Payroll & Employment Guide Chile

Employment contracts in Chile must be documented in writing and include all key terms of the employment relationship. While an employment relationship can exist without a written agreement, employers are legally required to formalise the contract within a set timeframe.

Employment contracts must include essential details such as job duties, working hours, remuneration, contract duration, and workplace. Any agreed benefits, including those provided in kind, must also be specified.

Notice periods: Notice requirements vary by termination type. In most employer-initiated terminations (e.g. redundancy), 30 days’ notice or payment in lieu is required.

Termination of employment: Employment can end by mutual agreement, resignation, expiry of a fixed-term contract, redundancy, or dismissal for serious misconduct. Employers must provide written notice stating the reason for termination and all payments due, including severance (if applicable).

A final settlement document (“finiquito”) must be issued within 10 business days. Employees may challenge dismissals, and failure to meet legal requirements may invalidate the termination.

Employers in Chile must provide mandatory benefits in compliance with the country’s labour laws and social security system. These benefits ensure employee protection, while additional perks are often offered to stay competitive in the job market.

Mandatory benefits:

• Health insurance: Employees contribute 7% of their salary to either the public system (FONASA) or a private provider (Isapre)
• Pension (retirement): Mandatory contributions to individual pension accounts, with benefits based on total contributions and investment returns
• Unemployment insurance: Funded by both employer and employee (typically ~2.4% employer and 0.6% employee), with full employer contribution for fixed-term contracts
• Social security: Covers pensions and other statutory protections
• Disability coverage: Includes invalidity pensions for employees unable to work

Common perks:

• Private health insurance upgrades (Isapre plans)
• Meal vouchers or allowances
• Transport reimbursements
• Performance-based bonuses

Leave policies:

• Paid annual leave (minimum 15 working days after one year of service)
• Paid sick leave supported by the health insurance system
• Maternity leave (18 weeks) and paternity leave (5 days)
• Additional parental leave options for new parents
  

Chile has a well-defined tax system that applies to both employees and employers. Employers are responsible for withholding income tax and social security contributions, while individuals may have additional reporting obligations depending on their income sources and residency status.

Personal income tax: Chile applies progressive income tax rates ranging from 0% to 40%.

Tax brackets:

• Up to 13.5 UTA: 0%
• 13.5 to 30 UTA: 4%
• 30 to 50 UTA: 8%
• 50 to 70 UTA: 13.5%
• 70 to 90 UTA: 23%
• 90 to 120 UTA: 30.4%
• 120 to 310 UTA: 35%
• Over 310 UTA: 40%

VAT: 19%

Withholding and contributions: Employers withhold income tax and social security contributions monthly. Independent contractors are subject to 15.25% withholding on invoices (Boleta de Honorarios).

Additional taxes and withholding: Non-residents are generally subject to withholding tax (up to 35%) on Chilean-source income.

Deductions and tax reliefs: Mortgage interest deductions (subject to caps and income thresholds), education tax credits for dependent children, voluntary pension contributions (APV), and double taxation relief through tax credits and international agreements.

Payroll in Chile is regulated by the tax authority (Servicio de Impuestos Internos – SII) and requires employers to manage monthly salary payments, tax withholdings, and social security contributions in compliance with local laws.

Salary payment deadline: Salaries must be paid on or before the last working day of the month.

Taxes and contributions payment deadline: Between the 10th and 12th of the following month

Payroll declarations deadline: By the 12th of the following month (Form 29)

Payroll currency: CLP

Chile’s labour law is defined by the country’s Labour Code, which outlines all the essential aspects of employment, including contract types, working hours, minimum wages, probation periods, and termination rules. Employers must stay compliant with these national regulations, which also define payroll processes, tax obligations, and social security contributions.

Total employment cost:

• Employer’s social security contributions: 4.83%
• Employees’ social security contributions: 17.60%

Minimum wage: CLP 539,000 per month

Probation period: No probation period

EOR services in Chile enable you to legally employ individuals in the country without opening legal entities. Your EOR will take over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

PEO services in Chile provide HR and administrative support, while you remain the legal employer for your team. They are ideal for employers who already have legal entities in Chile but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams’ payroll calculators are adjusted to 95+ countries’ local labour laws, including Chile. Using our calculator, you can easily estimate net and gross salaries, employer/employee contributions, and other mandatory deductions in the country.