By Globalization PartnersDecember 2020
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If you’re interested in hiring in Chile or to work remotely for your company, our guide will help you get there. Hiring practices in Chile are influenced by the local customs and laws, which may differ from the ones you’re used to at home.
With thousands of kilometers of Pacific coastline, Chile is a unique and beautiful country. It’s also a great location for international companies that want to establish a location in South America. Chile ranks higher than any other Latin American country on the World Bank’s ease of doing business index and is widely regarded as one of the strongest economies in Latin America.
What to Know Before Hiring in Chile
Before you start recruiting new employees in Chile, you should research the local labor market as well as the employment practices you must abide by. To get you started, we’ve compiled some key pieces of information any company should know if they’re considering hiring Chilean employees.
1. The Workweek and Overtime
The Chilean Labour Code sets the maximum working hours for a week at 45 hours. These hours must be distributed across five or six days. This limit does not apply to managers and remote workers. Workdays should typically be no more than 10 hours long, and employees should receive a rest day — usually Sunday — each week.
Employees can work overtime when needed, but they may not work more than two hours of overtime per day. Overtime pay should be 1.5 times an employee’s normal pay rate, unless the employee has a collective bargaining agreement or an employment contract that specifies a higher rate for overtime pay.
2. Compensation Requirements
Chile’s minimum wage is currently 320,500 Chilean pesos per month. There is a separate minimum wage for employees under the age of 18 or over 65, which is currently set at 301,000 Chilean pesos. Research customary compensation levels for workers in your industry.
There is no required bonus in Chile as there is in many other Latin American countries. However, it is customary to give your employees token bonuses twice per year. The customary bonus times coincide with Chile’s Independence Day in September and Christmas.
3. Time Off Policies
The Labour Code states that employees should receive 15 working days off per year. After a person has been in the workforce for 10 years, they can start accruing additional days off. These more seasoned workers get one additional day for every three years they work for their current employer. Note that some regions in Chile have their own laws that require 20 days off rather than 15. Chileans are also entitled to take public holidays off — there are 14 annual holidays in Chile.
If an employee can’t come to work because they are ill, they generally do not receive sick pay unless their leave of absence extends past three days. If they are sick for longer than three days, they are entitled to sick pay. Employees can also receive paid leave for special circumstances, such as a marriage, a birth, or a death of a parent, child, or spouse.
4. Social Security Taxes
In Chile, employees must pay into several social security schemes. For employers, this means withholding the correct amounts from employees’ paychecks. Fortunately, employers themselves are required to pay relatively little. Employers must contribute small percentages to the unemployment fund and to cover work-related accidents and illnesses.
Employees contribute to a mandatory pension fund, health insurance, life insurance, and an unemployment fund. Because employees cover the bulk of social security expenses, the total cost of labor in Chile is quite reasonable.
5. Health Insurance
Chile’s healthcare system is a mixture of public and private provisions. In addition to social security health coverage, employees must pay into a private health insurance scheme from a provider called an ISAPRE, short for Instituciones de Salud Previsional.
In some circumstances, employees can contribute more than the standard amount to receive more health coverage, either through a more expensive insurance policy or through a supplemental policy. In these cases, employers can offer a bonus to offset this cost for employees. This sort of bonus is optional, so offering this supplementary benefit can be an effective way to attract employees to join your company.
The Cost of Hiring an Employee in Chile
Hiring in Chile is relatively inexpensive in terms of the cost of compensation and mandatory benefits. However, the hiring process itself entails costs of its own. Everything from advertising the job and setting up your company in Chile to ensuring compliance with the law can add to your hiring expenses. Companies hiring in Chile for the first time should budget for the following costs:
- Professional consultations: Despite the relative ease of doing business in Chile, the country is known for having strong employment laws in place that companies must comply with. Therefore, you may need to hire local attorneys and accountants to help you navigate Chile’s employment laws and tax laws.
- Business establishment: To directly employ your new hires in Chile, you’ll first have to establish your company there. This means creating a foreign branch or a subsidiary. This process involves some upfront expenses you should factor into the total cost of creating your new team in Chile.
- Job ads: While you can likely find places to post job ads online for free, you may also want to advertise on sites that generate more traffic but require a fee. Or, you may want to pay to have your ad featured more prominently on online job boards.
- Hiring committee or agency: Hiring through an agency can add substantially to your recruitment costs. However, handling the whole process internally can be costly. Your human resources team will have to dedicate time to working through the hiring process in a new country.
- Translator: If you aren’t traveling with any Spanish-speaking colleagues, you will need to hire a translator. The translator can help you with in-person communications and assist in drafting important documents in Spanish.
- Background checks: When you begin screening employees, background checks can add to your total hiring costs. In addition to checking educational background, work history, and visas, you can also legally order criminal background checks for job applicants in Chile.
What Does a Company Need to Hire Employees in Chile?
To employ people legally in Chile, you first need to establish your business in the country. This means creating either a branch or a subsidiary of your business. You need to have the following things in place before you can start legally hiring in Chile:
- Registration: You’ll have to register your company with the Registro Publico de Comercio and Servicio de Impuestos Internos. You’ll also need to register with the tax authorities to receive a tax ID.
- Documents: Setting up a company involves creating and submitting a whole host of documents, such as company statutes, a memorandum of association, articles of incorporation, by-laws, and more. These documents must be in Spanish and may need to be notarized.
- Chilean bank account: You’ll have to open bank accounts in the country. This process can take several weeks, and you’ll need to complete this before you can start paying employees.
- Permanent local address: You also need a registered office address in Chile.
- Municipal working license: Inquire about getting a “patente municipal” working license from the municipality where your business will be located.
- Insurance policy: Since employers must have labor-related accident insurance, you’ll need to register for this insurance coverage before hiring.
If you want to avoid these prerequisites to hiring, you can choose to hire with the help of an employer of record (EOR) like Globalization Partners. The EOR allows you to hold off on or completely skip the process of establishing your company in Chile. Your employees still work for you in effect, but the EOR handles logistics like legal compliance, compensation, and benefits.
Steps to Hiring in Chile
Hiring in Chile is rather simple and will likely mirror the hiring process in your home country. Let’s break down this process in detail.
1. Publish Job Ads
Networking and personal connections ordinarily play an important role in Chile’s hiring process. However, you can also reach qualified candidates through job ads. As of 2017, 82.3% of Chileans were using the internet. That means that, in addition to posting ads in newspapers like El Mercurio or El Rastro, you should post your job ads online. Besides general job boards, you can also seek out more specialized job boards, such as those that focus on your industry or are for expatriates in Chile.
Make sure the job ad describes your company as well as the job itself. If you are hiring remote employees in Chile, specify that in your job ad.
2. Read Applications and Create a Shortlist
Build tools like surveys or tests into your application process to help you compare applicants, or, if you don’t have the time or workforce to evaluate resumes manually, you can use software to help you process and sort through them. However you work through this step, the goal is to efficiently narrow down the candidate pool to a shortlist of the most qualified candidates.
Keep in mind that, while this country boasts some impressive workers, they may or may not have the degrees you’re used to seeing on resumes in your home country. As of 2011, 29% of Chile’s adult population had obtained a tertiary education qualification. The most popular degrees in Chile are in the fields of social sciences, business, and law. Even if you typically require employees to hold a certain degree, you may want to take a more flexible approach with Chilean job applicants.
3. Interview Candidates on Your Shortlist
Once you’ve determined who you would like to consider further, you should contact these individuals to schedule interviews. Allow plenty of time between interviews so you have time to converse and get to know your applicants more personally. Keep in mind that Chile has anti-discrimination laws in place, so you should avoid questions that could be seen as discriminatory, such as questions about an interviewee’s marital status or whether they belong to a trade union.
When scheduling virtual interviews, make sure you state the time in the local time zone, whether Chile Standard Time or Easter Island Standard Time. Chile also observes daylight savings time in the summer.
4. Draft Contracts
You must also create a written employment contract when hiring in Chile. The contract should cover the following pieces of information:
- Location and date
- Start date for employment
- Type of services the employee will provide
- Place of employment
- Amount, form, and payment period of remuneration
- Typical work schedule
- Term of the contract
5. Onboard New Chilean Employees
When you settle on salaries and your top candidates sign their job offers, you can onboard these new employees. The onboarding process will look different from company to company. In addition to completing paperwork, your new employees should review their contract thoroughly and sign it to confirm they understand and agree to the terms. You should also share details like dress code or other company policies. Additionally, you may need to provide training tutorials to help your new hires start strong.
Quickly Build Your Team in Chile With Globalization Partners
There is much to be gained by expanding your business into the Chilean market, but you may not want to take on the complexities that can come with a global expansion. When you work with an EOR, you can choose your new hires and leave all the logistics of legal compliance, payroll, and more to your EOR. This solution also means you don’t have to establish a business entity in Chile to hire there.
As a global EOR with a presence in 187 countries, Globalization Partners is equipped to help you rapidly take on a new team of employees in Chile and other locations worldwide. If international expansion is in your future, request a proposal from Globalization Partners. We can take on employment responsibilities so you can focus on running your company and making your new international operations a success.