How to Hire Remote Employees In 

Chile

The Basics

Currency
Chilean Peso (CLP)
Employer Taxes
4.39%
Payroll Frequency
Monthly
Official Language
Spanish

Employment in 

Chile

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

Chile

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Chile can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in Chile, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Chile.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in Chile is not the same as paying workers in your own country. Employees have to be paid using Chile’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

Chile

 Specific Information

Working Hours

A full workweek in Chile is 45 hours. The employer has the right to extend the day by no more than 2 hours a day, or 10 hours a week.

Overtime

Overtime is paid at a rate of 150% of the regular pay.

Payroll Tax

Employer

Employer

  • Unemployment
  • Disability and Survival Insurance (SIS)

Minimum Wage

The monthly minimum wage in Chile is 326,500 CLP.

Payroll

Pay Cycle

Employees in Chile receive their salary monthly.

13th Salary

There are no provisions in the law regarding 13th salaries. 

Leave

Paid Time Off (PTO)

PTO is calculated by the:

  • Employees who have been employed for at least 1 year are entitled to 15 working days paid leave.   

Public Holidays

There are 16 public holidays in Chile.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

In Chile, employees are entitled to sick leave if they can provide a medical certificate within 2 days from the beginning of the leave.  The employer must then forward the certificate to the health insurance within 3 days.  

  • For the first 3 days of sick leave, the employee is not entitled to pay  
  • From the 4th day on, employees are entitled to sick pay, however, it may be subject to a cap.

Maternity Leave

In Chile, the woman is entitled to 30 weeks of paid maternity leave, divided by 6 weeks before the birth and 24 weeks after, and is paid by health insurance.

During the pregnancy, the woman is not required to participate in activities that would endanger her health (i.e. heavy lifting). If this is a requirement of the job, the employer must reassign her to a different position during her pregnancy without pay reduction. 

Paternity Leave

Fathers are entitled to 5 days of paid paternity leave.

After the 7th week of birth, the mother can opt to transfer some or all of her maternity leave to the father.

Parental Leave

Female employees are entitled to 10 days of parental leave for a child under the age of 18. While the employee is entitled to be paid, they must make up the time taken off at a later date.

Other Leave

None.

Marriage Leave

None.

Bereavement Leave

If a member of the employee’s immediate family passes away, the employee is entitled to 3 days of paid leave.

Termination

Termination Process

In order to terminate an employee, the cause must first be decided.  By law, the following reasons are valid reasons for termination:

  • Mutual agreement, resignation, or expiration of a contract
  • Breach of contract (employer must be able to provide proof)
  • Company needs or reorganization (the most common reason for the dismissal of an employee)

The employer must prepare a letter for the employee stating the cause for termination as well as the effective date and it must be signed in person by the employee or sent by certified mail to their home address.  In addition, the same letter must be filed with the Chilean Labor Ministry.  It is common that the employee to be notified on the last day of work.

After the termination letter is given, the employer must prepare a severance agreement which must include the cause for termination as well as the amount that will be paid out to the employee.  The severance agreement must be signed within 10 days of the termination.

In the case of a mutual agreement, both parties must sign a document acknowledging that both parties have agreed that the employment contract is terminated.  A severance agreement must also be signed within the first 1-2 weeks following the termination date.

Notice Period

The notice period in Chile is:

The notice period is 1 month by law.  It is common that the notice period is waived and payment is made in lieu. 

Severance Pay

The Severance Pay in Chile depends:

If the employee has completed at least 1 year of employment, they are entitled to severance pay.  For every year of service up to 11 years, the employee is entitled to 1 month’s salary. In addition, after one year of employment, the employee accumulates an additional month of severance pay if they have worked for at least half of the following year. 

Probation Period

Probation period is 12 months.