Employer of Record in Chile: how to hire compliantly without an entity.
Employ full-time employees in Chile without setting up an entity. Locally compliant contracts, monthly payroll, statutory benefits, taxes. Below: what the law actually requires, in plain English.
- Country
- Chile
- ISO code
- CL
- Region
- South America
- Phone code
- +56
- Employ Latam coverage
- Full EOR + contractor payments
Last updated July 2026
Overview
Overview of hiring in Chile
Chile is one of the more stable hiring environments in Latin America. The economy is export-driven, the labor market is well-regulated, and the workforce skews toward professional and technical roles in mining, technology, finance, and services. For foreign companies, the main friction points are compliance with the Labor Code, mandatory social security contributions, and understanding that Chile has no statutory 13th-month salary (unlike most of its neighbors).
Country at a glance
| Currency | Chilean peso (CLP) |
| Working week | Monday to Friday |
| Standard workday | 9 hours (45-hour week) |
| Probation period | None formally. Fixed-term contracts (up to 12 months) are used instead |
| Notice period | 30 days (employer-initiated termination without cause) |
| 13th-month salary | Not statutory. Bonuses exist but are contractual or collective-agreement-based |
| Payroll cycle | Monthly (biweekly common in practice) |
What you need to know before you hire
Chile uses a private pension system (AFP) rather than a state-run fund. Both employer and employee contribute 10% of gross salary each, for a combined 20% going into the AFP. Health contributions add another 7% on the employer side. These are not optional and must be remitted monthly.
Fixed-term contracts run up to 12 months for most roles, or 24 months for managers and recognized technical professionals. If an employee keeps working after the term expires, the contract converts automatically to indefinite. Chile has no formal probationary period in the Labor Code. Companies that want a trial window typically use a fixed-term contract instead.
Termination without cause is permitted but carries cost. Severance (indemnización por años de servicio) is one month of last salary per year of service, capped at 11 months. Getting the paperwork wrong on dismissal is a common and expensive mistake.
Key facts for planning:
- Payroll runs in CLP. Currency risk sits with your budget, not the employee.
- Statutory contributions (AFP, health, unemployment insurance) add roughly 20 to 25% on top of gross salary in employer costs.
- No aguinaldo or mandatory 13th-month payment. Any annual bonus must be in the contract or collective agreement to be enforceable.
- Workers have strong protections under the Labor Code. Misclassifying a contractor relationship can result in back-payment of all social security contributions plus penalties.
With an EOR, you skip entity setup entirely. Employ Latam issues a locally compliant employment contract, handles statutory contributions, runs payroll in CLP, and gets your hire onboarded in 72 hours. Pricing starts from $349 per employee per month.
Employment contracts and worker types
Chile's Labor Code treats employment as a dependent relationship by default. If a worker follows instructions, works set hours, and receives regular pay, the relationship is employment, regardless of what the contract says. Misclassifying an employee as an independent contractor carries back-payment liability for all statutory contributions.
Contract types at a glance
| Contract type | Typical use | Max duration | Probation allowed |
|---|---|---|---|
| Indefinite (*contrato indefinido*) | Standard ongoing hire | No limit | No formal probation period |
| Fixed-term (*contrato a plazo fijo*) | Temporary projects, demand peaks, suitability assessment | 12 months (24 months for managers, professionals, and qualified technicians) | No formal probation; fixed-term itself serves this function |
| Part-time (*jornada parcial*) | Reduced-hours roles | No limit | No formal probation period |
| Specific-task (*por obra o faena*) | Defined deliverable with natural end | Duration of the task | No formal probation period |
Key conversion rule. If a fixed-term employee keeps working after the contract expires and the employer accepts this, the contract converts automatically to indefinite. The same happens if you renew a fixed-term contract more than once or exceed the cumulative duration limits.
Indefinite contracts
This is the default and most common contract type in Chile. It has no end date and continues until one party lawfully ends it. Termination requires a valid legal ground under the Labor Code. Termination without cause is possible but triggers severance obligations.
Fixed-term contracts
Chile has no formal probationary period. Employers use fixed-term contracts instead to assess a new hire before committing to an indefinite relationship. The 12-month cap applies to most workers. Managers, professionals, and technicians with recognized technical degrees can be hired on fixed-term contracts for up to 24 months.
Part-time contracts
Part-time workers have the same statutory protections as full-time employees. Wages, vacation entitlements, and social security contributions are all pro-rated to hours worked. You cannot use multiple overlapping part-time contracts to avoid classifying a worker as full-time if the underlying activity is continuous.
Independent contractors
Chilean law does not have a formal "contractor" employment category for dependent work. If the substance of the relationship involves personal subordination (fixed schedule, direct supervision, exclusive service), a court or labor authority will reclassify it as employment. Genuine independent contractors operate under civil or commercial law, issue invoices, and control how they deliver the work. When in doubt, hire through an employment contract.
Internships and training arrangements
Chile has no single statutory internship contract. Student placements are often structured as fixed-term or specific-task contracts. If the arrangement involves personal dependence and regular remuneration, labor law applies in full, including social security contributions. Treating internships as unpaid or contribution-free arrangements creates compliance risk.
What Employ Latam handles
When you hire through Employ Latam, we issue a locally compliant employment contract, handle statutory contributions, and run payroll in Chilean pesos. Onboarding is live in 72 hours. Pricing starts from $349 per employee per month, depending on country and team size.
Payroll, taxes, and the 13th-month salary
Chile pays salaries at least monthly. Bank transfer is standard. There is no statutory 13th-month salary or aguinaldo in Chile. Any annual or holiday bonus is contractual or set by a collective agreement. If a bonus is paid consistently and written into the contract, it becomes a mandatory obligation, so document bonus terms carefully before committing to them.
Employer and employee contributions
Both employer and employee carry meaningful statutory obligations. The table below shows the main rates applied to gross remuneration.
| Contribution | Employer rate | Employee rate |
|---|---|---|
| Pension (AFP) | 0% | 10% |
| Disability and survivors insurance (SIS) | ~1.53% | 0% |
| Health (FONASA or ISAPRE) | 0% | 7% |
| Unemployment insurance (Seguro de Cesantía), indefinite contracts | 2.4% | 0.6% |
| Unemployment insurance, fixed-term contracts | 3.0% | 0% |
| Occupational accident and disease (mutual) | ~0.93% base + variable | 0% |
| Income tax (IUSC, progressive) | Withheld and remitted by employer | 0% to 40% |
Notes: AFP pension contributions apply up to the statutory maximum taxable base (updated annually). The SIS rate and mutual accident rate are averages and vary slightly by mutual association and industry risk classification. ISAPRE premiums replace the 7% FONASA deduction for employees who choose private health coverage; the employer withholds and remits either way.
What the employer actually handles
On top of gross salary, the employer's direct cash cost is primarily the unemployment insurance contribution (2.4% for indefinite contracts) and the occupational accident premium. The AFP pension contribution comes entirely from the employee's side. The employer's main administrative duty is withholding and remitting everything correctly each month: AFP, health, unemployment, and income tax (IUSC) all go to different administrators and must be paid by the 10th of the following month.
Key operational points:
- Payroll runs in Chilean pesos (CLP).
- Income tax brackets are set annually by the SII (Servicio de Impuestos Internos) and applied to taxable remuneration after AFP and health deductions.
- Employees on fixed-term contracts pay no unemployment insurance; the employer rate rises to 3.0% to compensate.
- Bonuses and recurring allowances written into the contract form part of taxable remuneration and attract the same contributions.
With Employ Latam as your EOR, all statutory contributions are calculated, withheld, and remitted on time. You see a clear cost breakdown before the first hire. Pricing starts from $349 per employee per month.
Mandatory benefits, vacation, and parental leave
Chile's benefit obligations are set by the Labor Code and related social legislation. There is no statutory 13th-month or aguinaldo, but several other entitlements apply to every employee from day one.
Leave entitlements
| Leave type | Entitlement | Paid by |
|---|---|---|
| Annual leave | 15 working days per year (after 1 year of service); rises to 20 days for workers in extreme regions (Aysén, Magallanes, Palena, Antártica) | Employer |
| Sick leave | Up to 52 weeks (extendable); first 3 days unpaid unless covered by collective agreement, then FONASA/ISAPRE pays from day 4 | Social security (FONASA or ISAPRE) |
| Maternity leave | 6 weeks pre-birth, 12 weeks post-birth (18 weeks total). Followed by an optional parental leave period of up to 12 additional weeks at reduced pay | Social security (SUSESO via employer advance) |
| Paternity leave | 5 working days, taken from birth or adoption | Social security (SUSESO via employer advance) |
| Public holidays | 15 public holidays per year | Employer (paid rest days) |
Annual leave accrues from the first year of service and must be taken within the period set by mutual agreement. Unused leave can accumulate for up to two years before the employer is obligated to schedule it.
Health and pension contributions
Every employee must be enrolled in a pension fund (AFP) and a health plan (FONASA or a private ISAPRE). The employer withholds and remits these on the employee's behalf:
- AFP pension: 10% of gross salary deducted from employee pay, plus employer disability and survivors insurance (roughly 1.5% depending on the AFP)
- Health: 7% of gross salary deducted from employee pay, directed to FONASA or ISAPRE
- Unemployment insurance: 2.4% employer contribution plus 0.6% employee contribution (for indefinite contracts)
Other statutory benefits
- Meal and transport allowances. Not legally mandated as cash, but many collective agreements and employment contracts include them. Once established in a contract, they become binding.
- Severance fund (indemnización). Chile does not have a Brazilian-style FGTS. Severance is calculated at 30 days of last salary per year of service, capped at 11 years, paid at termination without cause.
- No statutory 13th-month. Bonuses are contractual. If an employer pays a recurring annual bonus, it can become a vested right under Chilean law.
Employ Latam handles AFP enrollment, health plan registration, unemployment insurance filings, and payroll runs in Chilean pesos. Onboarding is live in 72 hours. Pricing starts from $349 per employee per month.
Severance, termination, and notice periods
Chile's Labor Code sets firm rules on how employment ends. Getting this wrong is expensive. Termination without cause triggers mandatory severance, and procedural errors can add further liability.
Valid grounds for termination
The Labor Code lists specific grounds that allow termination. The two most relevant for employers are:
- Justified cause (Article 160): Serious misconduct, abandonment, fraud, breach of confidentiality, or repeated unjustified absences. No severance is owed, but the burden of proof sits with the employer. Courts scrutinize these claims closely.
- Company needs (Article 161): Economic, technological, or structural reasons, or simply that the role is no longer needed. This is the standard "without cause" route. Severance is required.
Termination for poor performance alone is not a clean Article 160 ground. If the conduct does not meet the threshold for serious misconduct, Article 161 is the safer path.
Notice requirements
For Article 161 terminations, the employer must give 30 days' written notice or pay one month's salary in lieu. Notice must be delivered in writing, copied to the Labor Inspectorate (Inspección del Trabajo), and served before the termination date.
Severance table
| Tenure | Notice period | Severance owed (without cause, Article 161) |
|---|---|---|
| Less than 1 year | 30 days or pay in lieu | Pro-rated: 1/12 of last monthly salary per month worked |
| 1 to 3 years | 30 days or pay in lieu | 1 month's last salary per year of service |
| 3 to 5 years | 30 days or pay in lieu | 1 month's last salary per year of service |
| 5 or more years | 30 days or pay in lieu | 1 month's last salary per year of service, capped at 11 years |
A few important details:
- Severance is calculated on the employee's last monthly salary, including fixed recurring allowances.
- The statutory cap is 11 months, regardless of how long the employee has worked.
- The cap applies to the severance base salary, which is currently set at 90 UF (Unidades de Fomento, a Chilean inflation-indexed unit). Salary above that ceiling does not increase the severance amount.
- Mutual agreement terminations (Article 163 bis) follow a different structure and involve the unemployment insurance fund (Seguro de Cesantía). This route requires specific procedural steps.
Procedural requirements
A termination letter must:
- 1.State the specific legal ground (the article number and cause)
- 2.List the facts supporting the ground
- 3.Be delivered to the employee and filed with the Labor Inspectorate within three working days
Failure to follow procedure can convert a justified dismissal into an unjustified one, adding severance liability plus a surcharge of up to 80% of the base severance amount.
Recent regulatory changes
Chilean labor law has moved quickly over the past two years. If you hired in Chile before mid-2023, your payroll setup and work schedules may already be out of date.
Key changes at a glance
| Date | Change | Impact on employers |
|---|---|---|
| April 2023 | Law 21.561 enacted. Maximum weekly hours begin phased reduction from 45 to 40. | Employers must track the phase-down schedule and update contracts accordingly. |
| April 2024 | First reduction takes effect: maximum weekly hours drop from 45 to 44. | Payroll systems need to reflect the new cap; overtime thresholds shift. |
| April 2026 (upcoming) | Second reduction: maximum weekly hours drop to 42. | Workforce planning and shift structures need to account for this now. |
| April 2028 (upcoming) | Final reduction: maximum weekly hours reach 40. | Full compliance deadline; contracts not updated by then will be non-compliant. |
| January 2024 | Minimum wage increased to CLP 500,000 per month. | Any employee earning below this rate must be brought up immediately. |
| July 2024 | Minimum wage increased to CLP 510,000 per month. | Payroll must reflect the mid-year adjustment; retroactive underpayment creates liability. |
| 2023 to present | Pension reform debate ongoing. Congress is considering raising the AFP contribution rate and introducing a new solidarity fund. | No law passed yet, but employers should monitor closely. Changes to contribution rates will affect total employment cost. |
What the working-hours reform means in practice
Law 21.561 is the most operationally significant change in a generation. The reduction does not happen all at once. Each phase triggers a new legal maximum, and contracts that reference "45 hours per week" without updating language will create compliance gaps.
The law also introduced new flexibility options. Employers and employees can now agree to distribute hours across four days in some cases, and the concept of "adaptive working hours" allows annualized scheduling within defined limits. These options require written agreement and cannot be imposed unilaterally.
Minimum wage cadence
Chile adjusts the minimum wage at least once per year, sometimes twice. The July 2024 increase to CLP 510,000 followed a January adjustment. Budget for mid-year corrections. Any fixed-term or indefinite contract that references a salary in nominal terms without a floor clause tied to the legal minimum will need manual review each time the rate changes.
Pension reform: what to watch
The AFP system has been under political pressure for years. The current proposal in Congress includes a higher mandatory contribution rate and a new collective fund component. No final law has passed as of mid-2025, but the direction of travel is toward higher employer costs. The final numbers are not settled, so plan conservatively.
Frequently asked questions
- Do I need a legal entity in Chile to hire someone there?
- No. You can hire in Chile without setting up a local company by using an employer of record. The EOR employs the worker on your behalf, handles the contract, payroll, and statutory contributions, and keeps you compliant with the Labor Code. You manage the day-to-day work; the EOR handles the employment infrastructure.
- What is the most common employment contract in Chile?
- The indefinite-term contract (*contrato indefinido*) is the standard employment relationship in Chile and the one the Labor Code defaults to when the nature of the work is ongoing. Fixed-term contracts are used for temporary or project-based needs, but they convert automatically to indefinite if the employee keeps working past the expiry date or if renewal limits are exceeded. Most companies hiring long-term staff should plan for indefinite contracts from the start.
- What is the total employer cost on top of gross salary in Chile?
- For an indefinite-term contract, the employer's direct on-cost above gross salary is roughly 3.3% to 4.5%, covering unemployment insurance (2.4%), the occupational accident premium (around 0.93% base, variable by industry), and the disability and survivors insurance (SIS, around 1.53%). The AFP pension contribution is funded entirely by the employee through a salary deduction, so it does not add to the employer's cash outlay, though the employer is responsible for remitting it.
- How long is paid maternity leave in Chile?
- Mothers are entitled to 18 weeks of paid maternity leave: 6 weeks before the due date and 12 weeks after birth. After that period, parents can access an additional parental leave (permiso postnatal parental) of up to 12 weeks at a reduced subsidy rate, which can be shared with the father under certain conditions. Payments are funded through social security (SUSESO) and advanced by the employer, who then recovers the amounts from the system.
- How much severance is owed for terminating an employee without cause in Chile?
- Under Article 161, the employer owes one month of the employee's last salary for each year of service, plus 30 days' notice or pay in lieu. The severance is capped at 11 months, and the salary base used for the calculation is capped at 90 UF per month. Any years under 12 months are counted on a pro-rated basis.
- What is the current maximum working week in Chile, and when does it change again?
- As of April 2024, the legal maximum is 44 hours per week following the first phase of Law 21.561. The next reduction to 42 hours takes effect in April 2026, with the final cap of 40 hours arriving in April 2028. Contracts and shift schedules should be reviewed ahead of each phase, not just at the final deadline.
We handle the contract, payroll, taxes, and benefits in Chile so you can hire that person this month.
Found someone in Chile? Let's employ them.
We'll send a fully-loaded cost breakdown for the role within a few hours, then draft a locally compliant employment contract. Most Chile hires can start within 1 to 3 business days once docs are in.
Other countries we cover
Compare Employ Latam with other providers
Deciding how to hire in Chile? See how our employer of record service stacks up against the global platforms, then pick the fit for where your hiring actually happens.
The talent is in Latin America. The hiring is on us.
Set up an account in three minutes. No credit card. No sales call. Hire one person, hire fifty. Pay only when they're on payroll.