Employment law in Chile: A quick guide

If you are interested in entering the market or are already doing business in Chile, you need to understand and comply with local laws. Employment law in Chile, overseen by the Ministry of Labor and Social Security, shares many similarities with other countries in the region, but also contains particularities that you will need to be aware of when doing business in the market.

Employment law in Chile covers a number of regulations, such as working hours, minimum wage, health and safety standards, and employee benefits. Companies must comply with these regulations to avoid legal complications and ensure a fair working environment. Understanding these laws is essential to maintaining good employee relations and avoiding potential legal disputes.

If you are determined to engage more deeply with the Chilean market, you will need to acquire the services of a reputable local lawyer to keep you compliant under employment law in Chile. Biz Latin Hub can help you throughout this process and support your business with our array of back-office services that operate across Latin America and the Caribbean.

What are the working hours under Chilean employment law?

Under employment law in Chile, a standard working week is currently 44 hours long and divided into no less than five and no more than six days. An average working day is nine hours long.

It is important to note that a new law entered into force in 2024, reducing the weekly working hours progressively, starting at 44 in 2024, 42 hours in 2026, and finally 40 hours in 2028.

Under current employment law, only workers in manager and executive positions, without direct supervision, can be exempted from the mandatory working hours rules. Note that in Chile there are generally between nine and 12 national holidays that fall on weekdays per calendar year.

3 Main contract types in Chile

There are three contract types under employment law in Chile that are most commonly used by foreign investors and corporations.

1. Indefinite-term employment contracts are the most common type of contract used in Chile and can only be terminated by mutual agreement between the employee and employer, or when one of the parties can act unilaterally, such as in the case of the employee resigning.
   
2. Fixed-term employment contracts can last for days, weeks, or months, but they generally do not exceed more than one year. However, in certain cases they can last for up to two years.
   
3. Specific task or project contracts — regarded as an “undetermined contract” — have no specific date for when the contract ends, meaning that clear makers and thresholds must be established in order to eliminate any ambiguities regarding the completion of the project.

What types of absences are covered by employment law in Chile?

According to employment law in Chile, after 12 months of service with the same employer, an employee is entitled to 15 days of paid vacation leave. That leave can be accrued for a period of up to two years, meaning an employee can build up 30 days of PTO. 

Under Article 70 of the Chilean labor code, when an employee accrues two periods of PTO allowance, the employer is obliged to grant or instruct the employee to use the allowance from at least one of those allowances (i.e. 15 days of leave) before the completion of a third period and accrual of more leave.

It must be noted that PTO is a nonnegotiable guarantee under Chilean Law, which means that it cannot be replaced by financial compensation, and cannot be given up by the employee, and will ultimately have to be paid for by the employer at the end of the contract in case they were not used.

• Sick leave: Employees are entitled to payment for leave due to illness, however, when that sick leave lasts for less than 11 days, they do not get paid for the first three days. For example, if an employee is off work sick for five days, they will be entitled to payment for two of those days.
  
  If sick leave lasts for 11 consecutive work days or more, the employee is entitled to payment for all of them. In all cases, sick leave is paid for by the employer’s health insurance provider.
  
  Note that within two working days of returning to work, an employee must present documentation proving their illness that is signed by a registered physician.

• Maternity and paternity leave: According to employment law in Chile, maternity leave allowance totals 12 weeks and begins six weeks before the expected date of birth. Fathers are entitled to five days of paid paternity leave. However, in the event that the mother does not use all of her maternity leave allowance, she is able to transfer it to the father from the seventh week after the birth of the child. 
  
  Maternity and paternity leave are paid for by the government or the company health insurance provider.
  
• Bereavement leave: In the event of the death of a spouse, civil partner, or child, employees are entitled to bereavement leave totaling seven days. In the event of the death of a parent, they are entitled to paid bereavement leave totaling three days.

What are the mandatory contributions under Chilean labor legislation?

According to employment law in Chile, employers must oversee making the following deductions from employee salaries and contributions from employers must be made:

• Employee deductions generally total around 18.6% of the employee’s salary, including an 11% deduction that goes toward the pension fund chosen by the employee. 
  
  Additionally, a 7% deduction goes to the national public health agency FONASA, and a deduction goes towards unemployment insurance and totals approximately 0.6%. Note that the minimum wage according to employment law was set at 337,000 Chilean pesos (approximately US $408) in 2021.
  
• Employer contributions total around 5.7% of an employee’s salary, with a contribution equal to 2.3% of the salary going towards disability insurance and paid through the employee’s pension fund. 
  
  A further contribution of 2.4% must also be made for unemployment insurance and is also paid through the same pension fund.
  
  Accident insurance is based on the level of occupational risk associated with the role being undertaken, however, it generally totals around 0.93%.
  
• Profit sharing is mandatory under Chilean employment law and means that any company must share 30% of net profits with its employees. The share received by each individual is calculated based on their salary level, and profit shares can be distributed on a monthly or annual basis, based on the preference of the employer.

FAQs on employment law in Chile

In our experience, these are the common questions we face from our clients.

Biz Latin Hub can help with employment law in Chile

At Biz Latin Hub, our multilingual team of corporate support specialists is available to help you get to grips with and properly implement employment law in Chile.

We have a comprehensive portfolio of back-office services, including company formation, visa processing, accounting & taxation, legal services, and hiring & PEO,  allowing us to offer tailored packages of integrated services to suit every need.

Beyond Chile, we also have teams operating in 15 other markets around Latin America and the Caribbean, and we specialize in multi-jurisdiction market entry.

Contact us today to receive more information about how we can support you doing business in Chile.

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