Countries › Chile › Guide › 7. Labor and employment › Dismissal and severance in Chile: grounds, notice letters, the 90 UF cap, court surcharges, unpaid contributions, protected workers, settlements and claim deadlines

Dismissal and severance in Chile: grounds, notice letters, the 90 UF cap, court surcharges, unpaid contributions, protected workers, settlements and claim deadlines

Last verified: 2026-10-26 · Status: Stable

Chile has no at will dismissal: an employer must invoke a legal ground, the most used being company needs (art. 161), which requires 30 days written notice or a month of pay in lieu plus severance of 30 days of pay per year of service, capped at 11 years and a 90 UF monthly base (about CLP 3.7 million). Courts raise severance by 30 to 100 percent when the ground is not proven, and add 6 to 11 months of pay where fundamental rights were breached. A dismissal while pension or health contributions are unpaid does not end the contract, and the final settlement must be ratified before a labour inspector, notary or on the Dirección del Trabajo website.

USD figures use the Central Bank exchange rate of CLP 986.58 per US dollar published in the Diario Oficial of 23 October 2026 (Ley Nº 18.840 art. 44). UTM amounts use the SII value of CLP 72,151 for October 2026. Amounts capped in UF use the SII value of CLP 41,057.20 for 30 September 2026, the value the law applies to payments made in October 2026; other UF amounts use CLP 41,205.16 for 23 October 2026. Conversions are for orientation only.

Key facts

Notice for dismissal for company needs (or one month of pay in lieu)	30 daysCódigo del Trabajo art. 162, as of 2026-10-26 · in force
Statutory severance per year of service	30 days of payCódigo del Trabajo art. 163, as of 2026-10-26 · in force
Maximum years of service counted for statutory severance	11 yearsCódigo del Trabajo art. 163, as of 2026-10-26 · in force
Cap on the monthly pay base for severance and notice pay	90 UFCódigo del Trabajo art. 172, as of 2026-10-26 · in force
Maximum statutory severance (11 x 90 UF at the 30 September 2026 UF)	40646628 CLPCódigo del Trabajo art. 163 and art. 172, as of 2026-10-26 · in force
Minimum service for statutory severance	1 yearCódigo del Trabajo art. 163, as of 2026-10-26 · in force
Deadline to sue for unjustified dismissal	60 working daysCódigo del Trabajo art. 168, as of 2026-10-26 · in force
Court surcharge on severance when company needs were improperly invoked	30 %Código del Trabajo art. 168 letter a), as of 2026-10-26 · in force
Maximum court surcharge on severance (unfounded serious misconduct)	100 %Código del Trabajo art. 168, as of 2026-10-26 · in force
Minimum extra indemnity for dismissal breaching fundamental rights	6 months of payCódigo del Trabajo art. 489, as of 2026-10-26 · in force
Maximum extra indemnity for dismissal breaching fundamental rights	11 months of payCódigo del Trabajo art. 489, as of 2026-10-26 · in force
Deadline to issue the settlement and make payment available	10 working daysCódigo del Trabajo art. 177, as of 2026-10-26 · in force
General prescription of labour rights	2 yearsCódigo del Trabajo art. 510, as of 2026-10-26 · in force

The rule

1. Neutral grounds end the contract without severance: mutual agreement, resignation with 30 days notice, death of the worker, expiry of the agreed term, completion of the specific job, and acts of God (force majeure).DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 159, 2003-01-16 official text · verified 2026-10-26

2. The employer may dismiss without any severance for proven serious misconduct: lack of probity, sexual harassment, workplace harassment, violence or insults against the employer or co-workers, immoral conduct affecting the company; prohibited competing business; unjustified absence on two consecutive days, two Mondays in a month or three days in a month; abandonment of work; reckless acts affecting safety; intentional damage to property; and serious breach of contract obligations.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 160, 2003-01-16 official text · verified 2026-10-26

3. The employer may also dismiss for the needs of the company, such as restructuring or modernisation, lower productivity or changes in market or economic conditions. For managers and others with general powers of administration, positions of exclusive trust, and domestic workers, the employer may instead give written notice (desahucio) with 30 days notice or a month of pay in lieu. Neither ground may be used while the worker is on medical leave.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 161, 2003-01-16 official text · verified 2026-10-26

4. The termination letter must be delivered personally or sent by registered mail to the contract address, stating the ground and the facts, within 3 working days of the separation (6 for force majeure), with a copy to the Labour Inspectorate. For company needs, notice must be given 30 days ahead or a month of pay paid in lieu, and the letter must state the exact total to be paid. The letter must also say whether the settlement will be signed in person or electronically.
Example: Pay in lieu of notice is one month of pay capped at 90 UF: at most CLP 3,695,148. / At most about US$3,745.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 162, first to fourth and eighth paragraphs, 2003-01-16 official text · verified 2026-10-26

5. Before dismissing, the employer must inform the worker in writing of the status of pension, health and unemployment contributions up to the last day of the previous month, with proof. If contributions are unpaid, the dismissal does not end the contract: the employer must keep paying pay and benefits until it pays the arrears and notifies the worker by registered letter (the "Ley Bustos" rule), unless the debt is the lower of 10 percent of the total or 2 UTM and is paid within 15 working days of being served with the claim.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, as amended by Ley Nº 20.194, Art. 162, fifth to seventh paragraphs, 2003-01-16 official text · verified 2026-10-26

6. When the employer ends a contract of one year or more for company needs or by notice under art. 161, it must pay severance (indemnización por años de servicio) of 30 days of the last monthly pay for each year of service and fraction over six months with that employer, up to 330 days, unless a higher amount was agreed individually or collectively.
Cost to do it: At most 11 months of pay capped at 90 UF each.
Example: At most 11 x CLP 3,695,148 = CLP 40,646,628 at the 30 September 2026 UF. / About US$41,200.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 163, 2003-01-16 official text · verified 2026-10-26

7. The monthly pay base for severance and notice includes all amounts received for services at termination, including the worker's own contributions and benefits in kind, but excludes family allowance, overtime and sporadic or once a year items such as the annual gratificación or Christmas bonus; variable pay is averaged over the last three months. The base is capped at 90 UF of the last day of the month before payment. Amounts are adjusted by CPI and earn maximum interest for indexed operations from termination.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 172 and art. 173, 2003-01-16 official text · verified 2026-10-26

8. From the start of the seventh year of service, the parties may replace severance for the period after year six and up to year eleven with an "any cause" severance, funded by a monthly employer deposit of at least 4.11 percent of taxable pay (on pay up to 90 UF) into a special AFP account, payable whatever the reason for termination.
Example: At the 90 UF cap, at least CLP 151,871 a month. / About US$154 a month.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 164 and art. 165, 2003-01-16 official text · verified 2026-10-26

9. The part of the worker's individual unemployment insurance account funded by the employer's contributions, plus returns and less costs, is offset against the severance owed for company needs dismissals; the worker's own contributions are never offset.Ley Nº 19.728, Art. 13, 2001-05-14 official text · verified 2026-10-26

10. A worker who considers the dismissal unjustified, improper or groundless may sue within 60 working days of separation (suspended by a complaint to the Labour Inspectorate, but never beyond 90 working days). If the court agrees, it orders notice pay and severance increased by 30 percent if company needs were improperly invoked, 50 percent if an art. 159 ground was unjustified or no ground was given, 80 percent if an art. 160 misconduct ground was improper, and 100 percent if lack of probity, harassment, violence or reckless conduct was alleged without plausible grounds. An employer that followed the harassment investigation procedure avoids the surcharge in harassment cases.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 168, 2003-01-16 official text · verified 2026-10-26

11. If the dismissal breached fundamental rights (such as discrimination, privacy, freedom of opinion or retaliation), the worker may bring a protection claim (tutela) within 60 days. If upheld, the court adds to notice pay, severance and the art. 168 surcharge an indemnity of 6 to 11 months of pay; for serious discriminatory dismissals the worker may choose reinstatement instead.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 489, 2003-01-16 official text · verified 2026-10-26

12. The company needs letter is an irrevocable offer to pay notice pay and severance, payable in one go when the settlement is signed; instalments may be agreed with interest and adjustment, ratified before the Labour Inspectorate, and default makes the whole amount due. If not paid, the worker can enforce the letter in executive proceedings and the judge may increase the amounts by up to 150 percent.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 169, 2003-01-16 official text · verified 2026-10-26

13. Workers with dismissal protection (fuero), such as pregnant workers, union leaders, workers forming a union or in collective bargaining, and safety committee representatives, can only be dismissed with prior court authorisation, granted only for expiry of the term, completion of the job or art. 160 misconduct.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 174, 2003-01-16 official text · verified 2026-10-26

14. The settlement (finiquito), resignation and mutual agreement must be in writing and, to be relied on by the employer, signed by the worker and ratified before a Labour Inspector or another authorised witness (union officer, notary, civil registry officer or municipal secretary), or signed electronically on the Dirección del Trabajo website, which the worker may refuse. The employer must issue the settlement and make payment available within 10 working days of the separation, and the worker may reserve rights to sue.
Cost to do it: Free on the Dirección del Trabajo website; notary fees otherwise.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, as amended by Ley Nº 21.361, Art. 177, 2021-07-27 official text · verified 2026-10-26

15. If the employer is put into insolvency liquidation, contracts end on the date of the liquidation order; the liquidator must notify workers within 6 working days and pay notice pay (average of the last three months) and severance as for company needs, with no court authorisation needed for protected workers.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 163 bis, 2003-01-16 official text · verified 2026-10-26

16. Rights under the Labour Code prescribe two years after they become due.DFL Nº 1 of 2002, Ministerio del Trabajo, Código del Trabajo, Art. 510, 2003-01-16 official text · verified 2026-10-26

Scenario	Notice pay	Severance	Surcharge	Total CLP	Total USD
Company needs, no notice, accepted	3,695,148	29,561,184 (8 x 3,695,148)	None	33,256,332	33,708.70
Company needs held improper by court	3,695,148	29,561,184	30 percent: 8,868,355	42,124,687	42,697.69
No ground or unjustified art. 159 ground	3,695,148	29,561,184	50 percent: 14,780,592	48,036,924	48,690.35
Misconduct ground held improper	3,695,148	29,561,184	80 percent: 23,648,947	56,905,279	57,679.34
Probity, harassment or violence alleged without plausible grounds	3,695,148	29,561,184	100 percent: 29,561,184	62,817,516	63,671.99

Cost of dismissing a worker with 7 years 8 months of service earning CLP 4,500,000 a month, paid in October 2026 (90 UF cap at the 30 September 2026 UF; before the unemployment insurance offset and accrued holiday)

Worked example

A sales manager hired in February 2019 earning CLP 4,500,000 a month is dismissed for company needs on 15 October 2026 without 30 days notice. Service is 7 years and 8 months, so 8 years count (the fraction exceeds six months). The base is capped at 90 UF, CLP 3,695,148. Notice pay is CLP 3,695,148 and severance CLP 29,561,184, a total of CLP 33,256,332 (about US$33,709), less the employer funded balance of the worker's unemployment insurance account, plus accrued and proportional holiday.
If the worker sues and the court finds the restructuring was not proven, severance rises 30 percent, adding CLP 8,868,355 (about US$8,989). If the court also finds the dismissal was retaliation for a harassment complaint, it adds 6 to 11 months of pay under art. 489.
A worker on CLP 1,800,000 with 3 years and 4 months is dismissed for company needs with 30 days notice: severance is 3 months, CLP 5,400,000 (about US$5,473).

Step by step

Pick the legal ground and document the facts; for company needs, prepare evidence of the restructuring or market change.
Check that pension, health and unemployment contributions are fully paid up to the previous month and gather the certificates.
Check for protected status (pregnancy, union roles, bargaining, safety committee, recent bereavement) and medical leave; if protected, seek court authorisation first.
Deliver the letter personally or by registered mail within 3 working days of separation (or 30 days before for company needs), stating ground, facts and the amount, with a copy to the Labour Inspectorate.
Within 10 working days: issue the settlement, make payment available, and have it ratified before an inspector or notary, or signed on the Dirección del Trabajo website.

Common traps

Unpaid contributions make the dismissal ineffective and pay keeps accruing until the arrears are paid and notified (art. 162).
Severance counts every fraction of a year over six months as a full year.
Misconduct grounds alleged without proof cost more than company needs: up to 100 percent surcharge plus reputational claims (art. 168).
An unsigned or unratified settlement cannot be invoked against the worker (art. 177).
Dismissal during medical leave cannot rely on company needs (art. 161).

Sources

← Leave in Chile: annual holiday, maternity and parental leave, paternity leave, maternity job protection, childcare (sala cuna), feeding time, bereavement and marriage leaveUnions, collective bargaining and strikes in Chile: union quorums, protected status, bargaining timeline, the negotiation floor, strike rules, replacement ban, minimum services and lockout →