In our experience, when assisting foreign clients who are in the process of hiring employees, certain questions and recurring situations seem to arise which often slow the negotiating and signing of the employment contract.
In line with the above, we have developed some key points to bear in mind while undergoing the negotiation process of hiring a Chilean employee:
The common practice in Chile is to talk about monthly salaries according to the net worth and not the gross amount.
- In Australia, and other countries, the common practice is to negotiate gross monthly salaries, when this is not made clear; it frequently results in a minor set back since Chileans typically negotiate according to their net amount.
Chilean Law provides that a mandatory annual bonus be given by the Employer to each Employee.
- This mandatory bonus sums up to 4.75 minimum Chilean wages that is currently equal to approximately $1,700.00 USD[1].
- It is important to bear in mind that this bonus is to be paid on a monthly basis (yes, an annual bonus that is paid monthly), meaning that the Employee will receive about $142.00 USD each month in addition with his/her salary.
- If the company does not wish to pay this amount, what we generally advise is for the aforementioned sum to be deducted from the Employee’s salary thus adding up to the original negotiated amount (i.e. If the Employee is to receive a salary of $5000.00 USD, the monthly salary indicated in the contract will be of $4858.00 USD, which, in addition to the annual bonus, will add up to a total of $5000 USD).
Chilean Law does not allow for Employees to be hired for a probation period.
- The majority of our clients ask for the employment contract to provide that the employment will be subject to a probation period of “x” months. This is not possible under Chilean law since the our labour law only considers strict causes for terminating an employment contract and not having a satisfactory performance during a probation period is not one of them. What we advise on this specific point is to hire the future employee for a fixed time period (as much as the client sees fit but no more than 12 months). Once the contract expiration date arrives, the company may decide to renew his/her employment contract to an indefinite basis or, to not rehire the employee.
We hope that these points have been useful and helpful for your future employment dealings and negotiations. There are more entries in which we will address other “every day” situations and the best way to deal with them.
[1] The amounts will be expressed in United States Dollars and not Chilean pesos for better understanding purposes.
Written by Jorge Tuane
Jorge is a corporate and commercial lawyer that specialises in employment law. Jorge advises clients on business and legal structures, and is able to provide cost-effective solutions to matters including relationships with public entities, negotiation of contracts and corporate governance.
