News Alerts

New Law on guaranteed Minimum Income

April 13, 2020

On April 3rd, 2020, Law No.21,218 (the “Law”), which creates a monthly subsidy (the “Subsidy”) borne by the State of Chile, in order for employees to reach a minimum guaranteed income, was published on the Official Gazette.

Requirements that employees must fulfill in order to be eligible for the Subsidy

  • Having a valid employment contract, pursuant to the Labor Code.
  • Their regular working schedule must exceed 30 hours a week.
  • Their monthly gross remuneration must be lower than $384,363 (currently USD 451 approximately).
  • They must belong to a home which is part of the 9 first income deciles, pursuant to the socioeconomic characterization instrument to which article 5 of Law No.20,379 (which “creates the inter-sectional protection system and institutionalizes the ‘Chile Crece Contigo’ infancy integral protection subsystem) refers to.

Amount of the Subsidy

Employee’s gross monthly remuneration Regular weekly working schedule (hours) Monthly amount of the Subsidy
≥$301,000 and <$384,363 (≥$353 and <$451 approximately) 45 CLP 59,200 - (Monthly gross remuneration – CLP 301,000) x 0.7101 = Amount to be paid.
<45 and >30 Same rule as the above cell, in proportion to the employee’s weekly working schedule.
<$301,000 (USD <353 approximately) 45 19.67% of the monthly gross remuneration.
<45 and >30 Same rule as the above cell, in proportion to the employee’s weekly working schedule.

Particularities of the Subsidy.

  • Neither subject to any deduction, social security contribution or tax, nor is it seizable.
  • Extinguished upon termination of the employment relationship or when the relevant employee ceases to comply with the requirements set forth by Law in order to be eligible for it.
  • Employees who are receiving the Subsidy will continue to receive it during the time they make use of their vacations, sick leave (“licencia médica”) and Parental Post-Natal leave.
  • It will be in force until December 31st, 2023.

Employer’s obligations

Employers must inform to all of their employees who may be eligible for the Subsidy about its existence, based on the employees0 respective gross monthly remunerations.

Prohibitions

  • Whether an employee is eligible to receive the Subsidy under no circumstance may derive in an unjustified reduction over the employee’s remuneration or any other of its components, as compared to the ones paid by the employer on the previous 3 months. Any clauses which imply a reduction over the employee0s remuneration will be deemed non-written.
  • The employer will not be able to terminate an employee’s employment contract and execute a new one, in which a lower remuneration is agreed, with the sole purposes of making such employee eligible to receive the Subsidy.
  • The remunerations received by the employees who are beneficiaries of the Subsidy must not be agreed in attention to this amount, or any other arbitrary consideration. They must always be agreed in an objective manner, only being possible to agree them based on the employee’s qualifications, suitability, responsibility or productiveness.

Sanctions

  • Employers which incur in any of the aforesaid prohibitions may be sanctioned with administrative fines that will amount up to: (i) 30 Unidades Tributarias Mensuales “UTM” (USD 1,774 approximately) in case of companies with 1 to 49 employees; (ii) 120 UTM (USD 7,096 approximately) in case of companies with 50 to 199 employees; and (iii) 180 UTM (USD 10,643 approximately), in case of companies with more than 200 employees. These fines will be imposed taking into account each employee who falls under any of the prohibitions.Likewise, in case of a relapse in the conduct and when applicable, shut down of the establishment or worksite for a 10-day term may be declared.
  • Everyone who, whether for their own or of a third party’s benefit, knowingly supply, declare or give false background or information in order to illegally obtain the Subsidy, will be sanctioned with fines and imprisonment, varying their amount and length based on the amount of the Subsidy maliciously obtained.

Validity

The Law will come into force on May 3rd, 2020, being the first payment of the Subsidy made within 30 days as of such date.

If you have any questions regarding the matters discussed in this news alert, please contact the following attorneys or call your regular Carey contact.

 

Oscar Aitken
Partner
+56 2 2928 2223
oaitken@carey.cl

Francisca Corti
Partner
+56 2 2928 2212
fcorti@carey.cl

Marcela Tapia
Associate
+56 2 2928 2377
mtapia@carey.cl

 


This news alert is provided by Carey y Cía. Ltda. for educational and informational purposes only and is not intended and should not be construed as legal advice.

 

Carey y Cía. Ltda.
Isidora Goyenechea 2800, 43rd Floor
Las Condes, Santiago, Chile.
www.carey.cl


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