Written by León Lanis V., Paralegal
Chile has triggered an economic reactivation plan with the goal of recovering the 2.16 million lost jobs during the Covid-19 pandemic. We have already noticed the positive effects of this plan, with many international companies interested in hiring new employees in Chile. With this in mind, it is important for any company looking to hire in Chile to pay close attention to the highly regulated Chilean employment relationships, and in particular remember that the jurisdiction as a whole favours employees’ rights and union rights. In today’s post, we outlay what we think are the 6 key things to consider when hiring in Chile.
- Social Security Contributions: Chile does not have a social security system in the traditional sense of the concept. The AFP (Pension Fund Management) system was established as the main pension system in 1980. Under this system, private financial institutions manage each individual pension saving account fund. It is an obligation of the employer to give the AFP (of each employee) a 10% of their monthly salary, where each employee is free to choose which AFP and which portfolio is more convenient for them. This money will be invested by the AFP to give an annual profit for the worker, and can only be accessed by the employee upon retirement (65 years for men, 60 years for women). Failing to pay the 10% each month of each employee results in fines for the employer and opens the employer to risk of potential legal action.
- Accident insurance: By law, the employer must pay for the accident insurance of every worker, which must be tailored to the dangers related to the employees activities. This is financed by two different employer contributions:
- Basic contributions of 0.90% of taxable remunerations;
- Additional contributions calculated according to the risk present in the workers activities, which may not exceed the 3.4% of taxable wages;
- Unemployment insurance: Chilean law seeks to protect as much as possible any unemployed person. Under this principle, the Labour Code establishes that all employers must discount 3% off the monthly wages of any employee with an indefinite-term contract to go towards an unemployment insurance fund.
- Remote working: The Covid-19 pandemic changed many jobs, particularly in regards to remote working. In 2021 Chilean legislators sought to protect workers and employers with a law that modified the Labour Code in case of a “state of emergency”. Under this law, the employer and employee must modify the contract by establishing the rules of remote working and notifying such changes to the Governmental Labour Agency. The same requirement applies to where the employer and employee agree for the employee to work remotely for other reasons. In addition, the law also establishes that the employer must offer remote work options in instances where the employee is deemed a patient of risk or is a caregiver of children.
- Age consideration: In Chile, you cannot hire anyone below the age of 18. The only exception to that rule is someone not younger than 15 with written and signed permission from their parents and put to labours that are not detrimental to their natural development.
- Foreign employees in Chile: For companies looking to bring foreign employees to work in Chile, there are certain things to have in consideration:
- The foreign employees must have a temporary working visa or a work permit for tourists;
- 85% of your company must have people born in Chile or with Chilean citizenship.
The re-activation of the economy will bring many foreign investors looking forward to start, renew or continue with their businesses in Chile. While it is important to comply with all the laws related to their business, it should be remembered that Chile has a very well-developed labour code that should not be overlooked. If you need employment law advice in Chile, get in touch with our experienced team of employment lawyers today.
Harris Gomez Group opened its doors in 1997 as an Australian legal and commercial firm. In 2001, we expanded our practice to the international market with the establishment of our office in Santiago, Chile. This international expansion meant we could provide an essential bridge for Australian companies with interests and activities in Latin America, and in so doing, became the first Australian law firm with an office in Latin America.
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