Chile excels as an economically strong country in Latin America. As a result, several thriving small and medium enterprises operate in the region. These companies are usually found competing for the best talent to improve the quality of their operations. According to Statista, the IT outsourcing market is projected to exceed 1 billion dollars by 2029 which is an indicator of the influx of foreign companies who wish to hire from the region. Chile is also the highest ranked South American country on the Global Competitiveness Index. Therefore, companies compete intensely here and are always looking to impress workers and potential employees. When these companies start to operate out of the region, they are expected to incorporate additional perks and benefits into the employee payroll system to attract the best talent. 

Employee benefits are a crucial part of the payroll system in Chile, and many startups incorporate them because they offer benefits to employers and employees. They serve as an incentive for the workforce and reduce turnover rates to ensure employers don’t spend much on training and onboarding. You must also understand all existing statutory benefits for employees in Chile to create a comprehensive payroll package that’s rewarding for your workers and legally compliant. 

Read more: Payroll Taxes & Expenses in Chile

Eligibility and Expectations: Understanding the Chilean Benefits Landscape

Any full-time Chilean employee on your payroll is entitled to statutory benefits. Before now, Chile adopted a 45-hour work week. However, it’s been reduced to a 40-hour work week, but this reduction will occur in phases. In Chile, independent contractors are not entitled to the same statutory benefits as employees. As a result, it makes sense to classify each person that works for you properly. 

If you’re unclear on whether to classify your workers as employees or independent contractors, contact a legislator for expert insight. This tip helps you avoid the penalties for misclassification. 

Statutory vs. Market-Driven Benefits in Chile

Chilean employees receive several statutory benefits. Each of them is stipulated by the local labor code. They include: 

Minimum Wage

The minimum wage was introduced to tackle exploitation and ensure all employees receive fair compensation for their skills. There are two minimum wage rates in Chile, for adults and minors or retirees. 

If you’re hiring any employee 18 years or older, the minimum wage is 326,500 CLP. However, if you’re hiring workers younger than 18 years and older than 65, the minimum wage is 326,500 CLP. 

Overtime

In Chile, overtime is paid at 150% of the regular wage rate. However, employee overtime is limited to 2 hours per day or 10 hours per week. 

Pension

These statutory deductions contribute to disability, old age, and survivor pensions for Chilean employees. Local laws require employers to make a 0.90% contribution to employee pensions. When retiring, workers may use the balance in their pension account to purchase an annuity, schedule automatic withdrawals for the rest of their lives, or purchase a deferred annuity. 

Unemployment Insurance

The Chilean Labor Code stipulates that all employees must contribute to unemployment insurance to support their employees. While employees are expected to contribute 0.6% of their earnings to unemployment insurance, employers face a mandatory contribution of 2.4%. These contributions are calculated based on the employee’s taxable income and are capped at a 90 UF limit. 

Worker’s Compensation

Employers are expected to pay worker’s compensation at a 0.95% premium. This money is given to employees in the case of a work accident. Employees may be entitled to as much as 3.4% compensation depending on the actions that led to the accident. 

Public Holidays

Chile places a lot of emphasis on striking a work-life balance. That’s why you’ll find a long list of public holidays in the region. All employees are entitled to 15 public holidays annually, during which they get paid for their time off work. The employee must have worked for you for at least a year to enjoy this perk. The paid public holidays available to Chilean employees include 

  • New Year’s Day
  • Good Friday
  • Good Saturday
  • Labour Day
  • Navy Day
  • Indigenous People’s Day
  • Saint Peter and Saint Paul Day
  • Our Lady of Mount Carmel
  • Assumption Day
  • Independence Day
  • Day of the Glories of the Chilean Army 
  • Meeting of the Worlds
  • Reformation Day
  • All Saints Day
  • Immaculate Conception Day
  • Christmas Day. 

Leave Entitlements

Public holidays aren’t the only paid days off for Chilean employees. Workers from this region also enjoy different leave entitlements, including sick leave, maternity leave, and paternity leave. 

Aside from these statutory benefits, Chilean employees also want benefits similar to those of top tech talents in other parts of the world, such as equity and stock options, remote work allowances, gym memberships, meal vouchers, and performance bonuses. If you’re employing workers in Chile, it’s crucial to learn what other top talent in other parts of the world is earning and combine it with what’s stipulated in the local labor code.  

Health, Wellness, and Beyond: What Top Talent Wants

If you’re interested in standing out from other employees in the same industry, you can provide private health insurance to your employees. For instance, you can pay your employees for premium coverage, including outpatient surgeries, hospital stays, and emergency room visits. You may even offer optical or dental care. These benefits are attractive but will cost you additional money. 

Read more: Leave Policies in Chile

Leave Entitlements: Beyond the Basics

As mentioned earlier, Chilean workers have different leave entitlements, such as sick leave, maternity leave, and paternity leave. To attract top talent and compete favorably against any of the 290 startups operating in Chile’s capital, you need to ensure these leave entitlements are a major part of employee benefits. Let’s break down each one. 

Sick Leave

Employees who fall sick and cannot handle their obligations are entitled to paid time off work. However, employees must submit a documented medical report to their employees at least two days before their leave starts. Employers must also send this medical report to the health insurance agency within three days to process compensation. It’s crucial to note that employers reserve the right to turn down a sick leave request if they feel the employee is exaggerating their medical condition. 

Maternity Leave

The maternity leave is a 30-week paid time off work. However, there are several variations into which mothers may prefer to split their leave. For instance, they may wish to take a break 6 weeks before childbirth and spend 24 weeks off after childbirth. During their pregnancy, employees are also exempt from strenuous activities that could endanger their health or that of their unborn child. If the pregnant employee’s role requires this type of activity, employers must reassign her duty without reducing pay. 

Upon resumption of their duties, nursing mothers can take a one-hour break to breastfeed their baby. Mothers with kids younger than 18 are also entitled to up to 10 days of parental leave. 

Paternity Leave

Like maternity leave, paternity leave allows fathers to spend time with their newborns. Fathers are entitled to 5 days off work. After the seventh week of birth, nursing mothers may transfer all or some of their maternity leave to their partners. 

Implementing Competitive Benefits Strategies in Chile

If you’ve never operated in Chile, creating a comprehensive benefits scheme for your employees can be relatively difficult. However, this process is crucial to make your employment more attractive to the best talent. According to Statista, more than 75.4% of the population are covered by the public health insurance scheme by 2020 highlighting the importance of these benefits to workers in the region. When you’re done, you’ll be able determine the overall cost of your employees’ statutory benefits and how it affects your company’s finances. A comprehensive benefits scheme also indicates to prospective employees that you care about their welfare. 

The following steps will show you how to implement and deliver competitive benefit packages to meet the expectations of top talent in your workforce: 

  • Define the purpose of your benefits package: The first thing to do when designing a benefits package is to determine the scheme’s purpose. While the benefits you offer employees are meant to comply with local standards, there’s enough room to offer unique perks. Your organization’s goals for providing employee benefits determine how much you’ll commit to these packages. For instance, if you’re looking to attract the biggest names in the tech ecosystem, you may offer more perks than what’s stipulated in Chile’s labor code. 
  • Balance employee expectations and industry standards: Chile’s labor code stipulates a list of statutory benefits employers are expected to offer their employees. However, it makes sense to research what other companies in your industry are doing to avoid getting left behind. You should also conduct an internal survey to identify what your employees want. This additional research into employee expectations and industry standards shows you what’s widely acceptable and also allows you to compare these needs with what you can afford. 
  • Encourage flexibility: After researching and deciding on the elements of your benefits package, it’s crucial to stay flexible. There may be instances where you have to offer more benefits than usual, and you may also have to reduce these benefits if they’ve become too costly to maintain. 
  • Communicate details of the benefits scheme to your workers: Your benefits scheme may not have the desired effect if your workers and prospective employees are unaware of how it’ll benefit them. You must inform your staff before adopting a new benefits package. However, leave room for feedback to know their feelings about these new perks and gain their respect.  

If you struggle to create a competitive benefits strategy for your business, an hiring agency can help you handle the burden. While Globy is a platform that focuses on hiring and connecting companies to the best talent, this service provider can indirectly help you create a benefits strategy that ensures your employees are always offering their best. To do this, we’ll connect you with our EOR partners who will help you with your benefits strategy and even register these perks with the relevant authorities. Additionally, they’ll help you handle payroll and file benefit-related documents with the authorities. 

Further reading: Work Hours in Chile and Employer of Record in Chile

FAQs

Employers in Chile contribute to social security, health insurance, pension funds, unemployment insurance, and occupational accident insurance. These contributions typically amount to approximately 24.5% of an employee’s gross salary, ensuring comprehensive coverage for employees’ health, retirement, and social security needs.

In Chile, employee benefits include health insurance, pension contributions, unemployment insurance, paid vacation, sick leave, maternity/paternity leave, and severance pay. These benefits ensure financial stability, healthcare, and support during employment transitions, contributing to overall employee well-being and job security.

Chile does not mandate a 13th-month salary by law. However, some employers may offer bonuses or additional payments at year-end as part of their compensation packages, providing extra financial support to employees during the holiday season.

Yes, Chilean employees contribute to their employment benefits. They typically pay around 20% of their gross salary towards social security, health insurance, and pension funds. These contributions ensure employees can access healthcare, retirement savings, and other social benefits.

Employee taxes in Chile include income tax, which ranges from 0% to 40%, and contributions to social security, health insurance, and pension funds, totaling around 20% of their salary. These taxes and contributions fund public services and social benefits for workers.

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Article author
Vit Koval
Co-founder at Globy
A top Global Hiring voice on LinkedIn, co-founder of Globy, and host of Default Global. Using deep expertise in global hiring, remote work, and global business expansion to help companies excel worldwide with innovative strategies.