In Chile, for-profit companies of any size must annually distribute a portion of net taxable profits (with some adjustments) to employees with at least one year of service based on a prescribed formula, or instead pay some type of guaranteed annual bonus to such employees equal to at least 25% of their monthly base pay, with the guaranteed annual bonus capped at 4.75 times the monthly minimum wage. The Senate has approved legislation that would significantly modify the prescribed formula and increase the cap on the alternative annual bonus.
The bill (originally introduced in 2019) has progressed slowly, but some version of the bill recently approved by the Senate and now being reviewed by the lower House is expected to become law. Among companies surveyed by WTW, 73% provide some type of guaranteed bonus to employees (as opposed to using the 30% of net profits formula) according to statutory requirements. Employers should monitor the progress of the legislation and consider how the changes would affect their profit sharing or bonus payouts.
Also, the current requirement for profit sharing that net taxable profits be reduced by 10% of the company’s net equity would be abolished.