Employee benefits in Chile: All you need to know

The Chilean labor market offers a wide array of talented workers for both local and non-resident companies to employ.

However, employing workers overseas can be a difficult feat if you’re not informed and compliant with employment laws and regulations in every country you intend to hire.

How do you develop a strong benefits package in Chile?

There’s a significant list of statutory benefits you must provide according to local labor laws. We’ve also pulled together a collection of additional perks that could be the tipping point to push a potential candidate to choose you over a competitor.

In this guide to managing benefits and compensation in Chile, we’ll walk you through:

• How to classify workers correctly to determine who is entitled to what benefits in Luxembourg

• The statutory benefits you’re must provide

• Additional perks that’ll help you get a new candidate over the line

• How to develop a compensation package to compete in the local market

• When and why you need to start using an employer of record

Already have a star candidate in Chile?

Jump to our Chile Country Hiring Guide to work through all the local requirements you need (and the next steps to take to get started).

Who is entitled to employee benefits in Chile?

Full-time Chilean employees are entitled to benefits. A full-time workweek in Chile is 45 hours. In Chile, an independent contractor or a self-employed individual isn’t entitled to the same statutory provisions as an employee.

It’s important to understand this delineation. With the exception of social security contributions, the majority of benefits stated in Chilean legislation only apply to full-time employees.

Regardless of whether you view a worker as an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employee relationship and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification and subsequent fines or penalties.

For more detailed information about understanding this concept, be sure to read our dedicated guide to misclassification.

Statutory and common employee benefits in Chile

Chilean employees are entitled to at least 15 paid days off per year. To access this benefit, workers must be employed for at least one year.

There are 16 public holidays in Chile, and for more information about public holidays in Chile, you can access Remote’s Chile Country Explorer page to see exact dates.

Sick leave

In Chile, employees are entitled to sick leave if they can provide a documented medical excuse within two days from the beginning of the leave.

As an employer, you must send these documents to the health insurance agency within 3 days to organize compensation.

Maternity and paternity leave

According to Chilean employment law, pregnant mothers can take 30 weeks of paid maternity leave, starting six weeks before birth and 24 weeks after.

During their pregnancy, female workers don’t have to engage in work activities that may endanger their health, including heavy lifting.

If the job requires this type of activity, the employer must assign pregnant workers to another position without pay reduction.

Mothers of children under the age of 18 are also entitled to parental leave of up to 10 days. Nursing mothers can take breaks that last up to one hour to breastfeed a child under the age of two.

Similar to mothers, fathers are entitled to paid parental leave. Partners can take up to five days off after delivery. And after the seventh week of birth, the mother has the option to transfer some or all of her maternity leave to their partner.

Minimum wage

The Chilean government sets two rates for minimum wage, one for working adults, and another for minors or retirees.

For adults 18 and older, the minimum wage is 326,500 Chilean pesos, or USD$440. On the other hand, for workers under the age of 18 or over the age of 65, minimum wage rates are 243,561 pesos, or USD$318.

Overtime

In Chile, employers have to pay overtime at a rate of 150% of the regular pay. If an employee works overtime in Chile, they have the right to extend the day by no more than two hours per day, or 10 hours a week.

Pensions

Chile’s pension system includes old-age, disability, and survivor pensions for workers. The Chilean government sets a 0.90% pension contribution for employees.

At the retirement age (65 for men and 60 for women), workers can use the balance in their pension accounts to do one of the following:

• Purchase an immediate annuity to receive lifetime benefits

• Set up automatic withdrawals over the course of their expected lifespan

• Purchase a deferred annuity, which will allow them to set a future date for purchasing an annuity. Until then, they can automatically withdraw money from their account

• Purchase an immediate annuity with some of the funds in their account and make automatic withdrawals with the rest of the money.

Unemployment insurance

Under the Chilean Labor Code, mandatory unemployment insurance is in place to support employees.

The employee contributes 0.6% of their paycheck to fund unemployment insurance. This also includes the employer’s mandatory contribution of 2.4%. These contributions are based on the employee’s taxable income capped at 90 UF.

Health insurance

In Chile, employees must pay 7% of their monthly paychecks for health insurance. Employers withhold these contributions from an employee’s paycheck and must pay the insurance.

Worker’s compensation

For worker’s compensation, employers in Chile are responsible for paying a 0.95% premium.

The higher the risk of the worker’s actions that led to the accident, additional rates may apply. For example, an employer could pay up to 3.4%.

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Additional benefits to consider for Chilean employees

Let’s look at some ways to build an internationally competitive benefits package that you can customize to attract top Chilean workers.

Private and supplemental health insurance

You could offer private or supplemental health insurance to incentivize employees to work for your company.

Although the minimum requirement for companies in Chile is to offer public health insurance, employers can go beyond those requirements.

For example, as an employer of global workers, you can give your employees access to more premium coverage. Supplemental health insurance can help employees pay for additional medical care such as emergency room visits, hospital stays, outpatient surgery, and other potential extra costs.

You could even bolster your package with additional dental, optical, or life insurance to help you separate your offer from competitors chasing quality Chilean candidates.

Private pensions and supplemental retirement insurance

The public pension system in Chile is a pay-as-you-go (PAYG) system. The funds workers contribute to the system builds their pensions. This system requires workers to contribute 10% of their monthly earnings to their individual accounts.

Because public pensions in Chile can cause stress and uncertainty for workers, private models are often more attractive, as they offer better security.

Astute employers can entice Chilean employees by offering a private alternative. You could even consider an additional component of contributions from the employer side to supplement the employee’s individual contribution. By investing so directly in your team members’ futures, you build a strong sense of commitment, connection, and loyalty with this signal of care.

Creating a competitive and compliant compensation package

In Chile, the average annual wage in 2020 was approximately $26,728 US per year. If you want to attract top-level talent in Chile, then you should be prepared to pay above this rate.

There are various factors that determine how much an employee earns in Chile such as experience level and education, but in a global labor market, doing the bare minimum for your employees won’t deliver consistently excellent performance.

You may run into recruitment and retention challenges as employees and candidates seek more supportive cultures. The most successful global leaders develop a strategy that produces internationally compliant, competitive, and equitable benefits packages.

Remote always advocates for our customers to consider a global benchmarking system to pay your employees a salary that competes with the global industry average wherever you’re hiring. This strategy will enable you to find and keep the best talent. Remote’s guide to calculating global compensation gives you a number of mechanisms you could use to consistently create competitive offers.

Additional Paid Time Off (PTO)

Even though Chilean statutory requirements offer employees plenty of PTO, you can always exceed those minimum requirements. The perceived value of this benefit is significant in the mind of the employee, however the cost to your business is comparatively minimal.

For example, some companies offer up to six weeks of PTO to recruit and retain Latin American employees, matching provisions more commonly seen in the European labor market.

Generous time off does more than give your employees time to refresh and recharge. This benefit signals that your company truly cares for their team’s wellbeing and at Remote we consistently see this provision cited as one of the best employee benefits to attract top global talent.

Soft benefits to attract global workers

You don’t have to allocate huge budgets to prepare the type of benefits package that will incentivize and motivate your employees. There are so many alternative affordable perks that small businesses can offer remote teams.

Here’s a quick list of options that won’t hamper your growth or your bottom line:

• personal learning and development budget

• therapy or coaching allowance

• mentorship programs

• volunteering days

• flexible working hours

• home office stipends

• Meal and travel allowances

For more detailed information, check out our dedicated article on alternative value-based benefits you could consider.

How to set up and manage benefits for international employees

Preparing employment contracts, onboarding new hires, and managing payroll for a growing team is tricky enough when you own a legal entity in your country of operation.

When you hire across borders, things can get complicated fast.

Building your own legal entity is out of reach for all but the largest global businesses. The resources involved are exponentially more than other alternatives.

Instead of partnering with multiple local experts in each new country of operation, you could consider an employer of record (EOR) to manage all of your international hiring needs with one point of contact. Rather than searching for multiple payroll partners, legal experts, and HR providers – an EOR offers you a much more scalable proposition (and in Remote’s case at a fraction of the cost)

Our team of HR specialists are on the ground in regions around the world. We act as our customers’ own team of local experts, building locally customized employment packages.

Benefits & Leave —

2 min

[Webinar Recording] Managing a global benefits plan

In this one-hour webinar, you’ll get a crash course on all things global benefits, as well as a lively Q&A with real questions from business owners hiring around the world.

When should you use an employer of record?

Simply, an EOR will maintain compliance whenever you are considering an international hire.

An EOR can help you at any step of the global employment process. Our dedicated guide to understanding when you should use an EOR outlines a few key situations that should spark an employer to reach out for support. Just make sure you ensure your EOR can provide the following support:

• Creating compliant contracts for international candidates

• Developing benefits and compensation plans to meet local requirements and expectations

• Onboarding new employees (and contractors)

• Managing payroll for workers in countries where you don’t own a local legal entity

• Handling terminations and dismissals according to local labor law stipulations

• Protecting any IP & patents produced by your remote employees

How to set up and manage benefits for international employees

If you want to hire in Chile, you need expert knowledge of how compensation and benefits fit in with your global team and the specific local context.

And that’s why we built Remote.

• Our internal benefits and HR experts have decades of experience building culturally aware employment packages

• We have legal and taxation experts dedicated to keeping you compliant with ever-changing localized regulations

• Remote’s internal expertise allows you to build strong and meaningful connections with your international team

An employer of record like Remote takes the stress and pressure out of global hiring so your team can focus on growing your business. Managing your HR needs in Chile is just the start of the world of opportunities open up for you and your company.

You can learn more about how Remote simplifies global HR to help you develop a more connected, motivated, and powerful global team.

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