Social Security in Chile: A Summary for Employers – Pension Reform and Labour Regulations
Social Security in Chile:
A Summary for Employers – Pension Reform and Labour Regulations
1. Increase in the employer contribution
From August 2026 salaries (paid and declared in September), the additional employer contribution established by the Pension Reform (Law No. 21,735) has risen from 1% to 3.5% of taxable pay. As a result, the total pension contribution now stands at 13.5% per month. The increase does not involve any additional deduction from the employee: the cost is borne entirely by the employer.
0.1% → individual capitalisation account (AFP), in force since August 2025.
0.9% → new Protected Return Contribution (Cotización con Rentabilidad Protegida, CRP).
2.5% → Social Pension Insurance (including Disability and Survivors’ Insurance, SIS, now collected by the IPS).
2. New contribution: Protected Return Contribution (CRP)
This is a state-guaranteed mechanism that protects part of workers’ pension savings from market fluctuations. From August 2026, employers contribute 0.9% (rising to 1.5% in August 2027). Each contribution generates a Pension Security Bond (Bono de Seguridad Previsional, BSP) in the worker’s name. The FAPP Council has agreed that, on an exceptional basis, all BSPs issued between August and December 2026 will be paid directly, without yet being exchanged for an Amortisable Bond.
3. Where and how to declare
All contributions continue to be paid through Previred, within the usual deadlines. It is essential that companies and accountants update their payroll systems before processing the August payroll.
4. Generational Funds Investment Regime: now published
On 1 September 2026, the Superintendence of Pensions published (Exempt Resolution No. 1195) the final Investment Regime for Generational Funds. These will replace the current multi-fund system (A–E) with 10 generational funds assigned according to year of birth. The final regulation relaxed some aspects of the proposal put out for consultation in July, widening the permitted deviation bands and the limits for alternative assets.
Entry into force: Generational Funds will begin operating on 1 April 2027; the current multi-funds will remain in place until 31 March 2027.
Transition period: 36 months for AFPs to gradually adjust their portfolios to the new scheme.
5. Current subsidies for employers
Hiring Subsidy (Labour Activation line, SENCE / Ministry of Labour)
Paid directly to the company (not to the worker).
Maximum of 200 subsidies per company while the programme is in force.
Applies to contracts signed from 15 July 2026, for workers with no pension contributions in the previous 3 months and a gross salary of up to 3 Minimum Monthly Incomes.
The contract must be registered on the Labour Directorate’s Electronic Platform.
Paid until December 2026 (applications submitted in July/August are eligible for up to 4 payments).
6. Recent changes in labour regulations
Law No. 21,828 (Official Gazette, 23/07/2026): adds a new chapter to the Labour Code on measures for the labour inclusion of women in companies.
Law No. 21,822 (Official Gazette, 01/06/2026): Comprehensive Law on Older Persons, with implications for employment and social security.
Labour Directorate ruling on digital platform workers (Law No. 21,431): the Labour Directorate issued a ruling clarifying employers’ obligations regarding health and safety training, insurance for damage to the worker’s property (minimum coverage of 50 UTM per year), and the calculation of statutory severance payments for platform couriers and drivers.
Hantavirus health alert: the Labour Directorate reminded employers between the Atacama and Magallanes regions of their obligation under Article 184 of the Labour Code to effectively protect workers’ lives and health for as long as the alert remains in place.
7. Upcoming milestones in the reform timeline
Date | Milestone |
August 2025 | 0.1% employer contribution to the worker’s individual capitalisation account (AFP) comes into force. |
August 2026 | Additional employer contribution rises to 3.5% of taxable pay (0.1% AFP + 0.9% CRP + 2.5% Social Pension Insurance). |
August – December 2026 | Pension Security Bonds (BSP) issued during this period are paid directly, on an exceptional basis. |
December 2026 | Last payments under the Hiring Subsidy (Labour Activation line). |
31 March 2027 | Current multi-fund system (Funds A–E) ends. |
1 April 2027 | Generational Funds begin operating, with a 36-month transition period for AFPs. |
August 2027 | CRP contribution rises from 0.9% to 1.5%. |
2033 | Additional employer contribution reaches 8.5%, after gradual annual increases. |
8. How to calculate the labour cost per employee
An employee’s total monthly labour cost for the employer is not just the gross salary (taxable pay): it also includes all contributions and insurance paid by the employer. Following the August 2026 increase, the general formula is as follows:
Total labour cost = Taxable pay + Additional Pension Reform contribution (3.5%) + Employer unemployment insurance (2.4% or 3%) + Law No. 16,744 insurance (workplace accidents, variable rate) + other contractual benefits (statutory bonus, other bonuses, etc.)
8.1 Employer-paid components
Additional Pension Reform contribution (Law No. 21,735): 3.5% of taxable pay from August 2026 (see section 1).
Unemployment Insurance (AFC), employer contribution: 2.4% for permanent contracts, or 3% for fixed-term/project-based contracts (of this 3%, 2.8% goes to the Individual Unemployment Fund and 0.2% to the Solidarity Unemployment Fund).
Insurance against Workplace Accidents and Occupational Diseases (Law No. 16,744): a base rate of 0.90% plus an additional rate that varies according to the risk of the activity and the company’s accident record (it can add between 0% and a maximum of 3.4%, set by the relevant mutual safety association).
Other benefits that increase the total cost (not social security contributions, but usually included in hiring costs): statutory bonus (gratificación legal, 25% of earnings, capped at 4.75 Minimum Monthly Incomes per year), SENCE contribution (1% of taxable pay, recoverable through the training tax credit), supplementary health insurance or other agreed benefits.
8.2 Calculation example (taxable pay: CLP 800,000, permanent contract)
Item | Rate | Monthly amount (CLP) |
Taxable pay | – | 800,000 |
Additional Pension Reform contribution (Law No. 21,735) | 3.5% | 28,000 |
Unemployment Insurance (AFC), employer contribution | 2.4% | 19,200 |
Workplace Accidents Insurance (Law No. 16,744), base rate | 0.90% | 7,200 |
Total monthly labour cost | 854,400 |
Note: the Law No. 16,744 rate varies depending on the mutual safety association and each company’s risk level and accident record, so the actual amount may be higher. The example does not include the statutory bonus, SENCE contribution or additional contractual benefits, which must be added as appropriate.
8.3 Practical steps to calculate the cost per employee
Determine the taxable pay (gross salary, subject to the current taxable cap of approx. 87.8 UF, adjusted annually).
Apply the 3.5% additional Pension Reform contribution (rising gradually each year to 8.5% in 2033).
Apply 2.4% (or 3%) Unemployment Insurance depending on the type of contract.
Apply your mutual safety association’s rate (Law No. 16,744): 0.90% base + differentiated rate according to accident record.
Add the statutory bonus where applicable, plus any other agreed contractual benefits.
The result is the employee’s total monthly labour cost for the company.
Official sources for monitoring and verification
Superintendence of Pensions (Superintendencia de Pensiones) — spensiones.cl
Undersecretariat for Social Security (Subsecretaría de Previsión Social) — previsionsocial.gob.cl
Single Contribution Collection System (Sistema Único de Cobranza de Cotizaciones) — succ.cl
Labour Directorate (Dirección del Trabajo) — dt.gob.cl
ChileAtiende — chileatiende.gob.cl
