In 1980 the Government introduced a major change in the Chilean Social Security system, making a transition from Government-administrated pension and managed healthcare systems, to contributions made to funds administrated by private entities subject to overall Government control. 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 79.3,7 Unidades de Fomento (currently approximately US$3,500). In addition, employees must contribute a 7% of their monthly remuneration for medical care, also up to a 79.3 UF cap. Finally, the employers must contribute between a 1% and 1.5% of the employee’s remuneration for disability and survival insurance (SIS).
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. 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. Insurance for accidents or professional illnesses provides for medical and dental attention, hospitalization and medicine as well as indemnities (depending on the type of disabilities suffered) and related expenses.
The workday must be divided into two periods, leaving between them at least a half-hour break for lunch, which must not be considered for the purposes of determining the workday. The law also indicates some cases in which the rest period is longer, i.e. restaurants, hotels and club employees. Sundays and days legally established as holidays shall be nonworking days, except for activities authorized by law to be performed on those days, companies exempted from the above prohibition must compensate their employees with a paid day off in exchange for worked Sundays or holidays.
Employees who have worked for more than one year have the right to an annual paid vacation of 15 working days. 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. 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.
Maternity / 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 authorization of a labor 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. Establishments with more than 20 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.
Other Required or Typically Provided Leave
In the event of 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 labor protection or immunity for one month, as from the date of death, thus entailing that said employee cannot be fired unless a labor court has previously authorized such dismissal. This permit 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 worker’s father or mother, albeit without granting the benefit of labor privilege or immunity.
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 0.95% of the employee’s salary (with a cap of 75,7 U.F. 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.