Chile is one of the most important economies in South America, with crucial sectors such as mining and manufacturing. Known for being prosperous, Chile continues to play an important role in globalization. It has the region’s highest human development index, as well as some of the best universities in the world.
In recent years, Chile has become one of Latin America’s fastest-growing economies, with aims to develop into a more inclusive and sustainable country. Now, foreign countries are looking to Chile for opportunities to grow their business.
Professional employer organizations (PEO) and employer of record (EOR) services are both excellent avenues for a foreign business or company to explore when it comes to hiring employees in Chile and establishing subsidiaries.
If you’re looking to employ foreign individuals for your business or company, there are many things to know in advance.
It is vital to be aware of Chilean Labour Laws and Regulations, which address contracts, unions, and terminations. Employers should also be versed in Chile’s laws regarding employee benefits and paid time off (PTO), as well as Chile’s taxes, minimum wage rates, public holidays, and more.
All of the above can be handled in-house by a foreign business and employer. Many times it can be a strategic move to work with EOR or PEO, since navigating Chile’s laws, rules, regulations, and customs can be rather complicated for foreigners.
If you decide to use a PEO in Chile, you will need to establish an entity or subsidiary in the country–this is the only way you can legally engage with PEO services.
A PEO operates through a co-employment arrangement with the foreign business or company (i.e., you) to employ individuals on behalf of your company’s subsidiary. The PEO handles all HR-related responsibilities and outsourcing, and can be a good option for companies looking to open an entity.
When you partner with a PEO, you:
Reduce your amount of HR-related tasks and responsibilities, such as onboarding, payroll, and benefits
Benefit from HR support without adding to your company’s headcount
Can hire new employees in a relatively short amount of time
However, if you do not have an entity or local subsidiary, there is another option–working with an employer of record (EOR) partner that offers services in Chile.
An employer of record in Chile operates much the same as a PEO, but there are a few major distinctions. Similar to a PEO, an EOR handles all HR-related responsibilities (onboarding, payroll, and benefits), as well as managing compliance with Chilean labor laws and regulations.
By partnering with an EOR service like Via, you do not need to go through the time-consuming process of establishing a subsidiary or entity in Chile. An EOR partner like Via becomes the employer on paper, while you are still responsible for day-to-day management of employees.
In short, an EOR:
Handles all HR-related tasks
Remains its own entity and does not add to your company’s headcount
Quickly hires new employees without a business entity
Whether or not you work with a PEO or an employer of record in Chile depends on two things: does your company have a Chilean subsidiary, and do you want to maintain compliance in-house? If you answered no to one or both of the above questions, we recommend working with an EOR.
Either way, an employer or business must remain in regular contact with the international PEO or EOR they are working with.
Capital city: Santiago
Largest city by population: Santiago
Currency: Chilean Peso (CLP)
Population: 19.12 million
Chile GDP: 252.9 billion
Payroll frequency: Monthly
Federal Minimum wage: $400,000 per month
Employers of record in Chile are required to grant workers various types of paid leave.
Employees who have worked for more than one year are entitled to a paid vacation each year, consisting of 15 workdays. Ten days must be consecutive, but the remaining five may be used at other times, contingent upon mutual agreement between employee and employer.
After ten years of working for the same or different employers, employees receive an additional paid day off for every three years worked for their current employer. This added perk may differ from region to region in Chile, so it is recommended that you, your PEO, or your EOR look into what specific rules exist in your region of operation.
Nationally observed holidays and Sundays are typically recognized as non-working days. If a company requires employees to work on a holiday or Sunday, and their business is authorized to do so, the company must compensate the workers. It is worth noting that a minimum of two Sunday rest days must be granted per month.
In Chile, 16 national public holidays fall under the category of paid time off (PTO). Therefore, the employee may take those PTO days or be compensated if their place of employment requires them to work on those days.
Pregnant employees receive six weeks of prenatal leave and 12 weeks postnatal leave, with full pay provided by the Chilean Social Security System, not the employer. Additionally, female employees cannot be dismissed for up to one year after the conclusion of postnatal leave.
An extra permit provides a mother with another 12 weeks of full pay, extending to 18 weeks if she chooses to return on a part-time schedule. In this case, her pay will be 50% of her normal salary. Therefore, it is important for both employees and employers to thoroughly research and familiarize themselves with the requirements associated with maternity leave and all permits and extensions that are available.
Also, a mother may share her maternity/parental leave with the father of her child, and employers are required to provide a nursery service or supplement their employees for fees attached to an external nursery service if they employ 20 or more females. Nursing mothers are permitted an hour-long break each day to feed children under the age of two, and mothers of children under 18 are entitled to 10 extra days of leave on top of the existing PTO days.
When it comes to illness or disability leave, employers operating in Chile must grant leave and cannot terminate an employee’s contract without justification. Since Chile provides preventive and curative healthcare through its medical system, the salary of an ill or disabled employee is paid beginning on the fourth day of leave or the first day for leaves extending beyond ten days. Chile’s medical system is funded through employee contributions, and a monthly monetary cap does exist.
If an employee is deemed unable to work by a physician, then the individual will take a medical leave of absence for a suggested number of days. During this time, the employer is not typically responsible for paying the employee’s salary–this falls under the jurisdiction of Chile’s medical system.
Bereavement for death of a child, spouse, or civil partner: an employee is entitled to seven calendar days of paid leave on top of their annual leave.
Marriage or civil union: an employee is entitled to five consecutive working days of paid leave in addition to their annual leave.
Carer’s leave: paid leave for a parent caring for an ill child under the age of one.
Adoption leave: adoptive parents may receive the same leave time as natural parents if the adopted child is under six months of age. Otherwise, the mother’s PTO is limited to six weeks.
Employers should provide every Chilean employee with a written employment contract. Whether the contract comes directly from the employer’s HR department or through an EOR, the document should be drafted in Spanish, use the Chilean peso currency, and include information such as salary, paid leave, working hours, and responsibilities. Employment contracts should also address the following:
The Chilean payroll cycle is monthly, so employees receive wages once a month.
A typical work week in Chile is 45 hours–one of the longest work weeks in the world–and employees either fulfill those hours in five or six consecutive days. Employees are entitled to one day off per week, usually Sunday, and the Chilean Labour Laws recommend daily lunch breaks.
Employees who are required to work on Sundays or nationally observed holidays due to their field or position are compensated with different rest days during the week.
In Chile, overtime pay is 150% of an employee’s regular pay; therefore, the traditional time and a half rate. And each week, an employer has the right to extend an employee’s day by a total of two hours, or ten hours per week.
The monthly minimum wage in Chile is 400,000 Chilean pesos for employees between the ages of 18 and 65. However, the minimum monthly salary drops to roughly 280,000 Chilean pesos for individuals outside that specific age parameter.
Chile does not require employers to give their employees bonuses, also known as a 13th-month bonus, but many elect to give out two bonuses a year called Aguinaldos, an annual Christmas bonus. Businesses in Mexico, and many in Latin America, uphold the Aguinaldos tradition. Employers distribute funds for Aguinaldos on September 18 and around the Christmas holiday.
Aside from these employer-elected bonuses, employees receive an annual “legal gratification” bonus that is included with monthly payroll amounts.
It is not typical for employers in Chile to utilize a probationary period with new hires, as they prefer to onboard new employees with fixed-term contracts for up to 12 months, using that first year as a probationary period. Then, if the employee is a good fit with the business or company, their initial employment contract can be turned into a permanent one.
Employees who have worked a minimum of one year qualify for severance pay, which usually equates to one month’s salary, plus more, depending on how long they have worked for their employer.
However, if an employee is guilty of violating their employment contract or committing serious offenses, they are no longer eligible to receive severance pay.
There are three main reasons for termination in Chile:
Mutual agreement, resignation, or expiration of a contract
Company needs or reorganization, which happens to be the most common reason for termination
Breach of contract, dishonesty, negligence, fraud, or another work-related offense. For this, an employer must provide proof; if evidence stands, then no severance pay is given.
Employers are required to provide a letter stating the cause of termination, which is given to the employee and then filed with the Chilean Labor Ministry. Employees are entitled to one month of notice before effective termination.
Chile maintains a dual healthcare system where Chilean citizens can choose coverage from the public National Health Insurance Fund or one of the country’s private health insurance companies.
The healthcare system is funded by Chile’s universal income tax deduction, which is 7% of every employee’s wage, while the National Health Insurance Fund is supported in its entirety by the government’s general tax revenue.
Payroll taxes in Chile are similar to those of other countries–both employer and employee contribute to payroll taxes to fund things like pensions and different types of insurance.
Employers contribute to workplace accident insurance, unemployment insurance, and an unemployment fund.
Employees participate in payroll taxes for future pensions, life insurance, health insurance, and unemployment insurance. They also pay income tax, with the percentage dependent on their income level.
Employers have the choice of onboarding with in-house HR departments or using the third-party services of an EOR or PEO. As stated above, this decision depends on whether your business wants to be responsible for all HR-related tasks and maintain compliance with Chilean Labour Laws and regulations, and if you have a legal subsidiary in Chile.
Establishing an entity or subsidiary in Chile can take months, and you won’t be able to hire employees until the subsidiary is wholly set up. There are numerous steps required to open a subsidiary, some of which include:
Becoming familiar with Chilean subsidiary laws;
Getting your company name approved by Chile’s company registry;
Registering your company with the Registro Publico de Comercio and Servicio de Impuestos Internos;
Publishing a social constitution (a brief description of what your company does and solidifying shareholders’ names and company director details);
Establishing a registered office address and opening Chilean bank accounts.
Once your company has completed the set-up of its subsidiary in Chile, you can engage the services of a PEO, should you decide that is the best course of action. Entering into a co-employment arrangement with a PEO allows you to share the employee responsibilities and have the PEO handle all HR-related tasks and onboarding processes.
Conversely, partnering with an EOR service enables an employer or business to hire employees in a foreign country almost immediately, since you won’t need to worry about opening an entity or subsidiary.
For all intents and purposes, an employer of record in Chile is the employer on the ground, handling all HR-related duties and maintaining compliance with local labor laws, rules, and regulations. EOR partners like Via have the legal knowledge and background to assist employers in navigating foreign countries’ laws, which is usually missing from PEO services.
Companies of all sizes want to hire employees in Chile, but don’t know how to navigate the country’s local labor laws. Via makes hiring Chilean talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground legal experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity in Chile, Via assumes full responsibility for liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Chile with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.