A few weeks ago, after years of legislative processing, the new Pension Reform in Chile was approved by Congress. This reform seeks to transform the country’s social security system and improve workers’ pensions, presenting significant challenges for the stakeholders involved, including hiring companies.

As the system adjusts to ensure a fairer and more equitable pension, it is crucial to understand how the new regulations will impact both the amount of future pensions and monthly contributions.

These changes will require companies to implement modifications that completely reshape their legal framework, where specialized lawyers play a key role in helping affiliates, beneficiaries, and employers adapt to the new legal structure.

“The reform includes four structural changes: the creation of a Social Security Pillar that mitigates risks and manages a Social Insurance Fund; a permanent employer contribution, distributing the financial burden equitably; the opening of the industry to greater competition through bidding processes; and the reduction of inequalities by addressing gender gaps in the pension system.”

“As legal professionals, we must provide guidance to companies and employers. This is a profound change that impacts the labor and human resources areas of companies, as well as the tax domain, helping them understand and adapt to the new legal provisions. Additionally, we will play an active role in conflict resolution and in representing affected parties who wish to assert their rights before judicial or administrative bodies,” states Pamela Toro, Corporate Law Director at Apparcel Uriarte.

The legal departments of companies will have the role of:

• Helping to understand and adapt to the new legal provisions.
• Playing an active role in conflict resolution and representing affected parties who wish to assert their rights before judicial or administrative bodies.
• Safeguarding the financial sustainability of operations, as in some cases, these changes could lead to informality in employment as a cost-reduction strategy.

Labor law specialists can help employers comply with the new legal requirements without resorting to illegal practices or those that could harm their employees.

“One potential risk of the reform is that rising labor costs may create incentives for some employers to opt for informal hiring options. This could negatively affect workers’ labor rights and reduce contributions to the pension system. In this regard, lawyers play an essential role in ensuring compliance with the regulations aimed at reducing informal work and protecting workers’ rights,” adds Fernando Carreño, Senior Lawyer at Apparcel Uriarte Abogados.

The Pension Reform in Chile is an important step toward improving working conditions and the sustainability of the country’s social security system. However, its implementation presents challenges for both affiliates and employers.