Payroll & Employment Guide: Chile

PEO Services in Chile

For companies that already have a legal entity in Chile, PEO services help streamline HR operations and ensure full compliance with local labor and tax regulations. A PEO acts as an extension of your in-country HR team, reducing administrative workload and improving operational efficiency.

A PEO in Chile assists with:

• HR administration, including employee records, onboarding, documentation, and daily HR support
• Payroll processing, ensuring accurate salary payments, deductions, and statutory reporting
• Benefits management, including mandatory benefits such as pension (AFP), health insurance, and unemployment contributions
• Compliance with Chilean labor regulations, covering employment laws, tax obligations, and social security requirements
• Ongoing employee lifecycle support, from hiring to exit procedures.

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Employee Benefits

Chile has robust statutory benefits managed through both employer obligations and social security administration.

Mandatory Benefits:

• Annual paid leave: 15 working days.
• Sick leave covered by the national health fund (FONASA) or private ISAPRE
• Maternity leave: 18 weeks
• Paternity leave: 5 days + shared parental leave options.
• Unemployment insurance contributions
• Pension (AFP) contributions
• Health contributions

Leave Policies:

Annual Leave

• Minimum 15 working days
• Accrues after 1 year of service
• Some regions allow additional vacation days due to geographic hardship

Sick Leave

• Requires medical certificate
• Employer does not pay directly; compensated through FONASA/ISAPRE

Parental Leave

• Maternity Leave: 6 weeks before + 12 weeks after birth
• Paternity Leave: 5 days
• Shared Parental Leave: Optional distribution of postnatal period

Public Holidays

Approx. 15–17 national holidays per year

Healthcare

Chile operates a dual system:

• FONASA (public health insurance)
• ISAPRE (private health insurance)

Employees must contribute 7% of their salary toward health insurance.

Many employers offer supplementary health plans for competitiveness.

Retirement Benefits

Pensions are administered by private AFP funds.

Contributions:

• Employee AFP: 10%
• Disability & survivorship insurance: ~1.5%
• Employer: contributes to unemployment insurance and work accident insurance

Social Security Contributions (2026)

Employer Contributions

• Unemployment Insurance: 2.4% (for indefinite contracts)
• Work accident insurance: 0.9%–3.4% (risk-based)

Employee Contributions

Pension (AFP): 10% Health (FONASA/ISAPRE): 7% Unemployment Insurance: 0.6%

Bonus & Incentive Programs

Common programs include:

• Annual bonuses
• Sales commissions
• Performance incentives
• Profit-sharing (optional but common in large companies)

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Taxes in the Chile

Chile applies progressive income tax through payroll withholding (Impuesto Único de Segunda Categoría).

Personal Income Tax (High-level 2026)

Progressive rates ranging approx.: 0% to 40%

Employees may receive tax deductions for

• Dependents
• Mortgage interest
• Pension savings
• Healthcare expenses

Payroll Cycle

• Salaries are paid monthly in CLP
• Pay date typically the last business day of the month

Payroll Requirements

Employers must ensure:

• Correct deductions (AFP, health, unemployment)
• Electronic payslips
• Compliance with labour reporting laws
• Payments made in Chilean Peso

Payroll Deadlines

• Contributions: Due monthly
• Tax Withholding: Payable monthly
• Annual Reporting: Mandatory employer declarations

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Legal Regulations

Key labour rules are defined by:

• Chilean Labour Code
• Social Security Laws
• AFP & Health Insurance Regulations

Typical Total Employment Cost

Employer costs generally add ~5% to 8% above gross salary, depending on insurance rates.

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Work Permits & Visas for the Chile.

Foreigners must obtain:

Types of Work Permits:

• Temporary Residence Visa for Employment.
• Contract-Based Work Visa Processing Time: 4–10 weeks.

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EOR & PEO Services in the Chile.

EOR services in Chile allow companies to hire employees quickly and legally without establishing a Chilean entity. This makes market entry faster, reduces compliance risks, and removes the burden of managing Chile’s complex labor and tax regulations.

Employer of Record (EOR) in Chile:

• Locally compliant employment contracts aligned with Chilean labor laws.
• Payroll processing & tax deductions, including monthly withholding requirements
• Social security contributions, such as AFP pension, health insurance, and unemployment fund.
• Benefits administration & compliance, ensuring all mandatory benefits are correctly managed
• Employee onboarding and documentation for smooth integration into your team
• Contract termination procedures, handled according to Chile’s strict legal requirements
• Ongoing HR support to manage employee lifecycle needs

EOR in U.S.

Payroll Calculator

A Chile payroll calculator can estimate:

• Net salary
• AFP & health contributions
• Total employer cost
• Unemployment insurance
• Total employer cost