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Under Law No. 21,735, the mandatory employer contribution to Chile's public pension system rises from 1% to 3.5% of taxable wages effective August 1, 2026. This is part of a gradual increase schedule that will reach 8.5% by August 2033. The contributions are allocated across employee individual AFP accounts, a protected return mechanism, and the Social Security Pension Fund, which finances life expectancy compensation for women and the integrated Disability and Survivors' Insurance (SIS).
Effective August 1, 2026, Chile's mandatory employer pension contribution will increase from 1% to 3.5% of taxable wages under Law No. 21,735. This is the second step in a gradual increase schedule that began in August 2025 and will ultimately reach 8.5% by August 2033.
Who is affected
All employers in Chile with employees enrolled in the country's pension system are required to make these contributions. The increase applies to all taxable wages paid to employees, regardless of company size or industry.
What's changing
Chile introduced a new employer pension contribution in August 2025, starting at 1%. The contribution rate will increase annually according to the following schedule:
| Period | Employer Contribution Rate |
|---|---|
| August 2025 – July 2026 | 1.0% |
| August 2026 – July 2027 | 3.5% |
| August 2027 – July 2028 | 4.25% |
| August 2028 – July 2029 | 5.0% |
| August 2029 – July 2030 | 5.7% |
| August 2030 – July 2031 | 6.4% |
| August 2031 – July 2032 | 7.1% |
| August 2032 – July 2033 | 7.8% |
| August 2033 onwards | 8.5% |
Employer contributions are allocated across three mechanisms: a portion goes to employees' individual AFP (Administradora de Fondos de Pensiones) accounts, a portion funds a protected return mechanism to safeguard pension values, and the majority goes to the Social Security Pension Fund. This fund finances life expectancy compensation for women to reduce gender pension gaps and covers the integrated Disability and Survivors' Insurance (SIS).
What NEO partners and clients should do
- Update payroll systems to reflect the 3.5% employer contribution rate for all August 2026 payroll runs and beyond.
- Adjust labor cost budgets to account for the 2.5 percentage point increase effective August 1, 2026.
- Review multi-year financial planning to incorporate the scheduled annual increases through 2033.
- Communicate the change to finance and HR teams managing Chile operations before the August 2026 effective date.
