Gross and liquid salary: What to know if you work in Chile

Each employer, apart from paying a fixed salary to the collaborator, has legal responsibilities, which are the payment of pension and health contributions. The gross salary is the sum of these amounts. Basically, it is the sum of liquid salary plus the legal contributions that must be made. 

Which brings us to another question, What is net salary? The net salary is the amount of salary that you will obtain once the pension amounts stipulated in Chilean law have been deducted.. Learn in detail what it is, how it is calculated and how much the minimum wage is in the following note.

There is much more that you should know about net salary and gross salary, and as this includes several details to keep in mind, we bring you this note to clarify all your doubts in this regard.

What is net salary?

In simple words, the net salary is the monthly payment that you will receive every month in your bank account. Put even more simply, it is the money that you will obtain in exchange for the tasks you perform at your job, once the pension discounts have been eliminated.

For this calculation, taxable and non-taxable assets must be considered. Among the taxable ones are: 

• Base salary.
• Commissions.
• Legal rewards.
• Extra hours.

On the other hand, there are non-taxable assets, which are:

• Bonuses (locomotion, food).
• Travel expenses.
• Family responsibilities.

The net salary is then the amount of salary that remains once these assets have been deducted. On the contrary, the gross salary is the total investment made when hiring a collaborator. That is, the sum of all assets.

How much is the minimum wage in Chile?

Since the beginning of 2023, the minimum salary in Chile is $410,000. This amount is gross.

Liquid salary calculation: learn how to do it

To calculate net salary, you must consider 4 aspects: 

• The amount of the gross salary.
• The AFP contribution percentage.
• The health insurance plan (which can be Fonasa or Isapre).
• The payment corresponding to unemployment insurance. 

This net salary calculation will then depend on the AFP plan and the employee's health insurance. For this example, we will use the traditional 10% for AFP, the 7% for Fonasa's pension and the 3% corresponding to unemployment insurance. 

Considering this, we will take as reference the minimum salary in Chile, which is $410,000. Since this amount is a gross salary, we must subtract the 20% discount. To calculate this, you can do it in Excel, since remember that this tool is a calculator in itself. To do this, you just have to multiply the gross salary by the discount percentage, and divide it by 100. In this case, the formula would look like this:

=410000*20/100

That result will give you $82,000. So, from your gross salary, you must subtract this figure. Therefore, we move forward with the following formula:

=410000-820000

This result will give us $328,000. So, the net salary that a person who earns $410,000 gross will receive is $328,000.

What is the gross salary?

The gross salary in Chile is the total amount of money that the employer invests to hire a collaborator. This amount considers all assets, that is, taxable and non-taxable, before pension discounts.

Taxable assets

ANDAmong the taxable salaries are the base salary, commissions (they are common for sales executives and other areas), legal bonuses and overtime..

Non-taxable assets

Regarding non-taxable assets, there is the transportation and food allowance, travel expenses and family expenses.

Once these amounts have been calculated, you must consider the corresponding percentage of the legal provisions. Below check what they are according to the information available in Chile Attends:

• Pension Fund Administrator, AFP: This percentage varies depending on the institution (AFP) chosen. It goes from 10%.
• Social Security Institute:
• Health Quotes: these can be administered by Fonasa or an Isapre. Here you should consider at least a 7%, since it may increase depending on the Isapre.
• Unemployment Insurance: 3%.
• Disability and Survivorship Insurance (SIS): 2,21%.

Remember that it is very important to pay these pension discounts on time, since they generate interest and fines.

Liquid and gross salary: difference

The difference between the net salary and the gross salary is that the net salary is the amount of money that the employee will receive every month, while the gross salary is the sum that the employer invests for each employee.. This considers the net salary, plus legal discounts.