Navigating Employee Termination and Notice Periods in Chile

Chilean labor regulations establish that employment contracts typically conclude through mutual agreement between employer and employee. However, termination can also occur under specific circumstances, including employee resignation, death of the employee, expiration of fixed-term contracts, completion of contracted work, force majeure events, or employer-initiated dismissal.

Each termination type follows distinct procedures that must be carefully observed. When employers terminate contracts improperly, they face compensation obligations ranging from 30% to 100% of the employee's salary, plus potential legal fees.

Valid Grounds for Termination in Chile

Chilean labor law provides strong protections against arbitrary dismissals, requiring employers to demonstrate legitimate business-related justifications. Courts increasingly scrutinize termination reasons to ensure compliance with legal standards. Valid grounds include:

Serious misconduct including ethical violations, sexual harassment, immoral behavior affecting company reputation, physical aggression toward colleagues, or actions causing employer harm
Engaging in activities explicitly prohibited by the employment contract
Unexcused absences including two consecutive days absent, two Mondays absent within a month, three monthly absences, or absences causing operational disruptions
Unauthorized leave during work hours without employer approval or refusal to perform contracted duties
Safety-compromising behavior through recklessness or gross negligence threatening workplace safety
Intentional damage to company property, tools, equipment, or merchandise
Breach of contractual obligations
Employer bankruptcy leading to asset liquidation
Formal written dismissal following proper procedures

Special protections apply to certain employee categories. Those on medical leave, pregnant employees, or workers on approved leave cannot be dismissed until fully returned to work, except in cases of serious misconduct or company restructuring. Health and safety committee chairs and union leaders also enjoy these protections, requiring court approval for termination.

Notice Period Requirements

Chilean labor law specifies distinct notice periods based on termination circumstances:

Termination Reason	Notice Requirement
Dismissal under Labor Code Articles 159(4-5) or 160	3 business days to employee and labor inspectorate
Force majeure or natural disaster	6 business days to employee and labor inspectorate
Company needs or contract termination	Minimum 30 days advance notice or one month's salary in lieu
Liquidation proceedings	6 business days after receiving liquidation notice

Articles 159(4-5) cover serious misconduct including duty neglect, contract violations, or theft, while Article 160 addresses economic reasons or restructuring. Failure to provide 30-day notice requires compensation up to 90 UF (monetary unit adjusted for inflation), with potential 150% penalties for non-payment.

According to Article 152, employment contracts remain technically active until all statutory benefits are settled, requiring continued salary payments until obligations are fulfilled.

Severance Compensation Framework

Employees with at least six months of service dismissed for economic reasons or restructuring receive severance equivalent to one month's salary per year worked, capped at 11 years. Employers must provide written notice explaining dismissal reasons. Employees terminated for serious misconduct forfeit severance rights.

Termination Process Overview

Employers must prepare written notice specifying dismissal reasons and effective date, delivered within three days via registered mail or personal delivery with employee acknowledgment. Original notices must be submitted to the Labor Inspectorate within the same timeframe.

Following notification, employers prepare a severance agreement detailing termination reasons and compensation package, typically including:

Payment in lieu of notice period
Unused vacation pay
Intellectual property and confidentiality provisions

Agreements must be finalized within ten days and witnessed by a notary or Labor Inspectorate official.

Unemployment Benefits System

Chile's unemployment insurance system provides protection through individual accounts funded by 3% of taxable income. Eligibility requires:

Indefinite contracts: Minimum 10 months contributions
Fixed-term or project-based contracts: Minimum 5 months contributions

Benefit distribution follows this structure:

Month	Percentage of Base Salary
1	70%
2	60%
3	45%
4	40%
5	35%
6+	30%

Payments cease immediately upon re-employment notification. SailGlobal's HR experts can provide comprehensive guidance on navigating Chile's complex termination landscape.

Chile Employee Termination Guide: Notice Periods, Severance & Legal Requirements