Chile proposes new 'indemnización a todo evento' labor reform

The Chilean Ministry of Labor is drafting a reform to replace the current indemnización por años de servicio (IAS) system with an "indemnización a todo evento" (ITE) scheme. The proposal would finance the new system through an additional employer contribution of 1.8%, kept separate from the existing unemployment insurance fund.

The change comes amid a reported unemployment rate of 9.1% in early 2026, roughly 945,000 people without jobs, and criticism that existing labour laws already impose high dismissal costs and discourage hiring. Deputy Nathalie Castillo warned that the ITE plan could drastically reduce workers' severance entitlements, illustrating that a worker earning 1,000,000 CLP with ten years of service would receive 10,000,000 CLP under IAS but only about 2,160,000 CLP after ten years under the 1.8% scheme. She urged the government to halt the proposal, noting recent efforts to strengthen workers' rights and warning against a retrograde shift in labour protections.