Employee Compensation Structure: Payroll and Benefits Explained

The Book of Compensation: A Payroll Record

"The Book of Compensation" is a crucial record where all amounts related to employee compensation payments are documented. This includes Social Security contributions, legal deductions, and agreed taxes.

Payroll Components: Understanding Salary Calculations

Employee salaries are comprised of three main calculation types:

• Taxable Income
• Non-Taxable Income
• Discounts/Deductions

Taxable Income Components

Taxable income includes elements such as basic salary, overtime, bonuses, gratuities, and commissions. These are considered taxable because their total amount is subject to estimated discount rates and pension laws.

Base Salary

The base salary is the fixed monetary amount paid for regular periods. By law, these periods are typically 30 days, irrespective of the actual number of days in a month.

Overtime Compensation

Overtime refers to the amount calculated considering the extraordinary hours worked by an employee within a month. In Chile, the law stipulates that an employee cannot exceed two hours of overtime per day, and such work must be by mutual agreement with the employee. Another law specifies that the minimum premium an employer must pay for overtime is 50%.

Gratuities

A gratuity is an amount a company pays to an employee in addition to their basic salary. In Chile, there are two types of gratuities:

• Agreed Gratuity: This is an amount the employer agrees upon with the employee, often stipulated in a collective bargaining agreement.
• Legal Gratuity: The labor code outlines two types of legal gratuities. The first is calculated as 30% of the company's annual profits and is generally paid in two installments.

Annual Legal Gratuity

Its calculation relies on registration data and company balance sheets.

Monthly Legal Gratuity

Its calculation is obtained by applying 25% of the basic salary, with a cap of 4.75 IMM (Monthly Taxable Income) per year.

Commissions

Commissions are amounts paid by the company to sales personnel based on sales values achieved within the month. This is calculated on the net value of production, i.e., without VAT.

Bonuses

Bonuses are compensation paid by companies, typically in an equitable and proportional manner to employees' salaries. They are often linked to the company's total production or profitability. The most typical is the production bonus, but other types of bonuses may be paid depending on the company (e.g., area bonus, family assistance bonus).