Definitive Guide to Hiring in Chile

Hiring in Chile

Hiring employees compliantly in Chile means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Chile so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Chile or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Chile

Employee Probation Period

• The Chilean Labour Code does not consider a probationary period.

Annual Leave in Chile

• Employees with more than one year of service have a right to 15 paid working days per year. 
• Ten days can typically be taken consecutively, and the remaining 5 as agreed by the employee and employer.
• Vacation time can be accrued for up to 2 consecutive years.

Holidays in Chile

Maternity Leave Chile

• In general, employees are entitled to 6 weeks of maternity leave before childbirth and 12 weeks after childbirth.
• In addition, parental leave may be granted, at the choice of the new mother, under any of the following options:
• a 12-week leave following the expiration of maternity leave or
• 18 weeks of half-day work following the expiration of maternity leave.

Paternity Leave Chile

• Fathers are entitled to 5 continuous working days of paternity leave to be used when they want after the child is born.
• Fathers can also share the parental leave of up to six weeks of full-time leave or 12 weeks of part-time leave.

Sick Leave in Chile

• Employees are entitled to sick leave if supported by a medical certificate that is given to the employer within two working days from the date of beginning of the sick leave.
• Payment regarding sick leave is as follows: -
• 3 days or less of sick leave: employees are not entitled to sick pay
• Between 4 and 10 days of sick leave: employees are entitled to sick pay
• Greater than 10 days of sick leave: employees are entitled to sick pay for all working days during the sick leave period

Working Hours in Chile

• The Chile work week is 45 hours, with a standard work day of 8:30 am to 6:30 pm.
• Workers are entitled to 11 hours between work days and they are not allowed to work on Sundays (with certain exceptions depending on the sector, such as retail for example).
• Workers are entitled to one rest day a week.

Overtime in Chile

• If employees in Chile with contracts subject to a time clock must work overtime, they are entitled to 1.5% of their regular hourly salary, unless the collective bargaining agreement or employment contract indicate a higher amount.
• Overtime hours should not exceed more than 10 per week, or 2 hours per day.

Termination of Employment in Chile

In Chile, companies may terminate employment for the following reasons:

• • mutual agreement
  • the conclusion of particular task agreed upon
  • force majeure (e.g. an unexpected event, for example, a natural disaster)
  • the employee’s death
  • the expiration of an agreed upon term or duration of employment
  • resignation by the employee
  • company needs/company reorganization
  • Dismissal due to breach of contract or other serious issue (must be proven by the employer)

• In order to initiate the termination of a contract, you must first decide the cause, as per articles 159, 160, 161, and to a limited extent 163 of the Chilean Labor Code.
• In the event of dismissals, Article 161 (company needs/company re-organization) is the most commonly used cause.
• If this is the case, the employer would need to prepare a letter of notification to the employee, in which the cause is referenced and the effective date is indicated.
• This letter is either signed in person by the employee, or sent by certified mail to his home address. In parallel, an original is also filed with the Chilean Labor Ministry (“Inspección de Trabajo”).
• It is standard for the employee to be formally notified on his last day, with immediate effect.
• Once notified, the employer prepares the severance agreement (“finiquito”), in which the cause is detailed and the amounts are specified such as one month of notice, untaken vacation days, and severance (if applicable).
• This agreement should be signed within 10 days of notification, and this signature should occur either at the Chilean Labor Ministry or at a notary.

Notice Period in Chile

• Notice period is 1 month by law.
• It is common that the notice period is waived and payment is made in lieu.

Severance in Chile

• If the employee has completed at least 1 year of employment, they are entitled to severance pay.
• For every year of service up to 11 years, the employee is entitled to 1 month's salary.

Chile Salary and Wages

13th Month Salary in Chile

• Yes
• There is a statutory requirement to pay the 13th or 14th month salary.
• Which is either paid in one or two instalments.
• Additionally, you have the compulsory profit sharing referred to as 'legal gratification' and it is paid monthly.

• The employer must make the following contributions for social security:
  • a monthly 0.93% premium on remuneration (capped at a floating amount calculated by reference to the UF, an inflation-adjusted monetary unit) in respect of labor-related accident insurance
  • additional contributions that vary according to the risk of the employment activity, at rates up to a maximum of 3.4%
  • a 2.4% compulsory unemployment insurance contribution on remuneration subject to the floating cap (3% for fixed-term contracts); and
  • a 1.99% premium for life and disability insurance
• The main social security contributions borne by individuals are the 7% health insurance contribution and a 10% pension fund contribution, both capped at a floating amount.
• In the case of employees, the contributions are withheld by the employer.

Immigration Chile

• Expatriates who wish to engage in remunerated activities in Chile must apply for a visa or residence permit that entitles him or her to work.
• The most common of these are the provisional work permits for tourists, subject-to-employment-contract visas and temporary visas
• Subject-to-employment-contract visas are valid for up to two years and are renewable indefinitely for additional two-year periods.
• After two years in Chile under this visa, the employee may apply for a permanent residence status.
• Temporary visas are granted for up to one year, and may be renewed one time for an additional year.
• After the expiration of the renewal period, the expatriate must apply for permanent residence status or leave the country.
• Foreign nationals may start businesses in Chile if they comply with all legal requirements.
• Companies may be headed by foreign nationals if such nationals are residents or domiciled in Chile for tax purposes.
• The following types of residence visas are issued:
  • Officials: members of the consular and diplomatic corps
  • Temporary: gives the expatriate the right to work or perform other legal remunerated activities in Chile, and may be granted to individuals who have relatives in Chile or who intend to make investments that are considered advantageous for Chile
  • Subject-to-employment-contract: valid for up to two years, and may be renewed for an additional two-year period
  • Student: valid for up to one year and may be renewed for additional one-year periods, as many times as necessary
  • Political refugee: issued to foreign nationals who intend to establish permanent residence in Chile
  • Permanent residence: an indefinite visa that gives the expatriate the same rights as an ordinary Chilean national, except for the rights to vote and seek public office
• In general, foreign nationals must file all or some of the following documents when applying for visas and permits:
  • An application form
  • Passport and documents proving current visa status
  • Documents that prove professional status
  • Documents that prove marital status
  • Birth certificates
  • Documents that support the activities an applicant will develop in the country, such as a labor contract or documents that prove that the applicant has been accepted in a college or educational institution
  • A certificate proving that the applicant has no criminal record
  • A health certificate
  • Police record (required to apply for permanent residence)
• However, the appropriate authorities have the discretion to request different or additional documents if these are deemed necessary for the approval of the visa.

Value Added Tax (VAT) in Chile

• The current VAT rates are as follows:
• 19% standard VAT rate; and
• Exempt: exports of goods; entrance sporting and cultural events; real estate; freight services; used cars and lorries; international passenger transport; and education.

Mandatory Benefits in Chile

• These are mandatory benefits as postulated by law
• These include annual leave, public holidays, sick leave, maternity leave, paternity leave, notice period, and severance pay
• Statutory benefits also include social security benefits

Payroll Accrual in Chile

Country Accruals Additional Information

Payroll Accruals Additional Information

Accrued Benefits in Chile

Why use Global Expansion to hire in Chile

Establishing a branch office or subsidiary in Chile can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Chile labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Chile law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Chile. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Chile Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.