Essential Labor and Employment Concepts Explained

Core Concepts of Labor and Employment

Work

Work is how we contribute to the material development of society. It is the expression of our creativity, artistic vocation, and social, scientific, or spiritual pursuits. It is the way we bond with other human beings throughout history and space.

AFP (Pension Fund Administrators)

These are private institutions with a unique social order, responsible for the administration of pension fund contributions made by workers and managing the system's performance.

Employment Status

Dependent Worker

A worker who maintains a contractual link with their employer. The contract sets wages, hours, duties, rights, and other conditions.

Independent Worker

A worker who carries out their work based on their own initiative without an employer; there is no employment contract.

Labor Market and Compensation

Labor Market

The set of transactions generated between workers who offer their workforce and employers who demand it. This only includes paid work (compensated by salary or wages).

Liquid Salary

The cash amount a worker receives to make ends meet after all deductions.

Family Allowance

A non-remunerative state benefit providing money to low-income families for each child.

Compensation

Payment of a salary or wage in return for providing a good or service.

Legal and Administrative Framework

Labour Code

A document that constitutes the laws governing labor in Chile.

EAP (Economically Active Population)

The population ranging from 15 to 60 years for women and 65 for men, who have the capacity for work, savings, and the purchase of goods and services.

Participation

A share of the profits of a business, provided there is good performance by the company.

Wage Settlement

A document that an employee must receive from the employer due to an employment contract. It ensures that the worker received payment for their work.

Employment Contract

A legal document regulating the rights and obligations of employees and employers.

Deductions and Benefits

Taxable Salary

The salary on which the employer makes legal deductions:

• 10% AFP: Pension contribution.
• 7% Health: Minimum contribution (FONASA / ISAPRE).

Unemployment Insurance

A social security instrument for when employment terminates. It involves contributions from the employer, the worker, and the state. It generates funds used by the worker during periods of unemployment.

Bonus

A reward from the employer based on profits. It is mandatory when the company generates profits.

Viatical (Per Diem)

Money given to a worker for responsibilities outside the contract. It is voluntary and does not constitute remuneration.

Commission

A percentage of the selling price given in addition to the worker's base salary.