Introduction to Payroll in Chile

You must thoroughly understand the local employment, compensation, tax, and reporting rules in Chile to implement payroll in a manner that is accurate, timely, and compliant. You can trust our payroll solutions. Our in-country knowledge and guidance will make sure that your workers in Chile are paid properly, compliantly, and on time.

Taxes, employee compensation, and benefits

Our local experts will give you up-to-date support concerning benefits entitlement, tax laws, and compensation stipulations to process payroll in Chile. Support covers matters such as:

• Income, corporate and regional taxes
• Social taxes, such as unemployment, pensions, and healthcare
• Different kinds of paid leave, such as paid holiday and vacation
• Other types of withholdings and employer contributions

Request a demo to learn the value of this support for your company’s Chilean operations.

Payroll Process in Chile

Blueprint for a successful payroll practice

Since payroll in Chile consists of several activities amongst many teams, the payroll staff members must work efficiently every day as they keep track of employee count, alterations to statutory policies, novel deduction requirements, and much more. To help you make sense of the payroll process in Chile in its entirety, let’s categorize it into three stages.

Pre-payroll phase

The pre-payroll phase is comprised of organization establishment, the collection and validation of payroll input, and the comprehension of payroll requirements and compliance in Chile. Check out these various elements involved in the pre-payroll phase.

Setting up the organization in Chile

Daily, thousands of new companies emerge worldwide. Each company has a singular philosophy, method for employee engagement, and work culture. Step one in the standardization of payroll input is to establish clear organizational policies, including:

Business profile

• Be sure that you possess a registered business number that aligns with your other business materials. Payroll forms need registered numbers so that tax forms, payslips, and other materials can be correctly distributed.

Work location

• If your enterprise has several work locations in regions throughout Chile, you may need to clarify the policy for each region.

Leave policy

• All employees have the right to take different sorts of leaves, like sick and maternity leave. Developing a leave policy is of utmost importance because you must take it into account when generating paychecks.

Attendance policy

• The integration with biometric devices and timesheets also has a direct impact on employee pay.
• You will need to devise organizational policies that address various aspects of attendance, such as shift hours, regular hours, on-duty requests, and half-day permissions. You can collect worker attendance data by using biometric devices and timesheets integration.

Statutory components

• Following Chilean payroll laws is a must if you want to preserve the legality of your establishment. You have to choose what you will present to your employee from a standard list of mandatory components, including the Chilean Labor Code, the Chilean Civil Code, the Chilean Tax Code, and the Employees’ Compensation Insurance Law.

Salary components

• For the payroll process in Chile, make use of salary components that can include diverse compensation structures. Pinpoint the best earnings, deductions, allowances, reimbursements, and benefits based on your organization's policy.

Pay schedule

• Choose your organization's payday and pay schedule so that employees know when they will be paid and manage their finances adequately.

Employee information

• Collect vital employee information such as department and designation.

Request a demo and see for yourself how Skuad can help you flawlessly negotiate this payroll set-up phase.

Payroll calculation phase

This phase will depend on how you decide to conduct calculations. If you work with a system, the data you gathered during the pre-payroll phase will be fed into the payroll system to generate each employee's paycheck. The result of this process will be the correct salary for every employee, once the system addresses taxes, withholdings, and deductions.

Post-payroll phase

Salary payments

• Sending salary payments to your employees is a critical aspect of the post-payroll process. Once you have finished calculating payroll, you can give the bank advice to your corporate bank for the disbursement of salaries. You can skip over this process by utilizing software that has a built-in direct deposit element.

Payroll accounting

• Employee salaries represent one of the largest expenses for your business. To maintain business accounts, be sure to record your workers' salaries.

Payroll reporting and compliance

Contributions, such as unemployment insurance, pension, and health plan contributions, are deducted from employee earnings during payroll processing in Chile. The employer is responsible for making unemployment and Disability and Survival Insurance (SIS) payroll contributions. For the sake of tax reporting, businesses must file tax returns in Chile annually, before the end of April. The Chilean government utilizes information from these returns to determine tax compliance.

Payroll Processing in Chile

Payroll processing in Chile consists of many elements. It involves totaling wages, withholding deductions, filing payroll taxes, and sending payments to employees. You can accomplish this sort of processing manually and independently or you can refer to a payroll solutions provider, such as Skuad, which has software and systems that can automate many of the steps involved in payroll processing in Chile.

Using a provider can make the process of running payroll in Chile seem less daunting. Like many other countries, Chile has its own set of payroll-related rules and regulations, so implementing the process in the country without the assistance of payroll experts may prove difficult. Payroll experts will ensure compliance, helping your company avoid legal and financial issues in the long run.

Payroll Processing Company in Chile

As a payroll processing company in Chile, Skuad can simplify the process of expanding and setting up payroll in Chile so that you can focus on the growth of your business. Contact us today to acquire more information about our payroll processing company in Chile and how to get started.

Payroll Management in Chile

Payroll management in Chile, such as the one Skuad offers, aids companies in managing the financial records of their employees and following mandatory payroll and labor laws. Employee financial records shed light on earnings, gross income, net income, tax deductions, incentives, pensions, insurance policies, and payslip generation.

A high-quality payroll management system will make sure that employees are paid on time and will serve as a positive reflection of your company's financial stability. It will not make space for legal ambiguity. Effective payroll management in Chile will boost the morale of your company.

Payroll Compliance in Chile

Payroll compliance in Chile is a legal framework that the country's government uses to regulate the operations of private organizations. This framework includes many moving pieces, such as social security, employee salary, benefits, and taxes. In Chile, employees pay social security contributions for pensions, healthcare, worker illnesses and accidents, and unemployment.

For example, employees working 45 hours each week must be paid at least 350,000 Chilean pesos ($) per month if they are between the ages of 18 to 65. One Chilean peso is the equivalent of 0.0012 of a United States dollar.

Workers receive benefits such as paid holiday, annual, prenatal, and postnatal leave. Also, the tax brackets in Chile start from exemption and end at a 35% tax rate.

All in all, payroll compliance in Chile involves a plethora of elements. Achieving it can be very exhausting. Hiring payroll experts will make the process much less stressful.

Payroll Components in Chile

There are several payroll components in Chile, such as compensation, working hours, overtime laws, social security, sick leave, parental leave, public holidays, payroll taxes, and other laws. You will need to be aware of the payroll components in Chile so that, when working with a payroll partner, you can factor them into payroll administration correctly.

Compensation

The monthly minimum wage in the country is $350,000 for employees ages 18 to 65 and $261,092 for employees younger than 18 and older than 65.

Working hours

In Chile, a workweek is 45 hours for at least five and at most six consecutive days. On average, employees work nine hours each day.

Overtime laws

Overtime pay is 150% times that of regular pay, and, for overtime, two hours per day or 10 hours per week extensions are permitted.

Social security

Regarding social security contributions, employees must contribute 10% of their income to pensions, 7% of it to health plans, and 0.6% of it to unemployment insurance.

Sick leave

In Chile, if the sick leave period is less than 11 days, sick pay will begin on the fourth day.

Parental leave

Paid leave in Chile is for employees who have worked at least a year. They are granted pay for 30 weeks of maternity leave and at least five days of paternity leave.

Public holidays

There exists 16 public holidays in Chile, including:

• New Year's Day
• Good Friday
• Holy Saturday
• Labour Day
• Naval Glories Day
• National Day of the Indigenous Peoples in Chile
• Feast of Saints Peter and Paul
• The Feast of Our Lady of Mount Carmel
• Feast of Assumption
• Independence Day
• Day of the Glories of the Army
• Day of the Races
• National Day of the Evangelical and Protestant Churches
• All Saints' Day
• Feast of the Immaculate Conception
• Christmas

Payroll taxes

When the employee income tax rate is at its lowest, it is 0% for monthly earnings up to $695,250. When it is at its highest, it is 35% for monthly earnings between $6,180,000 and $15,965,000.

Other laws

Severance pay applies to employees who have worked at least one year. The amount of severance pay is equal to one month's salary for each year of service, for a duration of up to 11 years.

Still confused about these numerous payroll complexities? Request a demo and see how Skuad can help.

‍Conclusion

If you do not take advantage of the expertise of a payroll provider like Skuad, you will be forced to spend a great deal of time and money. You will have to engage in the time-consuming task of building an HR department. Then, you will have to allocate funds to pay the members of said department.

In addition, you will have to experience the trouble of launching an entity in Chile. This will be hard to accomplish if you need to follow a set schedule or tight budget. Know that entities are often heavily regulated, and you must be equipped to deal with a large number of regulations.

By partnering with Skuad, you will save time and money while ensuring accuracy and compliance. Skuad's Global Payroll and HR Platform will help you hire, onboard, and pay talent in Chile without having to set up an entity in the country.

We have systems that can automate payroll in Chile and monitor any changes so that your company can remain compliant. Your payroll systems will run steadily and efficiently. You will be able to home in on the global expansion of your company if you know that payroll is running smoothly.

Want to start hiring and paying in Chile — and all over the world? Book a free platform demo to see how Skuad can assist your business.