Labor legislation includes the rules that regulate the benefits to which people are entitled and relate to their main needs of healthcare, work and social welfare.
In Chile, there are general regimes established for pensions, healthcare, occupational risks, family allowances and the complementary social services defined by law. In the event of old age, unemployment, illness, disability, work accidents, maternity or loss of the principal household income earner, the State has a set of laws, policies and social security measures.
What does Chile’s social security system consist of?
These benefits and insurance policies give rise to rights in the face of social contingencies, linked to the payment of social welfare obligations:
- Pension System to address old age, disability and death.
- Healthcare System to address illness and pregnancy.
- Insurance to cover workplace accidents and occupational diseases.
- Unemployment Insurance.
What are AFPs?
Chile's current pension system was set up in 1980. The individually funded system establishes an individual financing mechanism, based on the savings that each employee makes during their working life, in order to pay for their pension.
In Chile, all employees must be affiliated with a Pension Fund Administrator (Administradora de Fondos de Pensiones or AFP). It is the obligation of the employer to subtract the amount from their monthly salary and transfer it to the respective AFP. Each employee is responsible for affiliating with an AFP and they can choose the AFP they prefer, notifying the employer of the amount which should be withheld and transferred to the AFP.
The minimum amount which must be deducted from the salary is approximately 12.3% of the gross salary, with 10% being transferred to the individual AFP account to finance the retirement of the employee and approximately 2.3% to cover the disability and survivor insurance and the commission charged by the AFP.
How does Chile’s healthcare system work?
The mandatory payment for healthcare is 7% of the employee’s gross salary, but the employee can previously agree a higher payment up to a maximum of 80.2 UF with a healthcare provider.
This amount should be withheld and paid monthly by the employer to the National Health Service (Fondo Nacional de Salud or FONASA), which is public, or to a private healthcare provider (Institución Privada de Salud Previsional or ISAPRE) chosen by the employee, who is responsible for affiliating with the organization chosen.
Would you like to find out more about Chile’s social security system? Download the chapter of our step-by-step guide for Foreign Investors. Other chapters of the guide also contain useful information about Labor Laws, Taxes and Environmental Assessment.