How does Chile payroll tax work in 2026?
Most of Chile's social cost comes off the worker's wage, not the employer's. Pension sits near 10% and health takes 7%, both deducted from pay. The employer's only direct payroll insurance is work-accident cover from 0.90%, plus a risk add-on. Income tax then runs in eight bands, the first one exempt.
· Chile guide
Illustration · Santiago, Chile
Chile splits payroll cost differently from most countries. The big social charges come off the worker's pay, not the employer's bill. Pension sits near 10% of pay and health takes 7%.
The employer's own direct payroll insurance is small. Work-accident cover starts at 0.90% of pay. A risk add-on sits on top, set by the regulator.
Income tax runs in eight monthly bands. The first band is exempt, so low pay carries no income tax. The top band is 40%. The 2026 minimum wage is CLP 539,000/month (Ley 21.751).
There is no 13th-month salary in Chile. Workers get a profit-share instead, the gratificacion legal. Pay runs monthly at most (Codigo del Trabajo).
What does an employer pay in Chile payroll charges?
The employer's direct payroll insurance is small. Work-accident cover starts at 0.90% of pay.
A variable risk add-on of up to 3.4% sits on top, set by the regulator. Pension and health are funded from the worker's wage, not by a separate employer rate (Ley 16.744).
| Employer payroll charge | Rate | Applies to |
|---|---|---|
| Work-accident insurance, base | 0.90% | Taxable pay, up to the UF contribution ceiling |
| Work-accident risk add-on | up to 3.4% | Set by SUSESO by activity risk |
Why the employer bill looks light
Chile runs its pension and health system through the worker's own wage. The employer withholds those amounts and pays them across, but they are charged to the employee, not added as a separate employer rate. So the employer's direct payroll insurance is mainly work-accident cover, which starts at 0.90% of taxable pay under Ley 16.744. On top of that base sits a variable rate of up to 3.4%, set by the regulator SUSESO according to the activity's risk class. A desk job pays close to the base. A construction or mining role pays far more.
What the employer still has to fund
Employer cost in Chile is not just the work-accident line. There is the worker's gross pay, the gratificacion legal profit-share, and unemployment insurance, where the employer pays a share for open-ended contracts. The single most common error is reading the low employer insurance rate as the full employer cost. It is not. Teamed itemises each line so the real number is visible before you hire.
What comes off a Chile worker's salary?
Two big deductions come off the worker before income tax. Pension sits near 10% of taxable pay, plus the AFP fund's own commission.
Health takes 7% of taxable pay. Unemployment insurance adds about 0.6% more. All are capped by the UF contribution ceiling (DL 3.500).
| Employee deduction | Rate | Applies to |
|---|---|---|
| Pension (AFP) | around 10% plus AFP commission | Taxable pay, up to the UF ceiling |
| Health (FONASA or ISAPRE) | 7% | Taxable pay, up to the UF ceiling |
| Unemployment insurance | around 0.6% | Open-ended contracts |
Pension is the worker's biggest deduction
Chile's pension runs through a private fund, the AFP. Each worker pays roughly 10% of taxable pay into a personal account, plus a commission the AFP sets for itself. The exact pension rate and commission vary by fund and are not fixed in a single statutory figure, so the page does not quote a precise pension percentage. Health is firmer. Every worker pays 7% of taxable pay to either the public FONASA or a private ISAPRE plan. All of these contributions are capped at the UF imponible ceiling, an inflation-linked unit that moves each month.
The deductions come off before income tax
Pension and health are taken from gross pay first. Income tax is then worked out on what is left. Get that order wrong and the tax figure is wrong, even when every rate is right. Teamed's payroll applies the deductions in the correct order on every run, then files the worker's monthly income tax.
Chile income tax bands for 2026
Income tax for employees, the Impuesto Unico de Segunda Categoria, runs in eight monthly bands. The first band is exempt, so low pay carries no income tax.
Rates then climb from 4% to a top rate of 40%. The bands are measured in UTM, a unit that moves with inflation each month (DL 824).
| Monthly income band | Rate |
|---|---|
| Band 1, lowest pay (exempt) | 0% |
| Band 2 | 4% |
| Band 3 | 8% |
| Band 4 | 13.50% |
| Band 5 | 23% |
| Band 6 | 30.40% |
| Band 7 | 35% |
| Band 8, highest pay | 40% |
Chile taxes employment income each month, not once a year, through the Impuesto Unico de Segunda Categoria. The first band is exempt, so a worker on the 2026 minimum wage of CLP 539,000/month pays no income tax at all. From there the rate steps up through 4%, 8%, 13.50%, 23%, 30.40%, 35%, and tops out at 40% on the highest pay.
Why the band edges move every month
The band thresholds are not set in pesos. They are set in UTM, the Unidad Tributaria Mensual, which the tax authority restates each month for inflation. So the peso value of each band edge changes from one payroll run to the next. The rates stay the same. The thresholds drift. Running the tax off last month's table is a common error, and it under-deducts when the UTM has moved up. Teamed pulls the current SII monthly table on every run.
How does Chile payroll filing and remittance work?
Pay runs monthly in Chile. The agreed pay interval cannot be longer than one month (Codigo del Trabajo, Art. 55).
Each month the employer withholds the worker's pension, health, and income tax, then pays them across to the funds and to the tax authority.
Pay must be made at the interval set in the contract, and that interval cannot run longer than one month. The employer withholds the worker's pension, health, and income tax from each payment, then remits those amounts to the AFP, the health plan, and the tax authority. A written employment contract must be in place within 15 days of the start date.
Chile payroll runs on a monthly cycle. The worker receives a liquidacion de sueldo, an itemised payslip, showing gross pay, each deduction, and net pay. The employer then makes the remittances:
- Pension to the worker's AFP fund, monthly
- Health to FONASA or the worker's ISAPRE, monthly
- Income tax withheld and paid to the Servicio de Impuestos Internos, monthly
- Unemployment insurance and work-accident cover to the relevant funds, monthly
Most of these run through the Previred portal, which collects the social contributions in one filing. Income tax withholding is declared separately to the tax authority. Each fund has its own deadline early in the following month, so a single late run can trigger more than one penalty at once.
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Collect pay data
Gather salary, hours, overtime, and any taxable benefits for the month before the run closes.
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Apply social deductions
Deduct the worker's pension and health first, capped at the UF ceiling. These reduce the pay that income tax is charged on, so the order matters.
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Work out income tax
Apply the current SII monthly band table to taxable pay. Pull the live table each run, because the UTM band edges move with inflation.
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Add employer charges
Calculate work-accident cover and the employer unemployment-insurance share on top of the worker deductions already taken.
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Issue the liquidacion
Produce the itemised payslip showing gross, each deduction, and net pay for the worker.
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Remit to the funds
Pay pension, health, unemployment, and work-accident cover through Previred, and the withheld income tax to the tax authority, by each fund's deadline.
Pension and the gratificacion in the Chile payroll stack
Pension is funded from the worker's wage, near 10% of taxable pay, into a private AFP account. There is no separate statutory employer pension rate.
Chile has no 13th-month salary. Workers get a profit-share instead, the gratificacion legal, worth at least 30% of net annual profit (Codigo del Trabajo).
Chile's pension sits with the worker, not the employer. Each worker pays roughly 10% of taxable pay into a personal AFP account, plus the fund's commission. The employer withholds and remits it but does not add a matching employer pension rate. That is a real structural difference from most payroll systems, where the employer carries a large pension charge of its own.
No 13th month, but a profit-share instead
There is no statutory 13th or 14th-month salary in Chile. In its place sits the gratificacion legal, a profit-share. Under Art. 47 the base entitlement is at least 30% of the company's net annual profit, shared in proportion to earnings. Most employers instead use the Art. 50 option, paying 25% of yearly remuneration capped at 4.75 minimum monthly incomes. Either way it is a real annual cost on top of salary, and it is easy to miss when budgeting a first hire. See the Direccion del Trabajo guidance on the gratificacion legal.
Work-accident cover sits beside the pension
Work-accident insurance is the one clear direct employer payroll charge, starting at 0.90% of pay plus the risk add-on. It funds treatment and income for work injuries. It is not a pension and not health cover. It runs in the same monthly remittance as the rest of the stack.
How does Teamed handle Chile payroll for you?
Teamed becomes your legal employer of record in Chile for from $599 per employee per month, with zero FX mark-up in any currency.
Pension, health, income tax, the gratificacion, and the full Chile employment law stack run on one platform.
Real HR and legal experts handle your Chile hires, from the first contract through every monthly liquidacion, social remittance, and income tax filing. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice, so you see pension, health, work-accident cover, and the gratificacion as separate lines, never one blended number.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Chile contractor who converts to payroll keeps their record. That same worker can graduate to your own Chile entity without switching systems. Run the Employer Cost Calculator to see the full picture, including the gratificacion and the UF-linked ceilings. EOR is the right model for a first Chile hire, until it isn't. Start from the Chile hiring overview.
Key sources: SII Impuesto de Segunda Categoria, SUSESO social security framework, and the Direccion del Trabajo.
Frequently asked questions
What does an employer pay in Chile payroll charges in 2026?
The employer's main direct payroll insurance is work-accident cover, which starts at 0.90% of taxable pay, with a variable risk add-on of up to 3.4% set by the regulator SUSESO. Pension and health are funded from the worker's own wage rather than a separate employer rate, so the employer's direct insurance bill is light. The fuller employer cost includes gross pay, the gratificacion profit-share, and the employer share of unemployment insurance.
What is deducted from a Chile worker's salary?
Two large deductions come off before income tax: pension into a private AFP account at roughly 10% of taxable pay plus the fund's commission, and health at 7% of taxable pay to FONASA or an ISAPRE plan. Unemployment insurance adds around 0.6% more on open-ended contracts. All of these are capped at the UF imponible ceiling, which moves each month.
What are the Chile income tax bands for 2026?
Employment income is taxed monthly under the Impuesto Unico de Segunda Categoria in eight bands. The first band is exempt at 0%, so a worker on the minimum wage of CLP 539,000/month pays no income tax. The rate then climbs through 4%, 8%, 13.50%, 23%, 30.40%, 35%, and tops out at 40%. The band edges are measured in UTM and restate every month for inflation.
Does Chile have a 13th-month salary?
No. Chile has no statutory 13th or 14th-month salary. Instead workers receive the gratificacion legal, a profit-share. Under Art. 47 the base entitlement is at least 30% of the company's net annual profit, or the employer can use the Art. 50 option of 25% of yearly remuneration capped at 4.75 minimum monthly incomes. It is a real annual cost on top of salary.
How often is payroll run and paid in Chile?
Pay runs monthly. The agreed pay interval cannot run longer than one month under Art. 55 of the Codigo del Trabajo. A written employment contract must be in place within 15 days of the start date. Each month the employer issues an itemised liquidacion de sueldo, withholds pension, health, and income tax, and remits them to the funds and the tax authority.
The mistake we see most on Chile payroll is reading the low employer insurance rate as the full employer cost. It isn't. The big social charges ride on the worker's wage, and the gratificacion profit-share is a real annual cost on top of salary. Budget the whole stack before the first hire, not just the headline insurance line.
Chile loads most social cost onto the worker's wage, so the headline employer insurance from 0.90% hides the real bill.
Income tax runs in eight monthly bands, the first exempt, the top 40%, with edges that move every month.
Budget the gratificacion before you hire.
