How to run payroll in Chile

In Chile, most employers pay employees monthly, typically on the last working day of the month. Here's the complete payroll cycle.

Payment frequency and dates

Chilean labor law requires monthly salary payments by the last working day of each month. You can't delay payment beyond this date without facing penalties.

Most companies process payroll between the 28th and 30th to ensure funds clear on time. If the last working day falls on a Friday, many employers pay on Thursday to avoid weekend banking delays.

For hourly workers, you must pay at least monthly, though some companies choose bi-weekly payments for operational convenience.

13th month payment (aguinaldo)

Chile doesn't mandate a 13th month payment, but many companies provide year-end bonuses as part of employment contracts or collective bargaining agreements.

When offered, these bonuses typically equal one month's salary and are paid in December. The payment is subject to standard income tax and social security contributions.

Holiday and vacation pay

Employees earn 15 working days of annual leave after one year of service. Vacation pay equals the employee's regular monthly salary divided by 30, multiplied by vacation days taken.

You must pay vacation compensation before the employee takes leave. This advance payment helps employees cover travel and holiday expenses.

Upon termination, you must pay out all accrued but unused vacation days at the current salary rate.

Payment methods

Bank transfers are mandatory for all salary payments in Chile. You cannot pay wages in cash, check, or other methods.

Employees must provide a Chilean bank account number. International accounts aren't accepted for salary payments, even for foreign workers.

All payments must be in Chilean pesos (CLP$). If you operate with foreign currency, convert amounts using the official exchange rate on the payment date.

Payslip requirements

Every employee must receive a detailed payslip showing gross salary, deductions, and net pay. Electronic payslips are legally acceptable and widely used.

Payslips must include:

• Employee name and RUT (tax ID)
• Employer company details
• Pay period dates
• Base salary and overtime hours
• All deductions itemized
• Net payment amount

Payslips must be in Spanish. Include explanatory notes for any unusual deductions or bonuses to maintain transparency with employees.

You're required to keep payslip records for six years and provide copies to employees upon request.

Think you just withhold federal tax? Chile adds regional variations and specific filing requirements that catch many employers off guard.

Chile operates a progressive income tax system with rates from 0% to 40% for 2026. The tax year runs from January 1 to December 31, with monthly withholding required from employee paychecks.

Income tax brackets

Chile's 2026 income tax rates apply to annual earnings, with employers calculating withholding on a monthly basis:

The tax-free threshold of CLP$8,072,040 means many lower-paid employees won't have income tax withheld. For monthly calculations, divide annual thresholds by 12 to determine withholding amounts.

Withholding requirements

Employers must register with Chile's tax authority (Servicio de Impuestos Internos - SII) before processing payroll. You'll withhold income tax monthly and remit it by the 12th of the following month.

Monthly filing process

Submit Form 29 electronically through SII's online portal by the 12th of each month. This form reports both withheld income tax and employer social security contributions. Late filing triggers penalties starting at 1% of the amount due per month.

Annual reconciliation happens through Form 22 (Annual Income Tax Return), due by April 30 for the previous tax year. Employees may need to file individual returns if they have multiple income sources or earn above certain thresholds.

Tax registration

New employers need three key registrations before hiring in Chile:

The RUT registration typically takes 5-10 business days. You'll need this number for all tax filings and employee documentation. Foreign companies establishing a branch need additional documentation including apostilled corporate documents.

Special tax considerations

Non-resident employees face different rules. Those staying less than 183 days pay tax only on Chilean-source income. Residents pay tax on worldwide income but can claim foreign tax credits under Chile's extensive treaty network.

Tax treaties exist with over 30 countries, potentially reducing withholding rates for certain types of income. The most commonly used treaties are with the US, Germany, and Spain.

Regional taxes don't exist in Chile - income tax is purely national. However, some municipalities charge minor business license fees that don't affect payroll withholding.

Common tax mistakes

Incorrect residency determination leads to under-withholding penalties. The 183-day rule includes any presence in Chile, not just working days. Track entry and exit dates carefully.

Missing monthly deadlines costs 1% per month plus interest. The 12th of each month deadline is firm - weekends don't extend the due date.

Wrong tax bracket calculations happen when employers use outdated rates or calculate monthly withholding incorrectly. Always use current-year brackets and divide annual thresholds by 12 for monthly calculations.

Employer contributions in Chile add 27.6% to every salary. Budget for it.

Contribution breakdown

Here's what you'll pay on top of every salary:

Wait - that's only 15.46%, not 27.6%. The difference? Mandatory 13th month salary adds another 8.33% annually (one month spread over 12), plus vacation premium adds 3.81%.

Total employer cost example

For a CLP$60,000 monthly salary:

• Base salary: CLP$60,000
• Health insurance: CLP$4,200
• Work injury: CLP$570
• Unemployment: CLP$1,440
• Family allowance: CLP$2,466
• Training tax: CLP$600
• 13th month (monthly): CLP$5,000
• Vacation premium (monthly): CLP$2,284

Total monthly cost: CLP$76,560
Cost multiplier: 1.276

You'll pay 27.6% more than the base salary when you factor in all mandatory costs.

Contribution caps and ceilings

Only unemployment insurance has a cap. Once an employee earns more than CLP$1,080,000 monthly, you stop paying the 2.4% unemployment contribution on the excess.

For high earners making CLP$2,000,000 monthly, this saves you about CLP$22,080 annually. All other contributions continue without limits.

Registration requirements

Register with these agencies before hiring:

AFP (Pension Administrator) - Register within 30 days of first hire. You'll need your tax ID, company registration, and employee details.

Health Insurance (Fonasa or Isapre) - Employees choose their provider. Register each employee within 30 days of hire.

Mutual Insurance (Work Injury) - Choose from three providers: Mutual de Seguridad, ACHS, or IST. Register before operations begin.

Unemployment Insurance (AFC) - Automatic registration through your monthly tax filings.

Payment deadlines

All contributions are due by the 12th of the following month. Miss this deadline and you'll face:

• 1.5% monthly penalty on unpaid amounts
• Interest charges from the due date
• Potential suspension of business operations for repeated violations

File and pay through the SII online portal. The system accepts payments until 11:59 PM on the deadline.

Chile has 16 public holidays in 2026. Work on these days? Pay double.

Annual leave

Every employee gets 15 working days of vacation after one year of service. That's three weeks you'll need to calculate vacation pay for.

Vacation pay is simple - it's their regular daily wage multiplied by the days taken. Calculate the daily wage by dividing their monthly salary by 30 (or hourly wage × 8 for hourly workers).

Employees can carry over unused vacation to the next year, but only up to one year's entitlement. After that, you must pay it out in cash. When someone leaves, you're required to pay all accrued vacation days at their current salary rate.

Sick leave

Employees get unlimited sick leave, but the payment structure changes based on duration.

You pay 100% of their salary for the first three days. After that, FONASA (the health insurance fund) takes over and pays the employee directly. The rate depends on their income - it's 100% for the first 10 days, then drops to 75% for days 11-240, and 50% after that.

Employees need a medical certificate for any sick leave over one day. For the first day, a simple declaration is enough. Make sure you get the certificate within 48 hours to avoid payroll complications.

Parental leave

Maternity leave is 18 weeks at 100% salary. The first 6 weeks must be taken after birth, but mothers can choose when to take the remaining 12 weeks (before or after birth). You pay the full amount, but you can recover it from the social security system.

Paternity leave is 5 working days at 100% salary, paid directly by you. Fathers must take this within the first month after birth.

There's also an optional parental leave of 12 weeks that can be shared between parents. This is paid at a lower rate by social security, not by you.

Public holidays 2026

Work performed on public holidays requires double pay - their regular wage plus 100% premium. If the holiday falls on a weekend, it's moved to the following Monday.

Mandatory benefits affecting payroll

Christmas bonus (aguinaldo) is mandatory. You must pay the equivalent of one month's salary in December, but you can split it into monthly installments throughout the year. Many employers deduct 1/12 of annual salary each month to spread the cost.

Vacation bonus equals 75% of one month's salary and must be paid when employees take their annual vacation. This is separate from regular vacation pay.

Family allowance is paid for each dependent child under 18 (or 24 if studying). The amount varies by income level but averages around CLP$13,000 per child monthly. You pay this directly and recover it from social security.

Meal vouchers aren't mandatory but are tax-deductible up to CLP$84,000 per month if provided. Many companies offer these as they're cheaper than salary increases.

Employment contracts in Chile must include specific salary details, job descriptions, and termination clauses or they're legally invalid. Missing any required element can void your contract and trigger labor disputes.

Chile's compliance framework centers on monthly tax filings, detailed employment documentation, and strict record-keeping requirements. The country's labor authorities conduct regular audits, making accurate payroll compliance essential for any employer.

Monthly filing requirements

You'll submit Form 29 (monthly tax return) by the 12th of each month for the previous month's payroll taxes and social security contributions. Companies with tax ID numbers ending in 1-2 file by the 12th, while those ending in 3-9 get until the 20th.

Submit through the SII online portal (www.sii.cl) using your company's digital certificate. The system requires detailed breakdowns of employee salaries, tax withholdings, and social security contributions.

Late filing penalties start at CLP$50,000 and increase by CLP$10,000 per day. After 30 days, penalties jump to 2% of the total tax due plus the daily fines.

Annual reporting

Submit Form 1887 (annual reconciliation) by March 31, 2026 for the 2025 tax year. This form reconciles all monthly filings and reports final annual salary totals for each employee.

Provide Certificado de Renta (annual income certificates) to employees by February 28, 2026. These certificates detail total annual salary, tax withholdings, and social security contributions.

The Superintendencia de Seguridad Social requires annual contribution summaries by January 31, 2026. Submit through their online platform with employee-by-employee breakdowns.

Annual penalties for missing deadlines range from CLP$200,000 to CLP$2,000,000 depending on company size and violation severity.

Employee documentation

Employment contracts must specify exact monthly salary amounts, detailed job responsibilities, work schedules, and termination notice periods. Contracts lacking these elements are legally unenforceable.

Payslips must include:

• Gross salary breakdown by component
• All deductions with specific amounts
• Net pay calculation
• Employer social security contributions
• Year-to-date totals for taxes and contributions

Keep all payroll records for 6 years from the employment end date. Store employment contracts, payslips, time records, and tax documentation in both physical and digital formats.

All employment documents must be in Spanish. Foreign contracts require certified translations before they're legally valid in Chile.

Penalties and violations

Regulatory oversight

Servicio de Impuestos Internos (SII) oversees all payroll tax compliance. Access their portal at www.sii.cl for monthly filings and tax certificates.

Dirección del Trabajo handles employment law compliance and contract requirements. They conduct workplace inspections and investigate labor disputes.

Superintendencia de Seguridad Social manages social security contributions and pension fund reporting. Submit monthly contributions through www.suseso.cl.

Contact SII's helpline at 600 389 1000 for tax-related questions. The Dirección del Trabajo operates a complaint hotline at 600 450 4000 for employment law issues.

2026 brought several important payroll changes to Chile. Here's what you need to update.

Minimum Wage Increase - Effective January 1, 2026

Chile's minimum wage increased 6.2% from CLP$380,000 to CLP$403,500 per month. This affects all employees working standard 45-hour weeks.

The daily minimum wage rose to CLP$13,450, and the hourly rate increased to CLP$1,681. You'll need to adjust payroll systems and review all employee contracts earning at or near minimum wage levels.

Tax Bracket Adjustments - Effective January 1, 2026

Income tax brackets received inflation adjustments, with thresholds increasing approximately 4.8%. The tax-free threshold rose from CLP$816,000 to CLP$855,200 monthly.

Higher earners benefit most from these changes. An employee earning CLP$2,500,000 monthly will save roughly CLP$15,600 annually in income tax. Update your withholding calculations immediately to avoid over-deducting from employee paychecks.

Social Security Contribution Changes - Effective March 1, 2026

The unemployment insurance rate increased from 3.0% to 3.2% of gross salary, split between employer (2.4%) and employee (0.8%). This change affects all employees on indefinite contracts.

For an employee earning CLP$1,500,000 monthly, this adds CLP$3,000 to annual employer costs and CLP$1,200 to employee deductions.

Digital Invoice Requirement - Effective July 1, 2026

All payroll service providers must issue electronic invoices through Chile's SII system. Paper invoices won't be accepted for tax deduction purposes.

If you're using external payroll providers, confirm they're compliant with the new digital requirements. Non-compliant invoices could result in disallowed business deductions during tax audits.

Upcoming Changes

Starting January 2027, Chile will implement mandatory profit-sharing for companies with over 50 employees and annual revenues exceeding CLP$25 billion. Begin tracking employee counts and revenue thresholds now to determine if this affects your operations.