Find a Professional Employer Organisation (PEO / EOR) in Chile

The Chilean economy is among the most stable, open and competitive in Latin America. The country is the world’s leading copper producer, and exports of minerals, wood, fruit, seafood, and wine. These industries contribute greatly to the country’s continued GDP growth.

The country is ranked as a high-income economy by the World Bank, and is considered to be South America’s most stable and prosperous nation, leading the continent in terms of competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.

Chile is an exciting place to start doing business. But before establishing operations in Chile, it is crucial to understand the local labour laws and to be aware of the different ways to attract and hire local staff. Keep reading and learn about hiring through a professional employer organization (PEO); an attractive method to hire local employees, which does not have the economic or administrative burden that forming a local legal entity has.

Some interesting facts about Chile:

• Chile is ranked 5 in the “Doing Business” report, carried out by the World Bank.
• Chilean employers must share profits with their employees, by either paying them 25% of their annual remuneration or 30% of annual net profits.
• The nation is the host of various multinational companies. 
• The country’s economy is dominated by foreign trade. 
• The mining sector in Chile is one of the pillars of its economy and the Chilean government strongly supports foreign investment in the sector and has modified its mining industry laws and regulations to foster a favorable investing environment for foreigners.

What is a Professional Employer Organization (PEO) / Employer of Record?

A Professional Employer Organization (PEO / EOR), also known as an ’employee of record’, is a company that legally employs workers on behalf of companies who do not have an established office in a given country. As such, the PEO oversees and manages all human resource related functions.

PEOs partner with businesses in order to provide them with complete HR outsourcing to support a company’s human resources management, employee benefits, regulatory compliance, and payroll outsourcing. A PEO / EOR works through a co-employment arrangement, meaning the PEO / EOR contractually shares various employer responsibilities with the company.

Real-life Example: A Canadian company is looking to hire a bi-lingual IT consultant. They decide that a Chilean employee may be a good option (having a high level of education, often being bi-lingual and a lower company cost than a Canadian employee). However, the Canadian company does not want to go through the administrative hassle of forming and maintaining a local company in Chile. Instead, they work with a Chilean PEO service provider who can ‘hire’ the individual, and comply with all local employment requirements. While the employee is technically employed by the PEO, the individual will be managed and tasked by the Canadian company.

Benefits of using a PEO in Chile

There are many benefits to using a PEO in Chile. By partnering with a company that is an expert in the local legislation, you minimize risk and ensure that your company stays on top of local law and regulation. 

In addition, you save on time by reducing your amount of administrative tasks, allowing you to focus on growing the company. 

Without increasing your headcount, working with a PEO will allow you to benefit from HR support. 
Moreover, you are able to hire employees quickly, in compliance with Chilean labour laws, and without having to establish and maintain a local Chilean legal entity. This allows you to start doing business quicker and test out the market.

Using a PEO / EOR is an enticing option to begin doing business in Chile. It enables a company to start commercial activities in the first phase of an expansion into the region. Some companies may find that a local entity formation may be a good option after first operating through a PEO / EOR, and once they have a better understanding of the local market. 

Labour Laws in Chile

When establishing a company abroad, it is vital to comply with local labour laws. For most foreign investors, it is a challenge to understand and comply with the local employment laws in Chile. For this reason, a Professional Employer Organization (PEO / EOR) solution can prove to be a great alternative to hire staff, facilitating the process of complying with Chilean labour laws. The most important aspects of the Chilean Labour Law are summarized below:

Employment contracts: The employment contract needs to be in writing and completed within 15 days from the initiation of services. 

Fixed-term contracts: These contracts can be made for a maximum duration of one year. This limit jumps to two years for managers or individuals who have obtained a professional or technical degree delivered by a state-recognised institution. 

Foreign workers: The Labour Code states that at least 85% of employees who work for the same employer must be of Chilean nationality. 

Committees: Regarding legislation, two committees are required. The first one is a joint health and safety committee which is mandatory whenever more than 25 employees are present in the workplace. It takes care of identifying and assessing the risks of accidents and occupational diseases. The second one, a bipartite training committee, is required whenever the company has more than 15 employees. Its mission is to promote the training of employees in the company. 

Unions: Employees benefit from the constitutional and statutory right to unionize and form labour unions, these represent the employees before the company. Company labour unions, intercompany labour unions, temporary workers labour unions, and independent workers labour unions are the different types of labour unions recognised by the Chilean law. 

Termination: If an employment relationship is ended due to “company needs”, the employer must send the employee a written communication informing about the labour contract termination one month in advance, unless the employer pays the employee a compensation equivalent to 30 days of work.

Employee Benefits in Chile

In addition to complying with labour laws, a company must be able to provide all the benefits Chilean workers are entitled to to its employees. Using a PEO / EOR facilitates this process, because they assume responsibility for managing employee benefits. The most important employee benefits are summarized below:

Working Hours: The Labour Code states that the maximum working schedule per week is 45 hours, distributed in no more than six and no fewer than five days. However, managers, employees with the power to manage, and employees without direct supervision working at home or in another location than the workplace are excluded from the above-mentioned limit. Ordinary work per day cannot exceed 10 hours, and only two hours of overtime are allowed per day.

Overtime: All employees who are not excluded from the working hours’ limit mentioned previously are entitled overtime pay. It is calculated as one-and-a-half times the ordinary hourly salary.

Annual Vacation: The annual holiday consists of 15 working days. It is increased by one day for every three years in employment with the current employer after the first 10 years of work for one or different employers.

Sick Leave: Employees have the right to sick leave following a doctor’s orders. During this time, the employee will receive an amount equivalent to his or her salary paid by the respective health institution. There is no annual limit on the number of days of sick leave an employee can take, as this will depend on the medical license extended by the doctor.

Maternity Leave: Female employees are entitled to a paid maternity leave starting 6 weeks prior to the birth of the child and continuing 12 weeks following the birth. Probationary Period: The Labour Code does not consider a probationary period.

How to use a Payroll Calculator

If you want to get an idea of the possible costs involved in payroll outsourcing in Chile, using a payroll calculator is one way to get a good estimate.

Although a payroll calculator won’t be completely accurate, it will give you the opportunity to look at costs while varying the salary, the number of employees, the country you want to enter, and the currency you wish to work in. As such, you will be able to understand your likely costs across a range of salaries, while also being able to compare other countries as potential alternative destinations. 

You can find the BLH payroll calculator at the bottom of our Hiring & PEO Services page. The calculator will allow you to make good estimations of the costs involved in hiring in Latin America and the Caribbean based on country, currency, and salary, with the calculator factoring in local statutory deductions.

To use the BLH payroll calculator, you will need to undertake the following steps:

Step 1: Select the country

Choose the country where you are doing business, or planning to launch. This feature will be useful when it comes to comparing potential alternative markets.

Step 2: Select the currency you wish to deal in

You can choose between US dollars (USD), British Sterling (GBP) and Euros, as well as the local currency for the country you are looking at, compared to what is most convenient for you. Note that for Ecuador, El Salvador, and Panama, the local currency is also USD, as they have dollarized economies.

Step 3: Indicate an employees monthly income

Here you can indicate the expected salary you will be paying an employee, in the currency of your choice.

Step 4: Calculate your estimated costs

Based on all of the information you have provided, you will receive results indicating your estimated costs, including a breakdown for estimated statutory benefits you will be liable for.

Step 5: Compare your costs to other options

With a good estimate at hand of how much your staff in Chile would be, if you are flexible about your expansion into Latin America and the Caribbean, you can use the BLH payroll calculator to compare those costs to other jurisdictions.

Common FAQs On Hiring Through an Employer of Record (EOR) in Chile

Based on our extensive experience,  these are the common questions and doubts of our clients on hiring through an EOR in Chile:.

Interested in Doing Business With a PEO in Chile?

Chile has the best-qualified economy in Latin America and one of the best regarded among the world’s emerging economies, thanks to its sustained economic growth and social progress, along with government changes designed to attract foreign direct investment (FDI). A PEO solution will enable you to maintain day-to-day control of your employees, while the PEO takes care of all risk mitigation, compliance, payroll, and employee benefits.

Contact our Country Manager, Allan here at Biz Latin Hub to learn more about how we assist your hiring and recruitment needs in Chile.