Employer of Record in Chile

Expanding your team into Chile offers access to a dynamic talent pool, but navigating the country's specific labor laws and regulations can be complex for foreign companies. Establishing a local entity is one approach, yet it often involves significant time, cost, and administrative overhead. Understanding the various pathways to compliantly hire in Chile is crucial for a smooth and efficient expansion.

When looking to hire employees in Chile, companies generally have a few primary options to consider:

• Establishing a local legal entity: This involves setting up a subsidiary or branch office in Chile, which requires registration, appointing local directors, and maintaining ongoing compliance with corporate and tax regulations.
• Utilizing an Employer of Record (EOR): An EOR, such as Rivermate, acts as the legal employer for your Chilean workforce. This allows your company to operate in Chile without establishing its own legal entity, significantly streamlining the hiring process.
• Hiring independent contractors: While this offers flexibility, it's crucial to ensure the engagement strictly adheres to Chilean independent contractor rules to avoid misclassification risks, which can lead to severe penalties.

How an EOR Works in Chile

An Employer of Record simplifies the process of hiring in Chile by handling all local employment responsibilities on your behalf. This partnership allows you to focus on managing your team's day-to-day work, while the EOR ensures full compliance with Chilean labor laws.

An EOR typically takes care of:

• Legal employment: Serving as the official employer, assuming all legal responsibilities.
• Payroll processing: Managing salary payments, social security contributions, and local tax withholdings.
• Benefits administration: Ensuring employees receive mandatory benefits and administering any additional benefits offered.
• Compliance with labor laws: Adhering to Chilean employment contracts, working hours, leave policies, and termination requirements.
• HR administration: Handling onboarding, local employment agreements, and other essential HR tasks.

Benefits for Companies Looking to Hire in Chile Without Establishing a Local Entity

Opting for an EOR service in Chile provides numerous advantages for businesses aiming for efficient and compliant global expansion.

• Rapid Market Entry: Hire employees in Chile quickly, often within days, without the lengthy process of legal entity setup.
• Reduced Compliance Risk: The EOR takes on the responsibility for understanding and adhering to Chile's complex labor laws, mitigating your company's legal and financial risks.
• Cost Efficiency: Avoid the substantial costs and ongoing administrative burden associated with establishing and maintaining a local subsidiary.
• Access to Top Talent: Recruit and hire Chilean professionals regardless of your company's physical presence in the country.
• Operational Flexibility: Easily scale your workforce up or down as business needs evolve, with the EOR managing the administrative aspects.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Chile includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Chile.

Chile's tax system mandates both employers and employees to fulfill specific social security and income tax obligations. Employers must contribute to pension (around 11.44%-12.94%), healthcare (7%), unemployment insurance (2.4% or 3% for fixed-term contracts), and work injury insurance (base 0.95%). Employers are responsible for withholding income tax based on taxable monthly income, with rates ranging from 0% to 35%, depending on income brackets.

Key tax deadlines include monthly declarations (Form 29) by the 12th of the following month, social security payments by the 10th, and annual income tax returns (Form 22) typically due in April. Employees can benefit from deductions such as voluntary pension contributions (50% government credit up to 600 UF), health, education, and mortgage interest expenses. Foreign workers' tax obligations depend on residency status, with residents taxed on worldwide income and non-residents on Chilean-source income. Chile has tax treaties to mitigate double taxation, and corporate income tax for foreign companies is set at 27% for 2025.

Chile's salary landscape varies significantly by industry and role, with technology and finance sectors offering higher compensation. For example, software engineers earn between CLP 2.5M-5M/month (USD 30K-60K/year), while marketing managers range from CLP 2M-4M/month (USD 24K-48K/year). Salaries tend to be higher in Santiago and for specialized roles, reflecting market demand.

The legal minimum wage in 2025 is CLP 460,000/month (USD 552), which employers must meet or exceed, with regular updates expected. Compensation packages often include bonuses such as the Christmas aguinaldo (at least half a month's salary), vacation bonuses, and allowances for transportation, meals, or housing. Payroll is processed monthly via bank transfer, with mandatory deductions for pension funds (AFP), health insurance (FONASA or ISAPRE), and income tax.

Emerging trends include rising tech salaries, increased focus on benefits, remote work adjustments, and inflation-driven salary increases, requiring companies to adapt their compensation strategies to remain competitive.

Chilean labor law grants employees various leave types, with minimum standards set by the Labor Code. The most notable is the annual vacation, which provides 15 working days of paid leave after one year of service. Vacation must be taken continuously or split by mutual agreement, and unused leave is paid upon employment termination. Employers should also be aware of public holidays, which are observed with paid days off; in 2025, these include dates like January 1 (New Year) and December 25 (Christmas).

Employees are entitled to sick leave upon presenting a medical certificate, with sick pay subsidized by social security starting from the fourth day, generally lasting up to one year. Parental leave includes maternity leave (6 weeks prenatal, 12 weeks postnatal, plus optional parental leave), paternity leave (5 days), and adoption leave with similar benefits. Other leave types such as bereavement, marriage, voting, and potential study or sabbatical leave may be granted based on company policies or agreements.

Chile mandates comprehensive employee benefits, including social security contributions, unemployment insurance, workers' compensation, paid vacations (15 days/year), severance pay (up to 11 months' salary), and family allowances. Employers must also provide annual bonuses in September and December, with costs typically constituting 25-40% of the employee's salary. Mandatory benefits ensure basic worker protections and compliance with labor laws.

Beyond legal requirements, many employers offer optional benefits such as supplemental health, life, dental, and vision insurance, meal and transportation allowances, education programs, childcare support, and wellness initiatives to attract and retain talent. The healthcare system is dual, with public (Fonasa) and private (ISAPRE) options, often supplemented by employer-provided private insurance. Retirement contributions are mandatory, with employees choosing from several AFP providers; voluntary contributions are also common.

Employment agreements in Chile are mandatory, written documents that specify key terms such as identification, job duties, workplace location, remuneration, working hours, contract duration, benefits, termination conditions, and applicable collective agreements. These clauses ensure legal compliance and protect both parties' rights. Employers must include all mandatory clauses to validate the contract.

Chile recognizes various contract types, primarily indefinite and fixed-term agreements, each with specific legal implications. A probationary period of up to 30 days allows either party to terminate without cause, with no prior notice required. Post-probation, full employment rights apply, and contract modifications must be mutually agreed upon in writing.

Confidentiality clauses are generally enforceable, protecting trade secrets, while non-compete clauses are restricted, requiring reasonableness in scope, duration (up to 6-12 months), and compensation. Modifications and terminations must follow legal procedures, with written agreements necessary. Just cause for termination includes serious breaches, with severance pay applicable in some cases, whereas voluntary resignation typically does not entitle the employee to severance.

Chile has experienced a notable rise in remote work, driven by technological progress and evolving employee expectations. The legal framework, primarily Law No. 21.220, mandates written agreements, defines remote work, and emphasizes employer responsibilities such as providing equipment, ensuring safety, and respecting the right to disconnect. Employees can request remote arrangements, which are reversible under certain conditions.

Employers should understand key legal obligations and consider flexible arrangements like flextime, compressed workweeks, job sharing, and part-time work to attract and retain talent. These options enhance autonomy and productivity while aligning with Chilean regulations.

This evolving landscape requires employers to adapt policies to ensure compliance and leverage flexible work options for a competitive advantage.

Terminating an employee in Chile requires strict compliance with labor laws to avoid legal issues. Key considerations include notice periods, severance pay, grounds for termination, procedural steps, and employee protections. For indefinite contracts, a minimum 30-day notice is mandatory, while fixed-term contracts generally do not require notice unless renewed. Employers can opt to pay one month's salary ("meses de aviso") in lieu of notice.

Severance pay is owed when employees with over one year of service are terminated without just cause, calculated as one month's salary per year of service, up to 11 months. Termination reasons are categorized as with cause (e.g., breach, abandonment, misconduct) or without cause (e.g., economic needs). Proper documentation, written notices, and a signed settlement ("finiquito") ratified by authorities are essential for lawful termination.

Employees can challenge dismissals within 60 working days, and wrongful termination may lead to reinstatement or compensation. Employers must follow precise procedures and maintain proper documentation to ensure compliance and avoid penalties.

Chile has experienced a notable rise in individuals opting for freelancing or independent contracting, aligning with global trends towards flexible work arrangements. For companies engaging Chilean talent, understanding the legal framework is essential to avoid misclassification risks. The distinction between employees and independent contractors is critical, as employees are protected under labor law with benefits like minimum wage and social security, while contractors are governed by civil or commercial law with fewer obligations for the company. Misclassification can lead to penalties, including back payments and fines.

When engaging independent contractors, companies should ensure service agreements include clear terms on scope, payment, confidentiality, intellectual property, and termination. Intellectual property rights default to the creator unless explicitly transferred in the contract. Contractors must manage their tax obligations, including a 13% withholding tax on payments, increasing to 17% by 2028, and mandatory contributions to pension and health systems. Common sectors utilizing contractors include technology, creative services, consulting, education, and professional services, where specialized skills are often required.

Companies must adhere to legal requirements for classification, contracting, and tax obligations to ensure compliance when engaging independent contractors in Chile.

Chile provides diverse work permit options to facilitate employment for foreign nationals, emphasizing skilled workers' entry and protecting workers' rights. Key visa types include:

Employers should ensure compliance with application procedures, which involve providing necessary documentation such as employment contracts and proof of qualifications. Fees vary by visa type, and the process is designed to attract skilled workers while safeguarding labor rights. The system also offers pathways to permanent residency and dependent visas, making Chile an accessible destination for foreign professionals seeking long-term employment.