Chile approves law to gradually increase minimum wage to $500,000 pesos
The bill to increase the minimum wage includes specific economic support for micro, small and medium-sized enterprises (MSMEs) and cooperatives, such as a subsidy per worker between May 2023 and April 2025.
Chilean workers received good news today, after the Chamber of Deputies approved the law to gradually increase the minimum wage in Chile to $500,000 pesos (US$622.50).
The bill to increase the minimum wage includes specific economic support for micro, small and medium-sized enterprises (MSMEs) and cooperatives, such as a subsidy per worker between May 2023 and April 2025, and a first-category tax rate of 12.5% for MSMEs.
Keep reading to find out more details about the bill to increase the minimum wage.
When does the minimum wage increase?
Following approval of the law to increase the minimum wage in Chile, the amounts will rise gradually as follows:
- $440,000 pesos (US$547.80) as of May 1, 2023 (retroactive)
- $460,000 pesos (US$572.70) as of September 1, 2023
- $500,000 pesos (US$622.50) as of July 1, 2024
The law includes the possibility of increasing the minimum wage according to variations in the Consumer Price Index (CPI).
Therefore, in the event that the accumulated CPI for 2023 exceeds 6%, an increase of $10,000 pesos (US$12.45) will be made on January 1, 2024, setting the minimum wage at $470,000 pesos (US$585.15) on that date.
The initiative also includes an automatic readjustment of the minimum monthly wage on January 1, 2025, according to the CPI percentage between July and December 2024.
Law to increase minimum wage includes support for MSMEs
The Economy, Development and Tourism Ministry sealed an agreement with several MSME trade associations for the Government to make a series of amendments to the bill to support MSMEs in complying with the minimum wage increase.
The agreement consists of a stable subsidy for each period that the minimum wage increases, which varies according to the size of the enterprise (micro, small and medium), in order to provide them with greater coverage and protection.
It also includes a protection mechanism to increase the amounts of this instrument if the following conditions are met:
- When the level of formal employment, understood as the rate of employees with social security contributions paid by the employer – which will be reported by the National Statistics Institute –, is less than 34.5%.
- When there is a technical recession; that is, when the growth of the country’s economic activity, understood as the seasonally-adjusted quarterly real GDP reported by the Banco Central de Chile, suffers a negative variation for two consecutive quarters.
In summary, the bill offers the following support to MSMEs:
- Subsidy per worker valid between May 2023 and April 2025.
- Resources according to the size of the company.
- Mechanism to increase the subsidy amounts in case of “deterioration of macroeconomic conditions”.
- First Category tax rate of 12.5% for MSMEs for 2024, postponing the increase to 25%.