Chile offers exciting opportunities for international businesses to invest in and incorporate a subsidiary or a branch in the South American country; the nation has signed more Free Trade Agreements than any other country. According to the World Bank Doing Business Report 2020, Chile ranked 59th out of 190 economies in the ease of doing business. Chile has many skilled professionals with the right talent you might be looking for when hiring for your company. The top industries where such talent dominate are:
Chileans are known to be friendly with foreigners as well as hospitable. This might make it easier for you to hire Chilean workers. Before hiring employees in Chile, employers need to register with the Chile Revenue Authority. To hire Chilean workers, you must meet a new regulatory setup and must understand new employment, taxation, payroll, and social security.
Even though these things can get overwhelming, since these will differ from what you might experience in your home country, it is necessary that they are done according to the country’s compliance laws to avoid further distress. To ensure that this is done smoothly, we would recommend that you get some assistance from local experts or a third party to establish a legal business presence in Chile. After reading this post, you will better understand the entire recruitment process in Chile.
This guide will help you know how to hire employees in Chile in a comprehensive manner. It will also benefit employers looking to invest in the top sectors in Chile.
Things to Know Before Hiring in Chile
Chile is a high-income market economy, according to data from the World Bank. Among the most thriving nations in South America, Chile leads the region in terms of competitiveness, globalization, income per capita, and economic freedom.
- Chile also ranks among the safest South American countries allowing negotiations. Rates of crime and corruption are low, and there is relative political stability. Foreign investors can invest in energy, mining, tourism, food, and infrastructure sectors.
- The gross domestic product worldwide for 2021 stood at 12.259 US Dollars per capita in Chile. Its GDP touched 317.06 bn US dollars. Chile ranks 42nd on the list of all major economies and 53rd on the list of the wealthiest countries in the world. The rate of inflation in Chile for 2021 was around 4.52%.
Such data will help you handle the recruitment process in Chile better. The following facts will assist you with recruitment and selection in Chile.
Once you complete the formation of your company, you can begin to hire employees. All hiring needs to comply with local laws.
- The labor market in Chile – The labor force participation rate stands at nearly 60 % per the latest estimates from May 2022, according to the National Institute of Statistics INE.
- Language of the workforce in Chile – The administrative language in use across Chile is Spanish. However, employers are currently looking at understanding and proficiency in English as a much-needed skill.
- Labor laws in Chile – While hiring in Chile, employers need to comply with the local labor law to avoid any compensation-related charges.
To begin with, employers need to hire a contractor or a third party who, in turn, helps with the process of hiring or recruiting in Chile.
You must draw up a written agreement per the Chilean labor law that mentions employment details. This will include information on:
- Employer details
- Employee designation
- The job description
- Payment timeline
- Legal working age – In Chile, anyone above 18 can be hired as an employee. However, young people between the age of 15 and 18 can also apply for jobs with their parent’s permission. Young people must continue their studying while they work.
- Visa – A tourist visa is mandatory when hiring a foreigner in Chile. Additionally, an employer needs to file an application for an employment visa with immigration for a grant of work permit. This will also enable the employee to stay in Chile.
- Probation- As you hire or recruit in Chile, remember that no law explicitly governs the probation period. The normal trend is to employ an employee for a specific period to monitor performance. Based on the latter, the final employment term stands fixed.
- Minimum wage – From August 1, 2022, the minimum wage in Chile per month will increase from 380,000 pesos to 400,000 pesos.
- Work hours and entitled paid leaves – Employees hired part-time are obligated to work 30 hours a week. Employees hired full-time are entitled to the following obligations:
- Fixed-term agreements have a maximum duration spanning 12 months.
- It can see an extension of up to 24 months for those employees who hold technical positions or if they have professional titles granted from some educational institution recognized in Chile. Employees will have entitlement to 15 working days of paid vacations post a year’s completion of continuous service.
- Employees with experience of 10+ will receive one additional day of vacation for three years of service.
- Employers in Chile will generally need to grant their employees discretionary benefits below:
- Life Insurance
- Stock/Share Options
- Food/Restaurant Coupon
- Christmas Bonuses
- National Independence Day Bonus
- Work payments – Payment for white-collar employees occur monthly or bi-monthly. On average, a Chilean monthly salary is 400,000 Chilean pesos ($419.98). In Chile, the monthly expenses for every employee form an employee’s net salary by around 24-26% more. All remuneration is subject to income tax and, thus, processed via payroll.
An employee profit-sharing cap is in place as well. Instead of the same, employees get a yearly bonus of 25% of their annual salary.
The employee shoulders most of the social security costs. But an employer contributes a maximum of 3.35%.
Check the table below-
The Cost of Hiring an Employee in Chile
Hiring can be a one-time process. However, recruitment is an ongoing process that keeps occurring at regular intervals.
Chilean laws make it compulsory for companies to share a minimum of 30% of taxable income with their employees. Additionally, all employees having work permits will have access to basic social protection. Employees also contribute to pension funds and the unemployment fund.
Hiring people in Chile is not a very high cost in the context of drawing up the mandatory benefits and compensation costs. When hiring an employee in Chile, the process has its own cost. During the recruitment process in Chile, you pay for everything—from the company setup to job adverts. First-time hiring employers in Chile need to account for these costs:
- Professional consultation: During the recruitment process, you will have to hire attorneys and accountants at the local level to help you navigate through Chilean employment laws and taxation norms.
- Business setup: Setting up a branch, subsidiary, or any form of company will bring on upfront expenses you need to account for when building a team in the South American country.
- Job advertisements: There are a few free advertising platforms for jobs where you can advertise the job positions, like Jora, Jobtome, Linkedin, Indeed, and more. But for more effective results, investing in paid job boards is the best way.
- Hiring agency: Hiring via a local agency will substantially add to Chile’s recruitment costs.
- Translator: A translator is an essential investment for your expense graph since most documentation and communications are in Spanish.
- Background check: As you begin to screen prospective employees, performing background checks will enhance your hiring costs. Besides the usual educational qualification checks and visa-related approvals, consider expenses around criminal checks for prospective job candidates in Chile.
- Training: A training session is essential for hiring foreign workers in Chile. It requires training newly joined employees with the requisite skills to make them the post requirements. Training costs include orientation and technical training and may include external courses.
- Annual salary: While hiring, the cost of salaries is borne by employers and companies. It is the amount you pay your employees before considering bonuses, taxes, or other benefits.
What Does a Company Need to Hire Employees in Chile?
Ensure you have the following stuff in place before you engage in hiring activities in Chile.
- Registration: Before you hire employees in Chile, register the company first with the Registro Publico de Comercio and Servicio de Impuestos Internos. Also, apply for a tax ID.
- Documentation: Notarized documentation in Spanish needs to be in place for company statutes, memorandum of association, incorporation, and by-laws, among business and legal papers.
- Bank account: Apply for a local bank account once the above two things are in order.
- Permanent address in Chile: You need to have a registered address for the office in Chile.
- Municipal license: You need to have a “patente municipal” license from the local municipal authority for the business set up before you begin to hire Chilean workers.
- Insurance: Before initiating the recruitment process in Chilean companies, employers must register for staff accident insurance coverage. This is important before you begin the process of hiring staff in Chile or recruiting in Chile.
In addition, employers must have written employment contracts while they hire new employees. It should mention the job duties, date, place of job, salary, and other information. Most importantly, the employment contract should be in the local language—Spanish.
Various Options for Hiring Employees in Chile
If you want to sail through such prerequisites for recruitment and selection in Chile, you must explore various hiring options.
- Partner with global EOR services- You can partner with an employer of record (EOR) such as Multiplier. The EOR handles all logistics such as legal compliances, compensation, benefits, payroll, and contingent workforce management without setting up an entity.
- Direct hiring- If you have a branch or subsidiary established in the country, you can directly hire in Chile with your HR department.
The Steps to Hiring in Chile
Look at the detailed process involved in the run-up to ‘hire employees in Chile.’
- While hiring staff in Chile, job ads are the easiest way to reach out to prospects looking for employment.
- Post online and in leading dailies like El Mercurio and El Rastro. Invest in ads on specialized job boards for specialized niches or the ex-pat community. Ensure that the ad is crystal clear and gives all essential details.
- Work on an app or software that allows you to screen candidates reasonably and keep timelines in mind.
- The next step in hiring employees in Chile is to schedule interviews.
- Make sure you avoid questions that might have a discriminatory edge. There are strict anti-discriminatory laws in place in Chile.
- When you schedule a virtual interview, ensure that you mention timings in the local time zone, either Chile Standard Time or Easter Island Standard Time.
- When hiring foreigners in Chile, you must create an employment contract in written form.
- The contract should be drafted in Spanish. It can also be written in the English language. However, the original draft should be in Spanish.
- Once prospective candidates sign on to your job offer, you can close the process of recruiting and selecting in Chile by onboarding these employees.
- Each company has its onboarding process that primarily involves completing essential paperwork. All new employees need to review the contract thoroughly before signing the same.
- Communicate the finer details such as company policies. New hires might need training tutorials for better workplace awareness.
Let Multiplier be Your EOR Platform in Chile
The recruitment and selection process in Chile is straightforward. A registered employer in Chile can hire temporary and permanent staff. However, employers must comply with the statutory practices before employing in Chile.
Employers can ensure compliance with all Chilean employment and taxation laws to hire or recruit employees with Employer-Of-Record (EOR) or Professional Employer Organization (PEO) solutions like Multiplier.
Multiplier offers a SaaS-based EOR/PEO solution for employing suitable talent in Chile without the obligation to form a Chilean subsidiary or a company branch in the country. Global employers can benefit from Multiplier’s EOR & PEO solutions in testing new markets and setting up teams at a fraction of the expense in over 150 countries.