Doing Business With a Chile PEO/EOR
Chile stands out as the finest in Latin America for its ease of trading across borders and financial independence. According to the World Bank Ease of Doing Business Report 2020, it ranks 59th out of 190 economies and is among the most economically open nations in the world. The country hopes to establish itself as a center for technical investment, prompting significant corporations to relocate there.
Chile is one of the South American nations with stable, high-income economies and a welcoming environment for foreign investors. Due to its strong fiscal response, the nation has seen a GDP growth of 11.7% in 2021. In countries where foreign trade accounts for 60% of GDP, home and foreign businesses coexist equally (imports and exports). The robust rule of law, flexibility in international commerce and finance, and a fair regulatory framework contribute to Chile’s ability to grow its economy through Foreign Direct Investment. According to the Global Competitiveness Report, the nation ranks far above some of the larger Latin American countries, such as Brazil and Argentina.
If you plan to start an entity in Chile, you can contact a Chile PEO to benefit from its top players’ efforts and start a business here. A respected EOR, like Multiplier can take care of orientation, training, and maintaining workers, involving full-time and independent contractors.
Why Use a Chile PEO?
A Chile PEO service is a third-party organization that helps companies sort employee hiring, payroll processing, employee management, and other HR-related tasks. It shares HR responsibility with the company and forms a co-employer bond.
Benefits of using Chile PEO services include:
- PEO in Chile will look after your HR responsibilities
- It complies with Chile’s tax regimes and dynamic laws
- Collaborating with global PEO services will help you save time
- It also handles all HR-related recordkeeping while maintaining ‘transparency’
Chile PEO Costs
Most PEOs either impose a set price per employee or a percentage of the total salary paid out by a business each year. The average price of a PEO per employee is between $500 and $1500, or 2 to 12% of the entire annual compensation. If the payment for your personnel is based on commissions, a “per-employee” PEO pricing system is advantageous. On the other hand, if your employees get a consistent monthly wage, a payroll-based PEO cost structure is preferable.
However, at Multiplier, we offer PEO services at a reasonable price, beginning at $300 per month. The PEO solution from Multiplier also allows you to hire and pay your freelancers worldwide; the services are only $40 per month. This per-freelancer bundle includes multilingual contracts and international payroll. Our convenient and inexpensive PEO services are created to enable a flexible and straightforward employment process, guarantee prompt payments, and provide required compensation to employees.
How to Hire in Chile
Establishing solid bonds with your regional business associates is essential while doing business in Chile. Employment laws in Chile are employee-centric and provide all protection to the working class. If you are planning to hire in Chile, you must comply with all the laws.
Any business that employs people in Chile must have a formal employment contract describing every aspect of the position. For a seamless expansion in Chile, companies must consider the hiring policies and be aware of local organizations.
Local Entity in Chile
There are three main business entities your business can take in Chile:
- Sociedad de responsabilidad (limited liability company)
- Sociedad anónima (public limited company)
- Sociedad por acciones (simplified joint stock company)
Chile employment contract
Companies planning to hire and onboard employees in Chile can furnish written employment contracts to employees. This contract should comply with Chilean Labor Law. The employment agreement’s necessary details should be included in the contract, which is given below:
- The contract’s expiration date and place
- Employer’s and the employee’s names and nationalities
- Quantity of compensation
- Beginning of employment date
- The type of services the individual will offer
- Method and duration of payment
- The term of the agreement, and
- Working hours.
To ease the process, you can utilize our Chile employer of record and PEO service. In that case, you need not create a separate template because the employment contract template is a component of the Multiplier service. The employee onboarding process is done in compliance with employment law by maintaining absolute transparency.
- Each year in July, Chile adjusts its minimum wage.
- From August 2022, the standard monthly Chilean minimum salary will be increased to 400,000 Chilean pesos ($404).
- Part-time employees are compensated proportionally.
- The maximum working hours are limited to 45 hours each week.
- As per Chilean labor legislation, these 45 hours must be worked in no less than 5 and no more than 6 consecutive days.
- In Chile, the average workday shall not exceed 10 hours.
- Employees are permitted no more than two hours of overtime per working day. This also applies to part-time employment. The personnel may be exempt from the cap if they have the designation “trusted” on their contract. This policy was initially created for corporate executives but extended to all employees over time.
- Unless the bargaining agreement or employment contract specifies a significant amount, Chilean workers are eligible for 1.5 percent of their regular hourly wage for any overtime required.
- The maximum number of extra hours per week should be 2 hours.
The following 15 public holidays are observed in Chile:
- January 1: New year’s day
- Easter Friday
- Easter Saturday
- May 1: Labor day
- May 21: Navy Day
- Monday close to June 29: St. Peter and Paul Holiday
- July 16: Holiday of Our Lady of Mount Carmel
- August 15: Mary’s Assumption Day
- September 18-1: Army Day and two national holidays (if one of the days falls on Wednesday, it is moved to Monday and Tuesday or Thursday and Friday)
- Monday closest to October 12: Columbus Day weekend
- Closest Friday to October 31: Reformation day (unless it happens on a Thursday).
- November 1: All Saints Day.
- December 8: Immaculate Conception Day.
- December 25: Christmas
- December 31: Bank holiday
States and territories may enact new holidays or change one or more of the ones mentioned here. Companies that are permitted to work on holidays must give their workers paid time off or overtime.
- Most employees with at least a year of service receive 15 paid yearly leaves
- Those who work in Chile’s 11th or 12th regions or the region of Palena in the 10th region are eligible for 20 days of vacation.
- Those who have worked for 9 months but less than a full year are entitled to 11.3 days of paid leave.
- Every three years of employment, individuals who have worked for one or more companies for at least ten years are eligible for an extra day of yearly leave.
- A minimum of 10 straight days must be included in the annual leave.
- Unused vacation days may be continued for up to two years and may be redeemed if the company and employee agree.
- Maternity leave is provided to female employees for 6 weeks before the anticipated due date and 12 weeks after delivery.
- Based on the child’s condition, the leave could last up to 18 weeks. For multiple births, an additional 7 days of rest are granted for each additional kid.
- The maternity leaves are paid by either government or private healthcare insurance funds.
Paid parental leave
- For the birth or adoption of a child, men are eligible for five days of paid leave.
- The father may use the mother’s unused leave if she passes away during labor, delivery, or maternity leave.
- Parents who have adopted are entitled to the same leave regulations.
- Employees must submit a medical certificate within two days of their sick leave to the employers.
- From the 4th day, employees are entitled to sick pay. Employees who have participated in a public health insurance scheme for at least six months and made payments for at least three months are eligible for government-paid sick time.
- If the sick leave lasts more than ten days, money is given beginning with the first day of absence.
Employers may offer additional coverage if contributions to the national health insurance are less than workers’ compensation.
- Online payslips are permissible in Chile legally, but the company must have a copy each employee has signed.
- Chile uses a monthly payroll and has no legal restrictions on the 13th-month salary.
- Payroll reports are required to be preserved for five years by law.
Taxation in Chile
Most social security expenditures in Chile are deducted from employees’ monthly wages. Employers in Chile should expect acceptable company taxes on top of labor costs.
Employees must give a percentage of their pay to a:
- pension plan (10%of salary)
- plan for health insurance (7%)
- plan for life insurance (2.84% to 3.4%)
- proposal for unemployment insurance (0.6%)
Employers must pay into the funds for work-related diseases and accidents and the unemployment insurance program. Depending on the company’s sector, this can be between 0.9 and 4.4 percent of payroll.
Additionally, employers are required to pay 2.4 percent of payroll into the unemployment fund. Help from a professional Chile PEO service like Multiplier will assist you in handling taxes in Chile.
Termination/Severance in Chile
An employer can terminate an employee and their services. According to the law, the following are sufficient grounds for termination:
- Mutual consent, resignation, or contract expiration
- Default on a contract
- Not fulfilling organization or business needs
The employee must sign a layoff letter in person or have it certified and mailed to their home address. The letter must specify the reason for the layoff and the starting date. Employers must also submit the same to the Chilean Ministry of Labor. The employee frequently receives a notification on the final day of work.
Following the delivery of the termination letter, the company must draft a severance agreement that specifies the reason for the layoff and the compensation to be awarded to the employee. Within ten days after the termination, the severance agreement is signed.
In the event of a standard agreement, both sides should sign a document stating their consent to the termination of the employment contract. Additionally, a severance agreement is signed during the first two weeks from the termination date.
Managing HR operations in the workplace can be difficult, especially if your company is setting up a new entity in Chile. Employers must ensure they are maintaining payroll, tax filing, and the benefits of the international workforce. With trustworthy and risk-free solutions, a global PEO solution like Multiplier can assist you in navigating the challenges of managing foreign employees.
Our professionals can handle various tasks, including creating employment contracts, payroll management, multi-currency payments, benefit and insurance administration, management of contingent workers, taxes, and much more. You may manage all your HR needs while guaranteeing compliance with tax laws and labor regulations with the help of our Chile PEO.
Our Chile PEO Simplifies Your Expansion
To assist companies in growing internationally, Multiplier PEO/EOR solutions include the following:
- Creation of employment contracts in compliance with Chilean laws
- Global payment facility
- Managed payroll services for businesses with a presence there
- Management of the contingent workforce
- Perks and insurance for employees
- Currency for independent contractors
- Startups should use employee stock ownership plans (ESOPs)
- Transparency and maximum precision
If you want more details about our services, contact our Chile PEO specialists immediately.