On April 26, 2024, a landmark law amending the Labour Code to reduce the weekly working hours limit from 45 to 40 hours will take effect in Chile. Over a span of five years, this gradual reduction aims to align Chile’s labor regulations with international standards, all while concurrently addressing concerns about excessive working hours. This blog will delve into the details and implications of these changes for employers and employees alike.
Key Changes Under the New Law
1. Reduction of Ordinary Weekly Working Hours
The law will reduce the ordinary weekly working hours from 45 to 40 without decreasing employees’ wages. This reduction will be phased in as follows:
- April 26, 2024: Reduced to 44 hours
- April 26, 2026: Reduced to 42 hours
- April 26, 2028: Reduced to 40 hours
Employers and employees must agree on how to allocate the reduction. If no agreement is reached, employers must proportionally reduce the hours across the weekly working days.
2. Flexibility in the Distribution of Working Days
The new law allows work schedules to be distributed over four, five, or six days. For example, with employee agreement, a four-day workweek with three rest days, consisting of ten-hour workdays, will be possible. Moreover, this flexibility will take effect on April 26, 2028, but employers can implement it earlier if they have already reduced the workweek to 40 hours.
3. Exclusions from the Ordinary Working Time Limit
The law has substantially revised the criteria for determining which employees are exempt from the limitations on working hours:
- Managers, administrators, attorneys with administrative powers, and unsupervised employees remain excluded.
- Employees working from home, commission and insurance agents, traveling salespeople, and similar roles are no longer excluded.
Employers need to review employment contracts to ensure compliance with these new rules, which will take effect on April 26, 2024.
4. Overtime Compensation
The law allows employers to compensate overtime with extra holidays instead of paying a premium. Employees can receive up to five extra days off per year for overtime, with each overtime hour translating to one and a half hours of rest. This change will be effective from April 26, 2024.
5. Reconciliation of Work and Family Life
To better balance work and family life, the law grants parents and caretakers of children up to twelve years old a two-hour flexible time band. They can adjust their start and end times by up to one hour. Employers can only deny this right in specific cases outlined by the law.
Implications for Employers
The new law mandates that employers cannot reduce salaries due to the reduction in working hours. This presents a challenge for businesses to maintain productivity without incurring higher costs. Employers must engage in dialogue with employees to adapt to the new working hours effectively.
Conclusion
Chile’s reduction of the working week to 40 hours signifies a significant shift towards modern labor standards. Moreover, it seeks to improve employee well-being, promote family and recreational time, and potentially increase productivity by aligning with practices seen in countries with shorter working weeks. Employers must prepare for these changes and collaborate with their employees to ensure a smooth transition.
For more detailed guidance on navigating these changes, our employment team are happy to assist to ensure full compliance and to optimise the benefits of the new regulations.