In the context of a global pandemic that has shaken different societies at all levels, governments are currently implementing extraordinary measures in order to cope with the effects of the crisis that led the Covid-19. That is why last June 1st, the official newspaper published the “short law” No. 21,232 by which extraordinary measures were added to the employment protection law No. 21,227, thus introducing important changes to the labor measures already implemented in the country, in order to ensure and guarantee job continuity during the contingency period.

The most significant changes regarding temporary contract suspensions and temporary working hours reductions during the pandemic are highlighted below:

Changes in the title of the suspension employment contract

There are 2 types of suspensions to the employment contract:

  1. Suspension by act of authority (Due to a territorial quarantine or to the closure of the authority of some money orders)
  2. Suspension by agreement with the employer (Accessed by agreement with the employer. The agreement must be in writing and signed, so that in case of inspections the document can be provided).

Changes in the way of calculating the payment of social laws for those cases covered by the employment protection law due to a temporary contract suspension

The mandatory contribution that has to be paid by AFP and SIS must be made for the 100% of the amount paid by the AFC to the worker, which means that the payment schedules reported by the AFC must be reviewed and supervised month by month. In addition, the payment to the AFP becomes more flexible as it will be possible to declare and not pay it, also the term to pay without interest or fines is increased to 24 installments.

Regarding the payment of Health, SANNA Law and AFC, the employer must pay the contributions at 100% of the taxable income corresponding to the last month remuneration received by the worker, prior to the work suspension, and it remains the non-payment of the social security stated in the Law 16,744 (Mutuality).

These are some other updates:

  • It is forbidden to dismiss by company needs to those workers whose dismissal date is from this June 1, 2020, regarding to workers who have applied this employment protection law.
  • The option of being able to dismiss workers is maintained, for the reasons stated in the article 159, numbers 1 to 5, of the Labor Code, maintaining force majeure excluded.
  • The possibility is allowed for those companies whose activities are excluded from the stoppage, because they were essential services, and today they can enter into suspension agreements with workers who provide services that are not essential for the mentioned company. The foregoing is allowed since it will be presumed that the employer’s activity is partially affected, always when in the month prior to the signing of the agreement, their income from net sales or services of the Value Added Tax have experienced a drop equal to or greater than 20% with respect to the same month of the previous year.
  • The right to claim by workers or unions is incorporated for all those who are affected by the suspension agreements concluded between worker and employer, therefore, they could make a complaint to the work management when they consider that all the necessary conditions of the company’s activity that justify the temporary suspensions of the contract are not being complied.
  • Regarding the alimony payments of the suspended workers that are paid through a court order, will be paid in proportion to what corresponds, through the funds that are paid through the unemployment insurance, and for this to happen the employer must expressly indicate which workers are obliged to withhold and pay alimony, all this so that the holder of the maintenance right does not have to carry out any procedure, such withholdings will be subject to withholding up to 50% of the same ones.
  • To women with fuero maternal (maternal innmunity), temporary suspension of the contract or temporary reduction of the working day cannot be applied. Consequently, a prohibition to apply the suspension of the employment relationship was incorporated, regarding workers who are in this situation.
  • Regarding the calculation of the compensation for future dismissals, it was expressly stated that, in the case of dismissal after the suspension agreements, as well as the dismissal that occurs during the reduction of working hours agreement, the calculation basis for the compensation recorded in the art. 163 and following of the Labor Code, will be the gross remuneration that the worker had agreed, without considering the benefit he received from the unemployment insurance.

With these changes, Chile is adapting to the situation caused by COVID-19 and responding to the world’s challenges in the wake of the pandemic. At Auxadi we are experts in providing value added services in accounting, tax compliance and international payroll management. If you need more information, please contact us.

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Manuel Oportus
Manager Chile

All information contained in this publication is up to date on 2020. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.