Chile, a South American nation stretching vertically along the Andes mountains and the Pacific Ocean, boasts a compelling investment landscape, a stable political climate, and a skilled workforce. 

Chile's competitive edge is underscored in the Global Index, placing it 1st in Latin America. This ranking reflects factors such as low public debt, open markets, and a strong financial system. 

However, navigating the intricacies of any new market requires understanding its legal landscape, and employment laws in Chile are no exception. This includes evolving labor regulations for remote work. 

So, here’s a comprehensive guide discussing employer obligations and how you can go about it in Chile.

Contractual Agreements

The labor law in Chile allows you to enter into an employment relationship after drafting an employment agreement. 

You may negotiate such agreements with individual employees, representatives of employee unions, or independent contractors/freelancers. 

Further, an employment contract must clearly outline:

• The employee's duties and responsibilities.
• The workplace location.
• The employee's wages or salary, including amount, payment method, and payment schedule.
• Working hours, including daily and weekly work schedules.
• The duration of the employment contract (fixed-term or indefinite).

You may further enter into a Data Processing Agreement to ensure strict compliance with handling employee data and related privacy requirements.  

Types of employment contracts in Chile

• Indefinite contract: No predetermined end date.

• Fixed-term contract: This type of contract has a predetermined end date and a maximum validity of 12 months and, in some cases, 24 months. 
  Generally, in the presence of a statutory probationary period in Chile, you may onboard new employees on a fixed term to determine their role suitability.  

• Contract for specific work or tasks: Hire employees with a defined scope for one-off projects.

Additionally, the contract employment laws in Chile allow you to bind independent contractors or freelancers in a contractual relationship. 

Obligations and rights for both parties

• You are responsible for adhering to regulations regarding minimum wage, employee benefits, safety, and non-discrimination. 
• You must ensure a safe work environment and job security for pregnant employees or employees on a maternity break in Chile. 
• In Chile, 85% of the workforce should be Chilean nationals if companies have 25 employees or more.

Working Hours and Overtime

The Chile labor law requires you to regulate working conditions per the following: 

Regular working hours

• You may ask full-time employees in Chile to work for nine hours a day or 45 hours a week. 
• You may schedule less than 30 hours a week for part-time work. 
• Additionally, you must offer at least one hour of rest break every work day. 

Overtime regulations and compensation

• You must ensure no more than two hours of overtime work per day and cannot exceed three continuous months. 
• The law prescribes overtime compensation in Chile at the rate of 150% of the regular pay.

Minimum Wage and Compensation

The employment laws in Chile allow you to negotiate salary standards above statutory limits and include profit-sharing provisions. The laws for remote employees remain the same. 

The minimum wage rate in 2024

• The statutory monthly minimum wage rate in Chile is 460,000.00 CLP and may gradually rise to 500,000 pesos as of 1st July 2024. 

Factors affecting wage determination

• In addition to statutory limits and individual negotiations, the labor laws of Chile mandate profit-sharing requirements as follows: 
  • Share 30% of net profits with employees
  • Pay individual employees based on their pay grade monthly or annually. 

• You must determine, negotiate, and pay salaries in Chilean pesos (CLP, $) and ensure monthly payroll.  

Explore more effective ways to pay your remote employees by partnering with an Employer-Of-Record (EOR) solution.

Employee Benefits and Social Security

Employee benefits in Chile are a combination of statutory requirements, mandatory social contributions by employers and employees, and optional benefits employers offer.

Statutory benefits

• Chile labor law requires you to grant paid leave for annual vacations, public holidays, and other personal reasons. 
• The laws also extend funded maternity leave benefits, combining paternity leave with maternity leave, parental benefits, and adoption leave allowance. 
• Chile’s social security system covers pension, health, unemployment, workplace accidents, and occupational disease insurance. 

Additional perks and benefits

• The law requires you to share net profits with all employees monthly or annually. 
• You may further add paid time off in addition to statutory leave.
•  You may also make suitable flexible work arrangements. 

Social security contributions and requirements

• The employment laws in Chile mandate you to pay the monthly deducted contributions to: 
  • Any employee preferred Pension Fund Administrator (AFP) 
  • The National Health Fund (FONASA) or an employer preferred Private Healthcare Provider (ISAPRE)

• All contributions are capped based on the Unidad de Fomento (UF), an inflation-adjusted unit used in Chile whose value changes daily.

Vacations and Paid Time Off

Here are some paid and unpaid leave entitlements mandated under the employment laws in Chile: 

Annual leave entitlement

• You may grant annual paid leave based on years of service: 
  • After the first year: 15 working days
  • After 10 years: 15 working days + One additional day for every three years

• You may allow unused leaves to be carried over for up to two consecutive years. After that, you must grant at least half of the accrued leave before the next cycle. 

Public holidays and special leaves

• Every Sunday is a holiday. Meanwhile, there are 16 other public holidays in Chile:

• Additionally, you may grant the following leave benefits: 
  • Marriage leave: Five continuous working days of paid leave.
  • Bereavement leave: Seven working days for when a spouse, children, or civil compassion passes, while three working days to mourn the death of parents. 
  • Medical examination leave: Right to half a day every year.  
  • Vaccination leaves: Half a day’s leave for vaccination as and when required. 
  • Military service or training leave: Indefinite. However, you must pay regular wages for service leave of less than 30 days.

• The Chilean labor law provides for the following family leave benefits:
  • Maternity leave: Statutory minimum of 18 weeks, preferably six weeks before and the remaining 12 weeks after the birth. 
  • Paternity leave: Statutory minimum of five days, in addition to any transfer of maternity leave to the father after the 7th week of childbirth. 
  • Adoption leave: Up to one year of unpaid adoption leave. 

• Further, the labor law in Chile prescribes no limit on the number of sick leave entitlements. 

• Moreover, you must ensure the health insurance provider extends all the pay benefits during family and sick leave.

Termination and Severance

The employment laws in Chile regulate the termination procedure and provide for an end-of-service clause. Let's discuss this further. 

Grounds for termination

• Termination due to poor performance: It may include consistent absenteeism and neglect of duties, disruptive behavior at the workplace, or if the performance remains unsatisfactory despite feedback.
• Termination with a cause: These include gross negligence, dishonesty, absconding, substance abuse, or criminal convictions. 
• Termination due to business redundancy: These include situations necessitating layoffs, workforce reduction, or company restructuring. 

You can partner with an EOR solution to explore other legal ways to terminate an employee in Chile.  

Notice period and severance pay

• Most grounds for termination necessitate you to offer a notice period of at least 30 days. 
• The notice period for termination with cause may be for at least two weeks.
• However, in practice, you may extend payment by waiving the notice period mandate. 

• Additionally, you may offer severance pay equivalent to one month’s salary for every year of employment, capped at 11 years.

Discrimination and Equal Opportunity

Here is a summary of anti-discrimination, anti-harassment, and equal opportunity provisions under the labor laws of Chile.  

Prohibitions against workplace discrimination

• You cannot discriminate between employees based on:
  • Race, ethnicity, nationality, socioeconomic status
  • Language, political views, religion
  • Union membership, sexual orientation, gender identity
  • Age, disability, marital status, and illness

• However, exceptions exist for job-related qualifications.
• Further, you must extend specific protections for pregnant and nursing employees. 
• You must also implement strict internal policies to prevent sexual and workplace harassment, including proper reporting, timely investigation, and appropriate sanctions for perpetrators. 

• Companies with 100 or more employees must take affirmative action to employ at least 1% of the workforce from persons with disabilities.  

An EOR solution can help you comply with any additional obligations to prevent workplace discrimination and extend equal opportunity rights.

Health and Safety Regulations

The employment laws in Chile mandate companies with over 25 employees to ensure the following health and safety regulations:

• Establish a Permanent Safety, Hygiene, and Risk Prevention Committee comprising representatives from both employers and employees.
• Empower this committee to take necessary preventive and mitigation steps to prevent workplace accidents.

Stay Compliant with Skuad

Skuad offers a compelling alternative by providing a platform that facilitates hiring, payroll, and benefits administration across over 160 countries without the need for local entity establishment. 

This streamlines the expansion process and ensures adherence to local employment laws in Chile, allowing you to scale your operations efficiently. 

So, ask for a demo today to get tailored compliance solutions for hiring in Chile!

FAQs

Q1. What is the probationary period in Chile?

A1. Chile has no statutory requirement for a probationary period. However, you may use a fixed-term contract to determine employees’ suitability. 

Q2. What is the termination law in Chile?

A2. The termination law in Chile requires employers to furnish valid reasons before ending the employment agreement. Additionally, employers must extend a notice period of 30 days and severance pay of one month’s salary for every year of employment, capped at 11 years.

Q3. What are the types of employment contracts in Chile?

A3. The three most common employment contracts in Chile are indefinite-term, fixed-term for a maximum of 12 months, and project-specific contracts. 

Q4. What are the labor laws in Chile?

A4. The labor laws in Chile protect both employers and employees through clearly defined contracts, working hour regulations (9 hours a day or 45 hours a week), monthly minimum wage (500,000 pesos), mandatory leave benefits (minimum of 15 working days annual leave), and regulations for safe and healthy work environments.