Chile

Employer of Record in Chile

When hiring in Chile, you will face common international business challenges, including language obstacles, recruiting and onboarding local talents, Chilean culture, currency exchange, etc. 

Fortunately, modern hiring solutions like Employer of Record in Chile can help. 

‍Skuad's Chile EOR (Employer of Record) solution helps you expand your business into Chile without needing an entity setup. 

Our unified and automated global HR platform enables you to expedite the onboarding of your remote team and manage their payroll, benefits, etc., compliantly. 

We help you streamline your global expansion process with the assistance of our international network.

Our global outreach and a tech-enriched HR platform ensure compliance with local labor laws by managing employment responsibilities such as monthly payroll and work permits.

Moreover, rapid globalization has induced changes in employment and labor laws across regions, enabling better conditions for the flow of human capital. 

In the following sections, we will discuss the specifics of Chile's labor laws, the work culture in Chile - holidays, employee benefits & more, and calculate the cost of hiring in Chile, including payroll, taxes, entity compliance checks in Chile & more.

Continue reading to learn more about hiring in Chile through Chile employer of record companies and the benefits of using one.

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Chile at a Glance

•  Population: 19.7 million 
• Currency: Chilean Pesos
• Capital: Santiago
• Languages Spoken: Spanish, English
• GDP: USD 301.02 Billion

How to Hire Employees in Chile

There are numerous ways to hire employees in Chile. 

Employees often post job advertisements on their websites and other popular job-hunting platforms, like Indeed and Laborum.cl, Chile Trabajos, and Buscojobs. 

This is a low-cost endeavor that helps them land the employees they need.

Businesses also hire companies in Chile to hire employees. 

However, this is an expensive undertaking. The HR team has to sift through the candidates' list and conduct the hiring process in a new country. 

There are costs associated with every avenue of hiring. Further, companies have to run background checks, onboard employees, manage payroll, and handle taxation in Chile, additional responsibilities, and costs. 

How to set up an entity for hiring in Chile

A traditional approach to hiring employees in Chile involves setting up a local entity. 

Moreover, setting up a subsidiary in Chile is a long process that can take months. 

Incorporating a holding company in Chile is even more long-drawn. You must consider numerous laws to determine if you want to set up an entity or hire an EOR instead. 

Here is the process of setting up a subsidiary in Chile:

The process's first step is registering the company with the Registro Público de Comercio y Servicio de Impuestos Internos. 

You must wait 15-20 days after applying for registration. In addition to registration, you must publish a social constitution and open bank accounts to operate the business.

There are numerous other steps as well. Chile's Company Registry will need to approve the name of your company. 

A description of your company's profile and how it plans to start operations will be asked for. The details of the shareholders, as well as directors, must be submitted to the Registry office. 

Most importantly, you must prepare a Memorandum of Association (MOA) and Articles of Association (AOA) and file them with the Conservador de Comercio.

If you’re thinking ‘Why hire workers from Chile?’ - Here are some good reasons.

Pros and cons of setting up an entity in Chile

If you are considering setting up an entity in Chile, it's essential to weigh the following pros and cons carefully:

Pros of setting up an entity:

• You have complete control over your operations in Chile, including hiring, firing, and managing employees.
• Establishing an entity signals a long-term commitment to the Chilean market.
• You may be eligible for certain tax incentives or exemptions depending on your specific business structure and activities.

Cons of setting up an entity:

• Setting up an entity in Chile can be a complex process involving various legal and administrative procedures.
• Establishing an entity can take several weeks or months, delaying your operations.
• You will incur high upfront costs, such as registration fees, legal fees, and potential capital requirements.
• You will need additional resources to comply with Chilean corporate laws, tax regulations, and labor laws.

EOR Solution in Chile

Business expansion is a long-drawn process that requires extensive planning, especially when expanding to a foreign country. 

It is complicated and can take up to several months to complete, but by choosing the EOR route for hiring employees in Chile, you can fast-track the expansion process. 

Employer of Record Chile (EOR) solutions by Skuad can make expansion to Chile much simpler and a lot quicker for business. 

Our global outreach and tech-enriched HR platform ensures compliance with local labor laws by managing employment responsibilities such as monthly payroll, work permits, employment contracts, and taxation for your employees in Chile. 

Payroll outsourcing in Chile has never been easier. Chile's talent pool is sure to attract the best of companies. 

If your company wants to expand into Chile, consider whether you want an in-house team or an EOR for employment-related responsibilities. 

An EOR like Skuad can make your decision easier by providing an efficient and effective platform to expand into Chile. 

Book a demo now.

Onboarding & Agreements

Onboarding welcomes new employees and integrates them into your company culture and team. 

It involves providing necessary information, training, and support to ensure new hires succeed.

How to successfully onboard employees in Chile

1. Develop a detailed plan outlining the steps involved in onboarding, the timeline, and the responsible parties.
2. Provide clear and concise information about the company, its culture, and the new employee's role.
3. Offer training on job-specific skills, company policies, and procedures.
4. Pair new employees with experienced colleagues who can offer guidance and support.
5. Schedule regular meetings with new employees to monitor their progress and address any concerns.

Onboarding Checklist

• Pre-employment:
  • Send a welcome email or package
  • Provide necessary paperwork and forms
  • Schedule a start date
• First day:
  • Introduce the new employee to the team
  • Provide a company tour
  • Assign a mentor or buddy
• First week:
  • Conduct job orientation and training
  • Assign tasks and projects
  • Schedule regular check-ins
• First month:
  • Provide performance feedback
  • Offer additional training or support
  • Review and update the onboarding plan

Alternatively, Skuad’s Chile EOR solution can onboard your employees per local compliance while you concentrate on core business operations. 

Types of employment agreements in Chile

You must also ensure to draft and agree upon the applicable employment agreement before onboarding your employee in Chile: 

• Indefinite-Term Employment Contract: This is the most common type, with no fixed end date. Termination requires notice from either party.
• Fixed-Term Employment Contract: Used for temporary projects, seasonal work, or specific positions with a limited duration. It can be renewed, but the duration cannot exceed two years.
• Part-Time Employment Contract: Fewer hours than a full-time employee, with pro-rated benefits.

• Non-Disclosure Agreement (NDA): A legal document that prohibits employees from disclosing confidential information about the company.
• Non-Compete Agreement: A legal document restricting an employee's ability to work for a competitor after leaving the company.

Probation period in Chile

Employment contract laws in Chile do not mention probation. 

There is no standard probation period in Chile as the employment laws do not mention probation, except in cases of domestic workers, where employers can take up to two weeks to decide whether to hire full-time workers. 

However, employees on a fixed-term contract for under 12 months are considered on probation. Once the probation period is up, employers can decide whether to extend the employee's contract.

Click here for more effective global hiring and onboarding strategies.

Taxes

Chile has a relatively straightforward tax system compared to some other countries. 

Here’s a quick summary of the key taxes and their implications on your business and your employees in the country: 

Employer taxation

Employee taxation

Compliance

Thanks to Chile’s political stability and economic growth, you must comply with the robust legal framework when operating in Chile:

Legal landscape (Employment laws)

Chile's labor laws are similar for residents and non-residents, except for minor differences. Understanding the various aspects of employment in Chile is crucial.

Companies setting up an entity in Chile should know local laws and regulations. 

The main sources of Chile's employment laws are The Labor and Employment Code, Law 16,744 on Occupational Accidents and Diseases, Law 17,322 on Social Security Payment, Law 19728 on unemployment insurance, Law 21,227 on Protection of Employment and Access to Benefits. 

Employment agreements in Chile need to be in line with the laws. 

To mitigate the risks of understanding and applying the employment laws, you can partner with Skuad, which is well-versed in the rules and regulations of Chile. Contact Skuad to book a demo today. 

Employee/Contractor classification

Chilean law does not differentiate between types of employees. It states that universal treatment has to be meted out to all employed persons. 

Contractors and full-time employees are only different in the kind of service they provide. You can control how full-time employees' services are rendered. 

They also decide the employees' hours of work. Employees are usually subordinate to employers.

Contractors are often independent. You do not have direct control over them. A mutually agreed project and the relative outcome are planned and signed under an agreement between both parties. The contractor is not subordinate to you.

Whether you hire an employee or an independent contractor, you must understand Chilean employment laws. 

Book a demo now to know why Skuad's EOR Chile is the perfect solution.

Types of visas in Chile

Book a demo today with Skuad!

Work permits

Anyone with a secured employment contract in Chile is eligible for the Chile work visa, while the working holiday visa is given only to people from a few selected countries. 

A Chile work permit cannot be obtained without a job offer. Skuad's Chilean partners can sponsor foreign workers for work permits and take on all employment-related responsibilities.

Fines/Penalties

Unidad Tributaria Mensual (UTM) is a Chilean unit of account used for taxation and government fines or fees. 

Interestingly, all fines and penalties, including workplace violations or employment of undocumented foreigners, may be reduced by 50% if you voluntarily declare your violations. 

IP protection

Chilean labor law does not directly address intellectual property (IP) protection. 

However, Chile is a signatory to several international IP treaties, including the Paris Convention, the Berne Convention, and the Madrid Protocol. 

This means work-related IP can be challenged under civil and criminal law.

Payroll

To set up Chile payrolls, you must know the local rules and regulations governing payroll taxes. Tax laws are often complex and difficult to understand. 

Working with an EOR can help you save time and money so you can focus on the expansion's goals and objectives.

Payroll options:

Benefits & Compensation

Chilean labor law ensures a comprehensive workforce benefits package, including statutory and voluntary benefits. 

Here's a breakdown of some common benefits and compensation practices in Chile:

Go through this list of countries that offer free healthcare to its workforce. Most importantly, Chile is among the 73 countries with universal health coverage. 

Bonuses

You are required to give a share of your profits to your employees. You must pay one of the following:

1. 30% of the company's net taxable income, subject to certain adjustments
2. 25% of the employee's annual pay but no more than 4.75 times the minimum wage for the month

The private sector is not compelled by law to pay Aguinaldo's 13th month salary (December bonus). 

However, some businesses agree to pay this bonus to their employees as part of individual or collective bargaining agreements.

Worker Rights

Some provisions of the employment laws in Chile before hiring:

Remote & Hybrid Work

The increasing shift toward remote and hybrid work arrangements offers you and your employees several advantages. 

Let's explore what you need to consider for a successful remote and hybrid work setup in Chile:

Flexibility:

• While Chilean law doesn't explicitly define remote work, it allows flexible work arrangements like part-time schedules and telecommuting agreements. 
• Understand your employees' needs and preferences for remote work arrangements. This could involve flexible hours, designated workdays, or a hybrid model combining office and remote work.

Technology requirements:

As referenced in Skuad's blog on the remote work readiness checklist, technology is a cornerstone of remote work success:

• Equip remote employees with tools for communication (e.g., video conferencing software, instant messaging platforms), project management, document collaboration, and cybersecurity.
• Provide training on these tools to ensure all employees understand their functionalities and proper usage.

Infrastructure requirements:

• High-speed and reliable internet connectivity is vital for smooth remote work. Consider offering internet allowance programs if needed.
• Encourage employees to set up an ergonomic home office environment to prevent work-related injuries.
• Implement robust cybersecurity measures to protect company data and employee devices. This includes providing secure access protocols, data encryption, and employee training on cybersecurity best practices.

Additional considerations:

• Regular communication is key to maintaining a cohesive and productive remote team. Schedule periodic team meetings and virtual check-ins and create collaboration channels for open communication.
• Establish clear performance goals and expectations for remote employees. Utilize remote performance management tools and conduct regular feedback sessions.

Chile offers a generally good internet infrastructure, especially in urban areas. 

To mitigate potential disruptions caused by occasional power outages, backup power solutions might be considered.

Remember, an Employer of Record in Chile like Skuad can be your partner in navigating the complexities of remote work in Chile by handling aspects like employment regulations, co-working space and payroll.

Salary

The average salary in Chile varies widely by industry and region but is generally around 800,000 CLP (approximately 1,000 USD) per month. 

Salaries in metropolitan areas like Santiago are typically higher than those in rural areas.

Moreover, the minimum wage in Chile has been revised as of July 1, 2024, and the new rates are:

• For workers aged 18 to 64: CLP500,000.00 per month
• For workers under 18 and over 65: CLP372,989.00 per month 

This means that the average income in Chile for all workers must be above these amounts, and you must comply with them, regardless of industry or experience level.

Furthermore, the total cost of employing someone in Chile includes the gross salary plus employer contributions for social security and taxes, which can add approximately 25% to 30% to the salary. 

You also need to consider costs associated with legal compliance and potential benefits like bonuses, which increase the overall employment cost. 

Try Skuad’s salary insights tool to estimate the average professional salary in Chile in USD and Chile salary average in other currencies.

Leave Policy

Here’s a summary of important provisions under the employment law in Chile related to statutory leave for employees: 

Paid Public & Chile National Holidays

There are 17 public Chilean holidays every year, as follows.

• New Year’s Day (1st January)
• Good Friday (2nd April)
• Holy Saturday (3rd April)
• Labour Day (1st May
• Naval Glories Day (21st May)
• Feast of St. Peter and St. Paul (29th June
• The Feast of Our Lady of Mount Carmel (16th July)
• Assumption of Mary (15th August)
• Independence Day (18th September)
• Day of the Glories of the Chilean Army (19th September)
• Day of the Races (12th October)
• National Day of the Evangelical and Protestant Churches (31st October)
• All Saints’ Day (1st November)
• Feast of the Immaculate Conception (8th December)
• Christmas Day (25th December)

Background Checks

Background checks are becoming increasingly common in Chile, particularly for roles requiring trust and responsibility. 

While there is no single centralized database for background checks in Chile, various sources can be used to verify an individual's background.

Common background checks in Chile:

• Criminal Record: Checking for any criminal convictions or pending cases.
• Credit Report: Assessing an individual's credit history and financial responsibility.
• Employment Verification: Confirming previous employment history and job roles.
• Reference Checks: Contact references provided by the candidate to verify their suitability for the position.
• Education Verification: Validating educational qualifications and degrees.

Get more information on background checks in Chile here. 

Sources for background checks in Chile:

You can seek information about the potential candidate by contacting the Chilean police and judicial system, credit bureau, previous employers, educational institutions, or credit bureaus. 

However, conducting the interviews fairly and ethically and respecting the candidate's privacy rights is essential.

Termination & Offboardings

Employment contracts in Chile often contain a termination clause that states the termination procedure. 

Employees are entitled to a termination letter that must include the reason for termination and all relevant facts. 

Employers must also include social security receipts with the termination letter. The letter must be given to the employee within three days of termination.

Employers must pay severance pay when terminating an employee. The compensation should be one month's pay for each year of service. 

If someone has been in service for five years, he will get five months of compensation if he is terminated. In calculating severance, the monthly payment cannot exceed 90 UF (US$3,571). This limit can be waived if both parties want it.

Not all employees can be terminated, even with notice. A pregnant woman can only be terminated with the permission of the labor board. 

The period for this shall be the period of pregnancy and one year six weeks after giving birth. The severance pay shall be the same as that of other employees.

A copy of the letter must be sent to the labor department. Employers do not require permission from the government to terminate an employee's services. 

Contact Skuad today to ensure your expansion endeavors are in compliance with Chilean employment laws.

Cultural Considerations

Cultural understanding is a continuous journey. Moreover, building strong business relationships is paramount in Chilean culture. 

This goes beyond just professional interactions; it involves getting to know colleagues personally and gaining their trust.

Here are some key aspects to consider in Chile’s culture:

• A small gift or token of appreciation can be a nice gesture on special occasions or when starting a new role.
• Be patient with the process and show genuine interest in your Chilean employees.
• The remote work culture in Chile is gradually gaining acceptance. To boost employee morale from time to time, you can organize virtual social events and expand communication channels.

Additional considerations

• Avoid conversations about religion or politics in business settings, as these can be sensitive topics.
• Some businesses may observe a siesta break in the afternoon. Respect this cultural custom and adjust your schedule accordingly.

Professional Employer Organization (PEO)

A Professional Employer Organization (PEO) can make it easier for you to hire employees in Chile. 

Skuad's PEO solution can handle payroll management, taxation related to employment matters, HR consultation, insurance issues, employee health benefits in Chile, compliance assistance, and training. Through co-employment arrangements, the PEO files Chilean employer payroll taxes on behalf of the company employing people.

On the other hand, an EOR is not a co-employment organization. It does not provide HR services like a PEO. 

There are numerous advantages to hiring a PEO or an EOR. Employment laws and regulations are often complex, and many compliance issues must be dealt with when employing people. 

With a PEO, you need to have an entity in the country, while with an EOR, you do not need to set up a subsidiary to hire people in Chile.

Skuad's EOR solution is a good way to expand your business in Chile without setting up a separate entity. 

Our solutions help you to stay focused on your business and leave all business compliances, payroll processing, and complete management work to us. Connect with Skuad to learn more.

Conclusion

Expanding your business into another country is not an easy business. You need to comply with the local laws and regulations. 

You need to understand the local customs and business environment. 

The culture change can be quite tough for a company that has not operated there. An EOR solution like Skuad can help you land on your feet firmly with constant help in understanding the local laws and business practices. 

Its international network can be immensely beneficial for your company.

Before hiring employees in Chile, a new employer needs to deal with payroll tax rates, health benefits, insurance, workplace conflicts, and many other issues. 

Skuad can help you with all the employment-related responsibilities so that you can focus on more pressing issues.

Another hurdle that most new business people face is setting up a subsidiary in Chile. 

Skuad can help you hire employees from Chile without setting up an entity there. 

With its unified employment platform, Skuad will ensure you can easily hire and manage employees in Chile. Book a demo now.

FAQs

1) What is an employer of record in Chile? 

In Chile, an Employer of Record (EOR) is a service provider that legally employs staff on behalf of another company, handling all related HR Chile tasks such as payroll, tax compliance Chile, and employee benefits. This allows businesses to operate in Chile without establishing a local legal entity, simplifying workforce management and compliance with local labor laws.

2) What is the difference between an employer of record and a staffing agency?

An Employer of Record company in Chile(EOR) legally employs individuals on behalf of another company and handles all compliance, payroll, and HR responsibilities. In contrast, a staffing agency recruits individuals to work on temporary or project-based assignments for client companies. While EORs handle employment responsibilities for long-term stability, staffing agencies focus more on short-term or specific project employment needs.

3) What is the difference between an employer of record and a professional employer organization?

While an Employer of Record (EOR) acts as the legal employer of your employees in a foreign country, a Professional Employer Organization (PEO) is a broader term encompassing EOR services and other HR outsourcing services, including benefits administration, payroll processing, and HR consulting.

4) How much does an EOR cost?

The cost of an EOR in Chile varies according to the number of employees and the specific services required. Generally, EOR companies charge as a percentage of the employee's gross salary, plus additional charges for certain services. Also, the long-term cost savings EOR can provide by streamlining Chile HR processes and ensuring compliance with Chilean labor laws should be considered.

5) What is the difference between employer of record and payroll?

While an Employer of Record (EOR) acts as a legal employer of your employees in a foreign country, payroll is a sub-component of EOR that calculates and pays employee wages and benefits. Ultimately, the EOR assumes responsibility for all employment-related matters, including hiring, payroll, benefits, and compliance with local labor laws. 

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