Doing Business 225upon returning to the office. Health care and social security
entitlements are discussed in detail below. In general,
benefits are not negotiated during the hiring process, only
salary and bonuses.
Health Care
In abidance with the law, a portion of every employee’s
salary (seven per cent) must be withheld for health care. The
employee chooses the health care plan he or she wishes to
join: the state system (FONASA) or one of the private plans
called ISAPRES. Most salaried employees opt for an ISAPRE
because the level of health care covered is substantially
better than that provided by FONASA. There are a number
of different ISAPRE plans from which the employee can
choose. The plan is not tied to the place of employment.
Private Pension System
Chile implemented a reform of its pension fund system
in the early 1980s. This successful programme has been
studied by many other countries in the region, including
the United States. All new workers entering the labour force
must choose a private, for-profit Pension Fund Administrator
(AFP). Workers who were already in the labour force at the
time of the reform had the option of choosing a private
company or staying with the
old system.
Each employee has 10
per cent of his or her salary
deducted. This money goes into
his or her personal retirement
account which is not tied to
his or her place of work. A
percentage of the deduction
covers service charges, disability
and survivor’s benefits. Those
wishing to surpass this limit or
make a separate investment may
make additional contributions
to the AFP or open a separate
The AFP
The AFP is not without its critics.
These criticisms include high
administrative fees, low coverage
(only about 55 per cent of the
population have an AFP account),
a ‘loss of solidarity’ (because
the new system emphasises
individual planning over large
group funds), irregular practices
to entice individuals to transfer
to another AFP, loopholes that
allow for early withdrawls, and
cozy relations between the AFPs
and the companies whose stock
is being bought by the pension
fund managers. In response to
these allegations, a reform of the
system is in the works.