Employment in Chile is governed by the Labour Code (Código del Trabajo) and enforced by the Labour Directorate (Dirección del Trabajo). The working week is shrinking in stages to 40 hours and a new employer pension contribution is being phased in. Here is what employers need to know about leave, pay, tax and ending employment.
Paid vacation is set by the Labour Code. Sick, maternity and parental leave are paid as subsidies by the employee’s health system (FONASA or an ISAPRE), not by the employer, while the employer keeps the job open.
Working days of paid vacation after 1 year of service. After 10 years of work (up to 3 of them with previous employers), 1 extra day for every further 3 years with the current employer.
6 weeks before the birth and 12 weeks after, paid as a health system subsidy.
Follows maternity leave (or 18 weeks part-time). The mother can transfer up to 6 weeks to the father.
Paid by the employer, to be taken within the first month after the birth or adoption.
Employees on sick leave need a medical licence (licencia médica), now issued electronically. The health system pays a subsidy in place of wages. For leave of 10 days or less, the first 3 days are unpaid.
Set up each Chilean leave type in IceHrm with its own accrual, carry forward and approval rules, including progressive vacation days for long-serving staff. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
The monthly minimum income (ingreso mínimo mensual) is set by law. The 40-hour law is cutting the maximum working week in stages: to 42 hours from 26 April 2026 and to 40 hours from 26 April 2028.
For workers aged 18 to 65, from 1 May 2026 (Law 21.830). The same law provides for a further adjustment on 1 January 2027.
Spread over 5 or 6 days, with no more than 10 ordinary hours in a day.
Overtime is limited to 2 hours a day and must be agreed in writing.
Companies that make a profit must share it with employees. Most employers use the method of paying 25% of each employee’s annual wages, capped at 4.75 monthly minimum wages a year, often as monthly advances.
Capture attendance and overtime in IceHrm and feed the hours straight into payroll, so overtime reflects what was actually worked as the weekly limit steps down. Time & attendance →
Employers withhold the single second-category tax (impuesto único de segunda categoría) from monthly wages after deducting mandatory pension and health contributions. Brackets are set in UTM, a tax unit indexed to inflation, and the Internal Revenue Service (SII) publishes the peso values each month.
| Monthly taxable income (UTM) | Approx. CLP (Sept 2026) | Rate |
|---|---|---|
| Up to 13.5 | Up to 968,234 | 0% |
| 13.5 – 30 | 968,234 – 2,151,630 | 4% |
| 30 – 50 | 2,151,630 – 3,586,050 | 8% |
| 50 – 70 | 3,586,050 – 5,020,470 | 13.5% |
| 70 – 90 | 5,020,470 – 6,454,890 | 23% |
| 90 – 120 | 6,454,890 – 8,606,520 | 30.4% |
| 120 – 310 | 8,606,520 – 22,233,510 | 35% |
| Over 310 | Over 22,233,510 | 40% |
Employees fund most of Chile’s social security themselves: about 10% to their pension fund (AFP) plus the AFP’s commission, and 7% for health. The 2025 pension reform (Law 21.735) adds an employer contribution that started in August 2025 and rises every year until it reaches 8.5% in 2033.
| Contribution | Employer | Employee |
|---|---|---|
| Pension reform: individual account | 0.1% | – |
| Pension reform: social insurance (protected return and life expectancy) | 1.62% | – |
| Disability and survivors’ insurance (SIS) | 1.78% | – |
| Unemployment insurance – open-ended contract | 2.4% | 0.6% |
| Unemployment insurance – fixed-term contract | 3% | – |
| Work accident insurance | 0.93% + risk surcharge | – |
| Pension fund (AFP), plus commission | – | 10% |
| Health (FONASA or ISAPRE) | – | 7% |
Build Chilean pay the way you already structure it, with your own salary components, deductions and formula columns, such as AFP, health and gratificación columns. Want to know how well IceHrm handles payroll calculations for Chile? Contact us or see Payroll →
Employment cannot be ended at will. The employer must rely on a cause set out in the Labour Code and give written notice stating the cause and facts, with a copy to the Labour Directorate. If a court finds the dismissal unjustified, severance is increased by 30% to 100%.
Dismissal for business needs requires 30 days’ written notice, or one month’s pay in lieu.
| Service | Severance |
|---|---|
| Less than 1 year | Nil |
| Each full year of service (and part year over 6 months) | 30 days’ pay |
| Maximum | 330 days (11 years) |
Final settlements (finiquitos) must be signed before a notary, a labour inspector or electronically through the Labour Directorate, and include unused vacation paid out in full.
Chile has around 16 national public holidays a year. Some move to the nearest Monday or Friday, and election days are also public holidays.
1 May, 18 and 19 September, 25 December and 1 January are “irrenunciable” for most retail workers, who cannot be asked to work on those days. Some regions have additional holidays.
Leave groups give each office its own holiday calendar, so moved holidays, election days and regional holidays are applied to the right teams automatically. Holiday calendars →
Employment contracts must be in writing and signed within 15 days of the start date, or within 5 days for fixed-term contracts or contracts for a specific job of under 30 days. They are usually written in Spanish.
Chilean law has no probation period. Employers often start with a short fixed-term contract instead. A fixed-term contract may last up to 1 year (2 years for managers and professionals). It becomes open-ended if it is renewed a second time, or if the employee keeps working after it expires with the employer’s knowledge.
Send contracts for e-signing within the legal deadline, store them on the employee’s record, and track onboarding with task lists so AFP and health enrolment are never missed. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Chile, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Chile? Talk to us.
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