Hire Employees in Chile

Your own entity is normally an SpA or SRL. Incorporation is quick by regional standards, and Chile’s institutional stability makes the entity route more attractive here than in several neighbours.

An Employer of Record inverts the sequence: the Chilean entity signs the contract within fifteen days of the start, affiliates the employee to an AFP and health insurer, and files through Previred — while you direct the day-to-day work.

Chilean labour law applies to work performed in Chile. The Código del Trabajo is prescriptive about process, and several of its requirements — the fifteen-day contract deadline, the ley Bustos rule on contributions — have no equivalent elsewhere.

Chile has the lowest employer contribution in Latin America — around 4–6% — because the pension system is employee-funded through individual AFP accounts. The employee pays 10% plus an administrator commission; the employer pays disability and survivorship insurance, unemployment insurance and accident cover, and little else.

That is changing. The pension reform approved in January 2025 introduces a new employer contribution phasing in from August 2025 over nine years, ultimately adding several points to employer cost. Any multi-year model that treats the current figure as stable will understate the later years, and guidance written before 2025 misses it entirely.

Chilean contribution ceilings are expressed in UF, an inflation-indexed unit, and reset annually — which is why published caps vary between sources depending on when they were written. The pension and unemployment ceilings differ from each other, so they need applying separately.

Two further points shape the model. There is no probation period in Chilean law, so protection applies from day one and the written contract must be signed within fifteen days of starting. And gratificación legal — a statutory profit share, commonly settled as 25% of salary capped at 4.75 minimum wages — is mandatory for profitable employers and frequently omitted from foreign cost models.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a small Chilean entity somewhere between 15 and 20 employees. Model both before committing — see EOR vs Entity for the full comparison, and plan any later migration so employees keep seniority.

Chile has the lowest employer contribution in Latin America because the pension system is employee-funded. The employee pays 10% into an individual AFP account plus an administrator commission; the employer pays disability and survivorship insurance at about 1.5%, unemployment insurance at 2.4% on an indefinite contract or 3% on a fixed-term one, and mutual accident cover.

That position is changing. The pension reform approved in January 2025 introduces a new employer contribution phasing in from August 2025 over nine years. Any model treating the current figure as stable will understate the later years, and guidance written before 2025 misses it entirely.

Ceilings are expressed in UF and reset each February, and 2026 shows why that matters. The Superintendencia set a provisional 89.9 UF in January, then revoked it and fixed the definitive 90.0 UF from 1 February — so both figures are correct for different months. Unemployment insurance has its own, much higher ceiling of 135.2 UF. The two must be applied separately, and a payroll configured once in January will be wrong from February.

Four representative profiles, costed with the 2026 contribution rates above. Salaries are illustrative market midpoints, not GX operating data — use them to see how the on-cost percentage behaves as pay rises, not as a salary benchmark for a specific role. For real market data on your roles, ask for a costing.

Because the main charges are capped, the on-cost percentage falls sharply above the ceiling. Model a senior hire explicitly rather than scaling the junior figure — the error runs in your favour but it distorts the comparison against uncapped markets.

Four representative profiles costed on 2026 statutory rates. Salaries are illustrative market midpoints, not GX operating data.

Payroll runs monthly in pesos. Contributions are declared and paid through Previred by the tenth of the following month, or the thirteenth when paying electronically.

Gratificación legal is a statutory profit share that foreign models routinely omit. A profitable employer must distribute 30% of taxable profit among employees, or alternatively pay 25% of each employee’s annual remuneration capped at 4.75 minimum monthly wages. Most employers elect the second method, which makes it a predictable monthly accrual of roughly 25% of salary up to the cap.

Income tax is withheld monthly against a progressive scale expressed in UTM units, which are uprated monthly for inflation, so the bands move continuously rather than annually.

Thresholds and ceilings are uprated periodically, so a figure correct in January may not hold later in the year. Where a row below is flagged, published sources disagreed and the conflict is recorded rather than resolved.

Thresholds move on a local cycle that does not always fall in January, so a figure correct at the start of the year may not hold through it. Where a row below carries a flag, published sources disagreed and the conflict is recorded rather than resolved — there are 4 such rows on this page.

The sections that follow set out contracts and probation, working time, leave, termination and immigration in that order. Where an entitlement comes from a collective agreement rather than statute it is marked as such, because that distinction determines whether it is negotiable.

There is no probation period in Chilean law. Protection applies from the first day, and the only flexibility is the termination grounds themselves.

The written contract must be signed within fifteen days of the employee starting work, or five days for a contract under thirty days. Failure to do so creates a presumption that the employee’s stated terms are correct — a meaningful evidential disadvantage in any dispute.

Fixed-term contracts are limited to one year, or two for professionals with a degree. A second renewal, or continued work after expiry, converts the relationship to indefinite. An employee who has worked twelve months or more in a fifteen-month period under successive fixed terms is also presumed to be indefinite.

The working week is being reduced from 45 to 40 hours in stages under Ley 21.561, reaching 44 hours in 2026 and 40 by 2028. Overtime is capped at two hours a day, requires written agreement and is paid at a 50% premium.

Overtime is where payroll disputes usually start. Record hours from day one even where the role is salaried and the expectation is that overtime will not arise — reconstructing records after a complaint is far harder than keeping them.

Overtime is where payroll disputes usually begin, and the burden of proving hours worked generally sits with the employer. Record hours from the first day even for salaried roles where overtime is not expected — reconstructing a record after a complaint is considerably harder than keeping one.

Public holidays sit on top of the annual leave entitlement. Where a holiday falls at a weekend, practice varies — some markets move it, some grant a substitute day and some do neither, so check the position before assuming a day in lieu.

The 16 dates below are the statutory position. Employers in many markets grant more by policy or collective agreement, and sector agreements sometimes add local or patronal days that do not appear in a national list.

Chile observes 16 paid public holidays in 2026. Dates that fall at a weekend and any substitution rules are set out below; entitlement is separate from annual leave.

Maternity: 6 weeks before and 12 weeks after the birth — Paid by the state health system up to a cap, not by the employer. Parental postnatal leave: A further 12 weeks full-time, or 18 part-time — State-funded; up to 6 weeks may be transferred to the father. Paternity: 5 working days — Employer-paid. Sick leave: From day 1 with a medical licence — The state or the Isapre pays; absences of 10 days or fewer are paid from the fourth day.

Bereavement: Between 4 and 7 days depending on the relationship — Paid, and the employee may not be dismissed during it.

The question that matters for budgeting is who funds each entitlement. Where the state or a social insurance fund pays, the employer carries administration but not cost; where the employer pays, it is a direct charge that headcount models routinely omit. Both patterns appear above.

Chilean dismissal must cite a ground from the Labour Code, and the ground determines whether compensation is payable. Article 161 — company needs, the closest thing to redundancy — attracts severance of one month per year of service capped at eleven years, plus a month in lieu of notice unless thirty days' notice is given.

Article 160 dismissals for serious misconduct attract no severance, but the bar is high and the ground must be specified precisely in the termination letter. Citing the wrong ground is one of the most common and most expensive errors here: a court that rejects the stated cause converts the dismissal into an Article 161 exit with a surcharge of 30% to 100% on the severance.

The finiquito — the settlement document — must be signed before a notary or a labour inspector to be enforceable. Until it is ratified the employee can still bring claims, so the ratification is not a formality.

Termination must also be notified to the Dirección del Trabajo, and social security contributions must be current — the ley Bustos rule means a dismissal is invalid and salary continues to accrue where contributions are outstanding.

A foreign national needs a work visa, either subject to contract or as a temporary resident. The subject-to-contract visa ties the employee to a named employer, and its termination ends the visa.

A 15% limit on foreign staff applies to employers with more than 25 employees, calculated across the whole workforce. Exemptions apply for specialist roles and for foreign nationals with Chilean spouses or children, or with permanent residence.

Allow one to three months. Chile’s 2021 immigration reform tightened in-country status changes, so the visa should generally be secured before arrival rather than adjusted afterwards.

The ley Bustos rule is the risk that catches foreign employers hardest. A dismissal is invalid where social security contributions are outstanding, and salary continues to accrue until they are paid — so an administrative arrears problem converts directly into an open-ended payroll liability.

Citing the wrong termination ground is the second exposure. An Article 160 dismissal for serious misconduct attracts no severance, but where a court rejects the stated cause it converts to an Article 161 exit with a surcharge of 30% to 100% on the severance.

Practical controls: keep contributions current without exception, sign the contract inside fifteen days, state the termination ground precisely in the letter, and ratify the finiquito before a notary or labour inspector — until that happens the employee can still bring claims.

Work backwards from the start date. For a Chilean national through an EOR, one to two weeks is realistic. A foreign national needs a work visa, adding one to three months, and there is a limit of 15% foreign staff for employers with more than 25 employees.

Confirm before making an offer: that the written contract will be signed within fifteen days of starting, since there is no probation period to fall back on; whether gratificación applies and how it will be settled; and which UF ceilings apply for the current year, as they reset annually.

AFP, health and unemployment insurance affiliation must be complete before the first payroll, and contributions must stay current throughout — under the ley Bustos rule, a dismissal while contributions are outstanding is invalid and the employer continues to owe salary until they are paid.