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11. Employee Benefits
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11. Employee Benefits

Social Security

In 1980, the government introduced a major change to the Chilean Social Security system, making a transition from government-administrated pension and healthcare systems, to contributions made to funds administered by private entities, subject to overall government control. Under Decree Law Nº 3,500 of 1981, old-age pensions are financed exclusively by the employees through contributions that are accumulated in individual accounts at entities known as Administradoras de Fondos de Pensiones (AFP). For these purposes, employees must contribute 10% of their monthly remuneration up to a maximum of 80,2 Unidades de Fomento (currently approximately US$3,334). In addition, employees must contribute 7% of their monthly remuneration for medical care, also up to an 80,2 UF cap. Finally, the employers must contribute between 1% and 1.5% of the employee’s remuneration for disability and survival insurance (SIS). For purposes of labour and social security legislation, work may begin, as a general rule, at the age of 18 and retirement may occur at the age of 65 for men and at age 60 for women. Nevertheless, the Social Security System contains provisions which allow for early retirement in certain cases. In Chile, retirement is not a legal cause for termination.

Healthcare and Insurances

The Social Security system covers all employees, including independent employees. The latter are legally obliged to contribute to a mandatory insurance that covers old age, disability and survivorship insurance.

  • Foreign Employees

In the case of foreign employees, as a general rule, they must also pay social security contributions as indicated above. However, Law Nº 18,156 grants exemption from social security contributions to foreign technician employees and the company that contracts them, provided that certain conditions are met: i) the expatriate subscribes to a social security system outside Chile covering at least illness, pension, disability and death; and ii) the employee expressly declares in his employment agreement that he will remain affiliated and paying the foreign social security system.

  • Accidents or Professional Illness

Insurance for accidents or professional illnesses provides for medical and dental attention, hospitalisation and medicine, as well as indemnities (depending on the type of disabilities suffered) and related expenses.

  • Unemployment Insurance

Unemployment insurance is financed on a tripartite basis, as the contributions are paid by the employer, the employee (2.4% and 0.6% of the employees’ taxable remuneration up to a maximum of 120 UF, respectively) and the government. This insurance is mandatory for every employee hired after 1 October 2002, whereas it is discretional for those employees hired before said date. In the case of fixed-term contracts, the entire contribution (3%) is exclusively financed by the employer.

Required Leave

  • Holidays and Annual Leave

Employees who have worked for more than one year have the right to an annual paid vacation of 15 working days. The holiday must be continuous, but the excess over the 10 working days may be divided by mutual agreement. After working ten years, continuously or not, for the same or different employers, vacations are extended by one working day for every three years of service for his current employer. In case of employees who work in the 11th and 12th Regions of the country and the province of Palena, the basic vacation period is 20 days.

Sundays and days legally established as holidays shall be non-working days, except for activities authorised by law to be performed on those days. Companies exempt from this prohibition must compensate their employees with a paid day off in exchange for worked Sundays or holidays. However, in certain activities, at least two rest days in the month must be granted on Sundays. When more than one paid day off is accumulated in one week, the parties may agree on a special distribution or on a special remuneration mechanism. In the latter case, remuneration for the compensated rest day has a surcharge that cannot be less than 50%.

  • Maternity and Paternity Leave

Female employees are entitled to six weeks leave before (prenatal leave) and twelve weeks after (postnatal leave) the birth of a child, on full pay. This payment is made by the Social Security system and not by the employer. In addition, women cannot be dismissed during pregnancy and for a period of one year as from the end of the postnatal leave, other than with prior authorisation of a labour court. Additionally, to the referred postnatal leave, exists a supplementary permit that as a general rule, provides a 12 weeks’ permit after the end of the postnatal dispensation of the mother, on full pay. Nevertheless, the mother entitled to this benefit may choose to return to her job in a part time schedule, in which case the parental permit and subsidy is extended to 18 weeks. In this case, the subsidy granted by the Social Security System is reduced to 50% of its salary and the employer must pay, at least, 50% of the remuneration set forth in the labour agreement and all variable remuneration to which she is entitled. Likewise, the mother may benefit the father of the child by granting him part of the parental leave. In this case, the subsidy will be paid according to the salary of the father.

When the health of a child under one year of age requires attention at home as a result of a serious illness, which circumstances will be demonstrated through a medical certificate issued by the services in charge of the infant’s health, the employee mother will be allowed to an employment leave and subsidy allowance in cases of prenatal, postnatal and paternal postnatal leaves, during the period prescribed by the health service. If both parents are under a labour agreement, either one of them, at the mother’s choice, will be able to use this permit and will be entitled to the corresponding subsidy allowance. However, the father will be entitled to these rights in case the mother of the child is deceased or if the legal custody has been granted by a judicial ruling. Furthermore, the employee who has been entrusted by a court of law with the personal care of a child less than one year old, as a protection measure, shall also be entitled to such leave and subsidy allowance. This right shall be extended to the spouse or civil partner mentioned above.

Establishments with 20 or more female employees, regardless of their age or marital status, must provide a nursery service for children under 2 years old. Employers may contribute to an external nursery school to provide such service. While the women are feeding their babies, they must be granted one hour a day for this purpose.

  • Sickness and Disability Leave

Chile provides a public and private medical system for employees including preventive and curative health care. The preventive medical service provides for periodic medical checks. When employees are found to suffer a specific illness, they are granted sick leave. During periods of sick leave the employer cannot terminate the labour contract without cause, but the medical system pays the salary starting on the fourth day of illness or the first day in case of leaves exceeding 10 days. A monthly cap applies. This system is funded through employees’ contributions.

  • Any Other Required or Typically Provided Leave(s)

In the event of the death of a child, spouse or civil partner, every employee shall be entitled to 7 calendar days of paid permit, in addition to the legal vacations to which the employee is entitled to. In this case, the employee shall also be entitled to labour protection or immunity for one month, as from the date of death, thus entailing that said employee cannot be fired unless a labour court has previously authorised such dismissal. However, regarding employees hired for a fixed-term or for a specific task or service, the labour privileges shall be afforded to them only during the effective term of the corresponding employment contract, if said term is less than one month, without requiring the court’s authorisation. This allowance shall amount to three business days in the event of death of a child during pregnancy, as well as in the event of death of the employee’s father or mother, albeit without granting the benefit of said labour privileges or immunity.

In case of marriage or civil union, every employee shall be entitled to 5 continuous working days of paid leave, in addition to the annual holiday. This leave may be used, at the employee’s option, on the day of the marriage and on the days immediately before or after the marriage.

Pensions: Mandatory and Typically Provided

Indemnities are granted in the form of a pension to the injured employee or to his/her spouse and dependent children in case of death of the employee. The Employees’ Compensation Fund is funded through a base contribution (made by the employer) of 0.90% of the employee’s salary (with a cap of 80,2 UF per base salary), plus an additional payment, which must be borne by the employer exclusively, depending on the activity and level of risk of the company (additional rate from 0% to 3.4%).

  • Other Required or Typically Provided Benefits

Employers have no legal obligation to provide fringe benefits, other than benefits which may be voluntarily agreed in individual or collective contracts or agreements. Pension and sickness benefits are covered by the Social Security system. There is no legal obligation to provide catering facilities and meals.

Any questions

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