Chile Labor Law Guide for Hiring Employees and Contractors
As of 2023, Chile’s economy remains one of the most stable and prosperous in Latin America, with a GDP of approximately $318 billion USD.
The country’s economy is strongly supported by the mining sector, particularly copper, which accounts for a significant portion of its exports. Other important sectors include agriculture, fishing, forestry, and services, especially in finance and telecommunications. Additionally, Chile is known for its growing technology sector and renewable energy initiatives.
The official currency of Chile is the Chilean Peso (CLP).
Minimum Wage
CLP 500,000 per month
Overtime Wage
150% of the regular hourly rate
Meal Breaks
30 minutes to 1 hour
Rest Breaks
15 minutes
Working hours
8 hours per day, 45 hours per week
Salary Payment Cycle
Monthly
Payroll Taxes
Social Security, Healthcare
Paid Vacation
15 working days after 1 year of service
Overtime Hours
More than 45 hours per week
Night Shift Hours
No specific rate mandated by law
Holidays
15
No Work Days
Sunday
In Chile, businesses must establish a legal entity to hire employees. The process to incorporate a business can take 4 to 6 weeks and typically costs between CLP 1,000,000 and CLP 2,000,000, depending on the type of entity and legal services required.
Employers must sign written employment contracts with their employees, which should specify the terms of employment, including job duties, salary, working hours, and termination conditions. These contracts must comply with the Chilean Labor Code, which governs employment relationships. Contractors and employees are treated differently under Chilean law, with employees being entitled to more protections.
Chile has a national minimum wage law. As of 2024, the minimum wage is set at CLP 500,000 per month. The minimum wage is reviewed annually and adjusted by the government.
There are no regional variations in the minimum wage, but certain industries or roles may have different wage agreements. Additionally, Chilean law requires employers to pay holiday bonuses, typically known as “Aguinaldo,” which are additional payments made during national holidays like Independence Day and Christmas.
The standard working hours in Chile are 8 hours per day and 45 hours per week. Overtime is allowed but must be compensated at 150% of the regular hourly rate. Employees are allowed to work a maximum of 2 hours of overtime per day.
Night shifts do not have a specific pay rate mandated by law; instead, compensation for night work is typically agreed upon in the employment contract. The minimum legal working age in Chile is 15 years, with strict regulations governing the employment of minors, including limitations on working hours and types of work.
Employers in Chile must make several payroll deductions:
Social Security: Employers contribute approximately 24.5% to 27% of the employee’s salary to cover social security, which includes healthcare, pensions, and unemployment insurance.
Health Insurance (Isapre or Fonasa): Employers must contribute to health insurance programs, which provide medical coverage for employees.
The current income tax regime in Chile is progressive, with the following tax rates:
Income Level (CLP per year) | Tax Rate |
Up to 8,004,372 | Exempt |
8,004,373 to 17,799,064 | 4% |
17,799,065 to 29,665,104 | 8% |
29,665,105 to 41,531,143 | 13.5% |
41,531,144 to 53,397,182 | 23% |
53,397,183 to 65,263,221 | 30.4% |
Above 65,263,222 | 35% |
Chilean labor laws mandate several types of leave:
Paid Vacation: Employees are entitled to 15 working days of paid vacation after completing 1 year of service.
Maternity Leave: 18 weeks of paid maternity leave (6 weeks before and 12 weeks after childbirth).
Paternity Leave: 5 days of paid paternity leave.
Sick Leave: Paid sick leave is covered through the Chilean social security system, with the first 3 days typically covered by the employer.
The following table lists the mandated holidays in Chile:
Holiday | Date |
New Year’s Day | January 1 |
Good Friday | Varies |
Holy Saturday | Varies |
Labor Day | May 1 |
Naval Glories Day | May 21 |
Feast of Saints Peter and Paul | June 29 |
Our Lady of Mount Carmel Day | July 16 |
Assumption Day | August 15 |
Independence Day | September 18 |
Army Day | September 19 |
Columbus Day | October 12 |
All Saints’ Day | November 1 |
Immaculate Conception Day | December 8 |
Christmas Day | December 25 |
Employers in Chile are required to provide several benefits:
Social Security: Covers pensions, healthcare, and unemployment insurance.
Aguinaldo: A mandatory bonus paid during the national holidays of Independence Day and Christmas.
Gratuity: Not mandatory by law, but often included in collective bargaining agreements or employment contracts.
Healthcare: Medical coverage provided through Isapre or Fonasa, funded by employer and employee contributions.
Chile does not follow At-Will Employment laws. Termination must be justified under the Labor Code, and employers must follow specific procedures, including providing written notice and severance pay if applicable.
Notice Period: Typically, 30 days’ notice is required for termination without cause. If notice is not provided, the employer must pay an additional month’s salary as compensation.
Termination Benefits: Employees terminated without just cause are entitled to severance pay, which includes one month’s salary for each year of service, up to a maximum of 11 months.
Legal Challenges: Employees can challenge their termination in labor courts. If the court rules in favor of the employee, they may be awarded reinstatement or additional compensation.
Employers can legally terminate employees for just cause, including misconduct, poor performance, or redundancy. However, the reasons must be well-documented, and the employer must adhere to the legal termination process.
This guide provides a comprehensive overview of the labor laws in Chile, helping businesses navigate the complexities of hiring and managing employees in the country.