What are Employee Benefits?
Employee benefits are the additional perks given to employees by their employers. These benefits are usually a part of the employee’s gross pay. However, these may be monetary and non-monetary, depending on how employers can deliver these benefits. Also, the nature of different benefits is decided based on the company’s policies.
Chile is an economically strong nation. The companies operating in the country want to ensure that they hire the best talent; hence, they provide various additional perks to all employees. These benefits include retirement, maternity leave, paid time off, etc. Companies ensure that all employees can access these benefits to remain happy, increase productivity, and enable professional growth throughout their employment.
Employee benefits are an essential component of the payroll in Chile as it benefits both employee and employer. This happens because employees get access to several benefits and pay. On the other hand, employers are happy because the turnover rate goes down, and they don’t have to spend additional resources on hiring new employees.
You must understand all the existing employee benefits in Chile if you are new to the country and have incorporated a new company. Once you know these benefits, you can draft a comprehensive compensation and benefits policy for all your employees.
Compensation Laws in Chile
Several laws in Chile govern the compensation structure and its other aspects. Let’s understand some of these laws directly impacting Chile’s compensation and benefits policy.
- Article 10 of Chile’s labor code states the minimum provisions the employment contract must contain, including the date of commencement, place of work, the employee’s designation, the job description, remuneration, and payment terms.
- Article 194 and other related articles prohibit the discrimination of employees on any grounds. The employees cannot discriminate between their employees based on pregnancy and diseases like HIV. Additionally, the law of Protection of Breastfeeding protects all employees from discrimination based on maternity and breastfeeding.
- Article 162, Para 5, states that if the company terminates an employee, but the social contribution payments are not made, the termination will be considered null and void. The employer will have to make regular payments, like salary, to the employee until such contributions are made in full.
- According to Chilean Labor Laws, the national minimum wage currently stands at 380,000 pesos. All employers must ensure that they pay an amount equivalent to at least the minimum wage decided by the Government.
- Article 22 of the Chilean Labor Code states that employees should not work more than 45 hours weekly. Article 28 states that employers must distribute these maximum hours over six days but not less than five days.
- Article 44 of the Labor Code defines the payment of wages and salaries. According to the law, the remuneration must be pre-decided based on criteria like time, etc., and it can never be less than the minimum wage.
How to Design an Employee Benefits Program for Employees in Chile?
Drafting a benefits program in Chile can be challenging for someone new to the country. However, it is mandatory to design a benefits program as it helps you ascertain the gross compensation of all your employees.
It would be best to design the benefits catering to employees’ needs. You must also evaluate the everyday challenges that employees face at work so that you can develop benefits that can help them overcome such challenges. You cannot discount the company’s position and consider the budget while crafting the employee benefits policy.
To help you create a compensation package in Chile, we have listed a few steps:
Step 1: Define your goals
You must have some goals before designing the employees’ benefits program. It will give you an indication of the company’s goals, and then you can align the needs of the employees with these goals. However, the benefits program will depend on other factors—the industry practice, benefits provided by the competitors, collective bargaining agreements, etc.
While some companies might consider broader goals during the program curation, others might choose to narrow these objectives and focus on core company objectives that affect benefits. The benefits strategy should align with the employer strategy, and you must keep changing them based on the dynamic business environment. Some goals to help you craft these benefits are:
- Retaining the existing employees and attracting new talent
- Curate the benefits and then deliver them within budget
- Coming up with benefits that solve practical problems
- Designing all perks while keeping the labor code in mind
Step 2: Be aware of the industry standards and what your employees need
Consider the benefits program offered by competitors in the market before deciding on a budget. You can conduct extensive research to understand the industry standards and what employees can expect from the benefits program.
Conduct an internal survey to understand employee expectations and benefits for swift employment. Also, these surveys will help you know the benefits you need to include to attract fresh talent to your organization. However, if you already have a benefits program, these surveys will help you improve them. You can also remove benefits that are not in use and cut costs.
Once you have all the research data, you can create Chile’s employee compensation and benefits policy. The plan must meet the employee’s ever-evolving needs and the employer’s objectives. The data will also help you in closing gaps.
Step 3: Draft a flexible compensation package
Once the research is done, you can use the outcome to determine worker’s compensation in Chile. This benefit program should be flexible, fulfilling the demands of numerous employees of your organization.
Also, it will help you reduce the program’s cost by eliminating unused benefits. This way, you can give the employees what they expect from a benefits package.
Step 4: Communicate
You must communicate the usefulness of the benefits program to the employee to increase its effectiveness. Also, you will have to keep all channels of communication open while creating a benefits plan. The companies must contact their employees and ask them to review the plan before it goes live. When the staff feels involved, they will actively contribute to drafting the employee benefits program. Also, you will gain the trust and respect of the employees by seeking their opinions.
Step 5: Assess and cross-check the plan
Once you curate the benefits plan, you must assess and cross-check it before introducing it to the employees. Also, there might be cases where specific laws might have changed while drafting the plan. You must account for such changes and make amends to the policy accordingly. Also, the plan should have no errors as it will include all the compensation structures. You also need to develop metrics that will help you understand if the benefits have worked for the employees. If not, you can take some necessary corrective measures.
Types of Guaranteed Benefits in Chile
There are several guaranteed employee benefits in Chile. All employees can avail of these benefits throughout their employment. Some of these benefits include:
- In Chile, there are two minimum wages set by the Government. One is for regular working professionals, while the other is for minors and retirees. For people above 18 years, the minimum wage stands at 380,000 pesos, while for people below 18 and above 65, the minimum wage is fixed at 283,000 pesos.
- The standard working hours are stated in the employment contract. The employer and the employee can mutually agree on the number of hours the employee works in a week.
- No employees in Chile can work more than 45 hours a week, and these 45 hours can be distributed across 6 or 5 days, depending on the company’s policy. A weekly holiday is mandatory in Chile.
- Overtime payments are mandatory in Chile if employees work beyond their regular hours.
- The employees are compensated at 150% of their regular pay if they are asked to work additional hours. However, the employees cannot work overtime for more than 2 hours a day or 10 hours a week.
Paid time off
Once the employee has worked for a year with the company, they are entitled to annual paid leaves. In Chile, the policy states that:
- Employees can take paid time off for a maximum of 15 days in a year. However, the employees must take a consecutive 10-day leave if they avail of these leaves. You can take the remaining five leaves as and when required.
- There are a few regions in Chile, like Región de Aysén, Región de Magallanes, and Provincia de Palena, where the employees are entitled to 20 annual leaves.
- Once an employee completes ten years of employment, they are given one additional leave for every three years of service.
- The employees in Chile can take sick leave only if they can produce documentary evidence of their illness. The employee must furnish proof within the first two days of sickness.
- The employer does not pay for sick leaves. Hence, there are no limits on the number of sick leaves an employee can take. The employer sends the documentary evidence to the health insurance agency, and the agency takes care of the compensation till the time the employee is sick.
- Pregnant employees are entitled to a 30-week paid maternity leave in Chile. The rest begins 6 weeks before the due date and continues 24 weeks after delivery.
- The social security authority covers the employee’s total salary.
- Like several other advanced economies, Chile also has a paternal leave policy.
- Fathers can take a 5-day paid leave after the delivery of the child.
- Also, the mother can transfer a portion of their maternity leave to the father.
- If you work in Chile, you can take parental leave to look after your children.
- Female employees are entitled to 10 paid parental leaves to take care of their children. However, these employees will have to compensate for the loss of work caused due to these leaves.
- No laws mandate the payment of a 13th-month bonus to employees working in Chile.
- However, if employers have promised a bonus to the employee, they must duly pay these bonuses. Usually, these Aguinaldos or bonuses are paid to the employees in September and around Christmas.
- Employees in Chile receive a fixed amount as a legal gratification bonus every month as a part of their salary.
- 16 public holidays are given to the employees in a year.
- According to the Chile Labor Code, it is mandatory to provide all employees with unemployment insurance.
- Both employees and employers contribute towards this insurance. The employee pays 0.6% of their salary, while the employer must pay 2.4% towards the insurance.
- A cap of 90 UF is placed on all contributions that make unemployment insurance.
- Health insurance is a statutory benefit in Chile, and the employees contribute 7% of their salary to a public health insurance scheme. Employers deduct the amount from the employee’s paycheck and pay it directly to the health insurance provider.
Employee Benefits for Expatriates
All employees from other countries working in Chile are included in the benefits program. They are entitled to the leaves and benefits offered per company policy. They are also a part of the allowance program and can apply for different allowances like travel, mobile expenses, etc. Some other benefits given to the expats are:
- Accommodation expenses
- Relocation and logistics expenses
- Transport benefits
- Mentorship programs
How are Employee Benefits Taxed in Chile?
Employee benefits are taxed like the employee’s basic pay. Also, different kinds of fringe benefits are provided to the employees and taxed at the regular income-tax rate. Benefits like cost-of-living allowance and vacation allowance are taxed at the usual income tax rate.
However, reimbursements such as travel expenses, housing expenses, etc., are not taxable according to Chilean tax laws. Therefore, they are not included in the tax calculation.
Restrictions for Chile Benefits and Compensation
In Chile, several employment benefits are subject to income tax. Therefore, companies must ascertain the value of benefits they pass on to the employees to calculate taxes easily. Benefits are an essential part of the payroll system in Chile, and they help determine different types of payroll deductions.
All the taxes must be duly paid to the authorities by the company at the end of every month. Also, all companies must pay the minimum wages and include the primary benefits in the compensation structure. The employees should also be allowed to take their share of leaves in Chile.
Supplemental Benefits for Employees in Chile
Employers in Chile provide their employees with several supplementary benefits as well. Some of these supplemental benefits include:
- Private and supplemental health insurance: Several employers provide public health insurance plans to incentivize their employees. However, employers can go above and beyond by offering private health insurance. You can include optical and dental services in the package as well.
- Private pensions: Additionally, employers can enroll their employees in a personal pension program as it is easier to understand and offers better pension schemes than the public pension system.
- Supplemental retirement insurance: Retirement insurance safeguards the employees’ finances post-retirement. Companies can incentivize their employees by providing retirement insurance to stay with the company longer.
How Can Multiplier Help with Benefits Management in Chile?
Setting up a new business in Chile can be challenging as you must adhere to the Chilean compensation laws while drafting a benefits policy for your employees. Also, the employment contract given to the employees should comply with the labor code. Hence, you must be extremely careful in drafting the agreements. You can avoid all the hassle by outsourcing a Global PEO like Multiplier.
Multiplier will help your company understand Chilean labor laws and draft a benefits policy ideal for employees and employers. Our experts curate a compensation package for your company and help you navigate the process.