When expanding a business into Chile, it is necessary to consider a variety of factors. One of the first things might be how to set up payroll in Chile. From getting the necessary information from employees to making sure they get paid on time, a company needs to become an expert in Chile employment laws.
Taxation rules in Chile
Most social security costs are withheld from employees instead of the employer, which makes taxes reasonable for employers in Chile. Workers have to contribute 10% of their salary to a pension fund, 7% to a health insurance plan, 2.84%to 3.4% to a life insurance plan, and 0.6% to an unemployment insurance plan.
On the other hand, employers contribute to work-related accidents, illnesses, and the unemployment insurance plan. Depending on the industry, this adds up to between 0.9% and 6.8% of the employer’s payroll. An additional 2.4% goes to an unemployment fund and 1.88% goes to the disability and survival insurance fund. Any employer must make sure all new employees are registered with tax authorities within 60 days of hiring them.
Chile payroll options for companies
When expanding to Chile, a company can:
- Choose payroll outsourcing: If a company lacks the resources to conduct payroll itself it can outsource payroll to another company in Chile. Although a third party will administer the payroll, the company as the employer will still be liable for meeting all employment laws.
- Run payroll in Chile: Some companies with more resources may choose to run payroll out of their Chile office. However, hiring the right personnel for the office can be more expensive, and would be necessary to understand everything about Chile’s payroll laws.
- Choose to work with an employer of record: Instead, you can work with an Employer of Record (EOR). G-P streamlines the entire payroll management process ensuring on-time, accurate payments in 150 currencies for team members across the world.
How to establish a payroll in Chile
Before hiring employees or setting up payroll, a local entity needs to be established in Chile. The entity will need to be registered with the Registro de Comercio and Servicio de Impuestos Internos. It can take 15 to 20 days to complete. Then it’s required to begin the time-consuming process of setting up a bank account with official paperwork and documentation.
Chile has complicated termination and severance rules. Before hiring someone, it’s best practice to outline all employment terms in a strong employment contract. Also, for termination purposes, it is necessary to look at the reasons an employer can terminate employment and determine which termination payment is applicable.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
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