.6 UF). Employers deduct and remit these amounts automatically. Foreign workers may be exempt if they are part of an equivalent system abroad covering pension, disability, illness, and death.
Income tax
Employees in Chile pay a progressive income tax. The rate ranges from 0% to 42%, based on gross monthly earnings. Income tax applies to all forms of income, including salaries, bonuses, and other compensation. Chilean residents must report worldwide income, while foreigners only report local income during their first three years in the country. After that, global income is taxable.
Employers withhold income tax every month through payroll. The final tax liability is confirmed during the annual filing, due each April via Form 22. Joint filing is not allowed, except for spouses under a community property system. In that case, they must submit a single joint return.
| Monthly Gross Income (CLP) | Tax Rate |
|---|---|
| Up to 709,540 | 0% |
| 709,541 – 1,105,144 | 4% |
| 1,105,145 – 1,502,595 | 8% |
| 1,502,596 – 2,100,240 | 13.5% |
| 2,100,241 – 2,797,880 | 23% |
| 2,797,881 – 3,495,520 | 30.4% |
| 3,495,521 – 4,393,160 | 37% |
| Over 4,393,160 | 42% |
Benefits in Kind
Some perks are non-taxable, while others are subject to income tax. The following are non-taxable when provided for the employer’s sole benefit:
Relocation and travel reimbursements
Housing provided for work
Work-related entertainment
Moving allowances
On the other hand, allowances for cost of living, vacation travel, utilities, or car usage are considered part of the employee’s compensation. These items must be taxed as regular income and reported accordingly.
Statutory Benefits in Chile
Chilean labor law mandates several statutory benefits, including:
Legal Gratification
Chilean employers must grant an annual bonus known as legal gratification to all employees. Companies can choose one of two methods. The first is to share 30% of net profits proportionally among staff. The second, more common method, pays 25% of the employee’s annual salary, capped at 4.75 times the minimum wage in force as of December 31.
Common Non-mandatory Benefits in Chile
Chilean employers, especially in tech and multinational sectors, offer many voluntary benefits to stay competitive and retain talent.
Kindly note that depending on the company CBA, some non-mandatory benefits can actually be mandatory.
Hardware
Tech companies often let employees choose their own laptops and accessories. This supports productivity and comfort.
Flexible Work
Flexible work models are growing fast. Many firms now offer remote-first setups, hybrid schedules, or flexible working hours based on core time blocks.
Private Health Insurance
While public healthcare exists, employers often add private coverage. Many cover up to CLP 100,000/month, including dental and vision plans.
Meal Vouchers
Ticket restaurant cards are another non-taxable perk, especially for office-based employees.
Life Insurance
Some firms offer life insurance or equivalent payouts. Premiums average CLP 50,000/month, and coverage may equal two years of salary, paid to the next of kin.
Payments in Chile
Minimum wage
As of July 1st, 2024, the national minimum wage in Chile is CLP 500,000 per month for employees aged 18 to 65. This amount is reviewed regularly and adjusted based on inflation and national policy. Employers must ensure that all full-time workers receive at least this minimum, regardless of their role or location. Non-compliance can lead to labor fines and legal actions.
Payroll frequency
In Chile, all employers are required to pay their employees once per month. This monthly payment schedule applies to both fixed-term and indefinite contracts. While some employers may choose to pay more frequently, such as biweekly, the law mandates that employees receive their salary at least monthly. Consistent payroll processing helps avoid labor disputes and ensures transparency.
Payday
By law, salaries in Chile must be paid no later than the last business day of each month. If the month ends on a weekend or public holiday, the payment must be made on the last working day before that date. This ensures employees receive their wages on time and can plan their financial responsibilities accordingly. Late payments can incur penalties or trigger formal complaints.
Working time and overtime in Chile
Working hours
In Chile, the maximum legal workweek is 45 hours, making it one of the longest in the world. Most companies operate Monday through Friday, from 8:30 a.m. to 6:30 p.m., with a one-hour lunch break. This results in a 9-hour workday. However, employers may legally schedule employees to work on Saturdays as part of their 6-day week. Working on Sundays is generally restricted unless the sector allows it.
Overtime
Any time worked beyond the 45-hour weekly limit or 9-hour daily cap is considered overtime. Employers must compensate these hours at 150% of the employee’s regular wage. Working on Sundays also generates overtime pay at 130%, or an alternative rest day in the following week. For national holidays, no premium is owed if the hours fall within the 45-hour cap. However, extra hours worked on a holiday must be paid at the 150% rate.
Break Rights
Employees are entitled to a minimum 30-minute break during their workday. This time is usually used for lunch and is unpaid.
Night Work Regulations
Night shifts are defined as work performed between 10:00 p.m. and 7:00 a.m. Chilean law does not provide extra compensation for night work, unless otherwise negotiated. However, pregnant employees cannot be assigned night shifts under any circumstance.
Time Tracking Obligations
All employers in Chile must track and register employees’ working hours daily. This includes both regular and overtime hours. Employers can use any method — from manual logbooks to electronic systems — as long as it captures the start and end times or the total hours worked.
Probation Period in Chile
The Chilean Labor Code does not define a formal probation period. Instead, the law treats all employment contracts as binding from day one. That means employees are fully protected under labor laws immediately upon hire. Any termination, even during the first months, must follow legal procedures and may require just cause or severance compensation. Employers should use fixed-term contracts cautiously and ensure expectations are clearly outlined during onboarding.
Leave in Chile
Annual leave
In Chile, all employees are entitled to annual paid leave after completing 12 months of continuous employment with the same employer. The statutory leave entitlement is 15 working days per year.
In certain southern regions of Chile (Aysén, Magallanes, Palena), employees earns 20 working days of leave instead of 15.
Public holidays
Chile observes 15 national public holidays each year, plus occasional regional holidays declared by local authorities.
New Year’s Day (Año Nuevo) – January 1
Good Friday (Viernes Santo) – March/April (date varies)
Holy Saturday (Sábado Santo) – March/April (date varies)
Labour Day (Día del Trabajo) – May 1
Navy Day (Día de las Glorias Navales) – May 21
National Day of Indigenous Peoples (Día Nacional de los Pueblos Indígenas) – June (date varies)
Saint Peter and Saint Paul (San Pedro y San Pablo) – June 29 (often moved to a Monday)
Our Lady of Mount Carmel (Virgen del Carmen) – July 16
Assumption of Mary (Asunción de la Virgen) – August 15
Independence Day (Fiestas Patrias) – September 18
Army Day (Día de las Glorias del Ejército) – September 19
Columbus Day (Día del Descubrimiento de Dos Mundos) – October 12 (may be moved)
Reformation Day (Día Nacional de las Iglesias Evangélicas y Protestantes) – October 31
All Saints’ Day (Día de Todos los Santos) – November 1
Immaculate Conception (Inmaculada Concepción) – December 8
Christmas Day (Navidad) – December 25
Sick leave
Chile allows unlimited sick leave as long as the employee presents a certified medical note (licencia médica) within 2 business days. Health insurers (not employers) pay for the leave:
- No pay for first 3 days
- Day 4–10: Full pay
- Over 10 days: Full pay from day one
Employees cannot be terminated while on sick leave.
Paternity and maternity leave
Women get 18 weeks of paid leave (6 prenatal, 12 postnatal). Premature births or twins extend postnatal leave. Social security covers full salary. Employers cannot terminate during pregnancy plus one year post-leave.
Women can share up to six weeks of maternity leave with the father.
Fathers receive five days of paternity leave, payable by the employer.
End of employment in Chile
Chile has strict rules around termination. Only directors, managers, assistant managers, and employees in “positions of exclusive confidence” may be dismissed at will. All other employees require a valid legal reason for termination. Employers must also follow a clear notification and documentation process.
Valid Grounds for Termination
The main types of employment termination in Chile include:
Mutual Agreement: Both parties must sign a termination agreement on the final day. A severance agreement must also be signed within 2 weeks.
Contract Expiry: Fixed-term or project-based contracts end naturally when the contract term is complete.
Company Restructuring: The most common type. Employers must send a termination letter to the employee and notify the Chilean Labour Ministry (Inspección de Trabajo).
Resignation: Employees must give 30 days’ written notice. Severance is not owed in this case.
Force Majeure: Natural disasters or uncontrollable external factors may justify termination.
Serious Misconduct: Employers must prove the employee committed a severe breach (e.g., harassment, absenteeism, fraud, or workplace violence).
Note: Poor performance is not considered valid cause for dismissal unless it directly violates the employment contract.
Termination Procedure
When terminating an employee, companies must:
Draft a termination letter that explains the reason and specifies the termination date.
Deliver this letter either in person (with signature) or by certified mail within 3 working days.
Send a copy of the same letter to the Chilean Labour Ministry within 3 days.
Prepare a finiquito (severance agreement) outlining accrued vacation, notice period (if paid in lieu), and severance.
Sign the finiquito in front of a notary or at the Labour Ministry within 10 working days.
Severance pay
Employees who have completed at least 12 months are entitled to one month of salary per year of service, up to 11 months. If the employee worked more than six months into a new year, that year counts as a full one. Misconduct-related terminations cancel the right to severance.
In most cases, companies pay in lieu of notice. The final paycheck must include salary, vacation days, bonuses, and any other unpaid items. Employers must finalize payment and de-register the employee within 10 working days.
How to hire in Chile
Entity setup
Establish a legal entity in a specific country will allow your business to operate legally in the country, hire, pay and manage your talents there.
Independent contractor
This solution might seem a good fit to reduce the cost of setting up an entity or hiring a full-time employee. Engaging a contractor can be a winning strategy in some cases and will depend of your business strategy and goals. For instance, it is a great solution when you need a talent for a short-term project.
Use an Employer of record in Chile
Partner with a Chile employer of record (EOR) is quite a game changer and can help you hire globally. The EOR will be the legal employer, which means they will handle employment contracts, onboarding process, compliance, benefits, payroll and more.