If you decide to expand your business into Chile, it is required to handle many business aspects, from HR to legal to accounting. One area of utmost importance is compensation and benefits. An employer needs to make sure its employees receive the right wages as well as all the statutory benefits required by the government.
Chile compensation laws
Chile has a monthly minimum wage of CLP 440,000. Employers are encouraged to evaluate an employee’s performance each year and raise their salary accordingly. While Chile does not mandate a 13th-month bonus, any agreed-upon bonuses must be given in the local currency.
Keep these bonuses in mind when looking at Chile compensation laws:
- Legal gratification: Employees receive an annual “legal gratification” bonus paid monthly.
- Aguinaldos, or 13th-month payments: While not required, many employers give out bonuses twice a year called aguinaldos. Most employers give these once on September 18 and again around December holidays.
Guaranteed benefits in Chile
Workers are entitled to additional benefits as well as these monthly bonuses. Employees must pay into Chile’s private health insurance — known as Isapres — and employers must hold an amount pre-tax each month. An employer can decide whether it wants to give employees a taxable bonus for health insurance. Typically, employees will look for a more extensive plan through Isapres or another private company where the employer compensates the employee for the difference.
Other guaranteed benefits include time off on Chile’s national holidays, 6 weeks of maternity leave before childbirth and 12 weeks after, and 15 paid working days of vacation a year once employees have more than a year of service.
Chile benefits management
As an employer in Chile, a company will need to disperse benefits itself. Benefit management is complicated and it is necessary to know all the ins and outs of the country’s employment laws to stay compliant. While you can work with a local Chile-based company for Chile benefits management, you’ll remain liable for any mistakes.
G-P offers the first fully customizable suite of global employment products designed to help quickly and seamlessly source the best benefits to attract top talent. We mitigate compliance risk, acting as the Employer of Record.
Restrictions for benefits and compensation
Chile compensation laws mandate a typical 45-hour work week. Anything over these hours is classified as overtime, especially for employees subject to time control, in which employees receive 1.5 times their regular rate.
One significant benefit restriction is car allowances. Employers cannot give employees company cars without a notable tax penalty. Employers can provide monthly commuting allowances, but limits depend on the employee’s gross salary.
Chile competitive benefits planning
Expanding to a new country comes with many considerations — including benefits plan development. When you’re unfamiliar with the laws and employment customs in a country, this stage can be a challenge. At G-P, our experts can give you the guidance you need for competitive benefits planning in Chile.
Chile employee benefits plans
While benefits play a role in compliance, they also support employees. The benefits provided to employees will show how much an employer values their work and keep overall morale high. A strategic benefits plan can aid in recruiting and retaining the talent a company needs to succeed.
Supplemental provisions and perks outside of the legal requirements can make a company competitive in the labor market and encourage people to apply to its vacancies. Possible fringe benefits include:
- Meal vouchers
- Housing or transportation stipends
- Holiday bonuses
- Education opportunities
- Childcare allowances
Employers are responsible for complying with labor regulations in Chile. That includes providing required benefits, which include:
- Social security contributions
- Paid annual leave
- Holidays off
- Maternity leave
Employees are entitled to 15 days of annual leave each year, and the country has 16 public holidays. Maternity leave is 18 weeks total with 6 weeks before delivery and 12 weeks after.
Designing employee benefit plans in Chile
Designing a benefits plan requires research and an understanding of company resources. The goal is to find a balance between what a company can afford and the support the employees need. Follows these basic steps to get started.
1. Evaluate company income and goals.
This initial phase is about understanding the company’s financial capabilities and how to allocate funds most effectively. Take a look at yearly earnings and expenses and create a budget for employee benefits.
It’s also essential to evaluate the company’s goals during this stage. For example, for improving employee retention, a company may decide to cut back on recruitment and add extra fringe benefits to the plan. If the goal is to build a large team, you might stick to the required benefits so the company can support more employees.
2. Research industry standards and employee needs.
When researching industry standards, it is possible to gain a clear understanding of what employees expect from companies and how to make a business more competitive in the market. Explore other companies in the area and in your industry and consider the benefits they offer as you plan your own.
Company benefit provisions will be more appealing to applicants if their needs are understood and met. A company can conduct surveys or interviews to understand workers in the area and the support they want from their employers.
3. Create your benefits plan.
With the information gathered, a company can develop a plan that balances employee needs with company capabilities. It’s best practice to allocate funds to required benefits first and use remaining budget for supplemental provisions based on the findings.
Average cost of benefits
Every company allocates a different amount of funds to their benefits. Several factors can affect a company’s expenses, including location, industry, and company size. The budget for benefits will be unique to each company’s business and its goals.
Managing benefits costs can feel challenging, especially early in expansion. At G-P, we back our platform with the industry’s largest team of legal and HR experts who will help you find the right balance and keep your costs in check.
How to calculate employee benefits
Much like costs, calculations for benefits will vary based on the provisions that an employer offers. Among the required benefits, social security contributions provide calculation guidance. Employers must contribute 1 to 1.5% of survivor and disability insurance. Employees contribute 10% for old-age pension and 7% for medical care.
How are employee benefits taxed in Chile?
The country describes both taxable and nontaxable benefits for employees. Most benefits types are considered taxable income, including housing and living allowances, education coverage, home leave, and medical allowances. Nontaxable benefits include:
- Meal allowances
- Transportation stipends
- Expenses necessary for the job, such as travel and language training
Employee health benefits
Chile’s social security system includes coverage for public healthcare, though private care and insurance schemes are available for people who want them. While employers are required to make social security contributions, private insurance schemes can be a part of supplemental provisions as well.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.