A brief guide to Chile’s labour laws A brief guide to Chile’s labour laws

A brief guide to Chile’s labour laws
16 Nov 2017

Chile is now one of the top countries with which to do business in Latin America, which means that having local knowledge and some insight into local regulations is crucial for any business looking to operate in the country.

Social security system

Chile’s social security system consists of:

• A pension fund: Every employee must be affiliated to a Pension Fund Administrator (AFP) of their choice. Contributions to the AFP should comprise a:

o Contribution to the Survival and Disability Insurance fund of 1.41%, which is covered by the employer;
o Contribution to the Individual Savings Insurance of 10%, which is paid by the employee;
o A commission payment of between 0.41% and 1.54%, which is charged to each employee.

• Health insurance: This is paid to either the state’s National Health Fund (FONASA) or a private Health Insurance Institution (ISAPRE) in line with each employee’s wishes. The minimum legal contribution is 7% of their housing rental costs;
• Labour-related Accident Insurance: The figure here amounts to between 0.95% and 3.4% of an employee’s salary, depending on how risky their employment activity is considered to be. Employers cover the sum in its entirety;
• Unemployment Insurance: This is the equivalent of 2.4% to 3% of an employee’s salary and is paid to the Unemployment Fund Administrator (AFC). Employers are required to make the payment, although employees may be required to pay an additional 0.6% in some instances.

Hiring and firing

Work contracts must consist of written documents. The Chilean Labour Code allows employers to terminate an employee’s contract based on the organisation’s requirements, but:

o The termination notice must be delivered to the employee 30 days in advance of their leave date either personally or by certified mail. A copy of this notice must also be sent to an appropriate labour inspector;

o Employers may choose to pay employees 30 days salary in lieu of prior notice.

Foreign personnel

The Chilean Labour Code states that, in the case of companies with more than 25 employees, at least 85% must be of Chilean nationality. Exceptions to these rules include if:

o Technical personnel are not available for employment locally;
o Foreigners are married to a Chilean national;
o Foreigners have resided in Chile for more than five years.

As Chile does not issue business visas, potential foreign investors must enter the country under a “tourist” visa and may stay there for up to 90 days.

“The Chilean Labour Code states that, in the case of companies with more than 25 employees, at least 85% must be of Chilean nationality.”

Temporary visas

Visas may be granted to people with proven family ties to Chilean nationals, or if they have interests in the country and their presence is deemed useful. Such visas are issued for a maximum period of one year, but are renewable for up to two years, after which time the individual concerned must apply for a Definite Permanence visa or leave the country. Temporary Visas are assigned to:

o Investors and traders;
o Professionals and senior technicians;
o Employees subject to contract.

It should be noted that applicants from countries in the MERCOSUR trade bloc – Argentina, Brazil, Paraquay, Uraquay and Venezuela - must have no criminal record.

Paid leave

• An employee who has worked for more than a year is entitled to annual paid leave of 15 working days (20 in some regions);
• Every employee that has worked for 10 years or more (continuous or not) for one or more companies is entitled to an additional working day for every three years of work.

Payroll cycles

• Payroll cycles can be set to run daily, weekly, monthly or on piece rate terms as long as they operate no more than monthly;
• The national minimum wage as of 1 July 2017 is 270,000 pesos (US$424) per month for workers aged between 18 and 65 years, but different rates apply for those over the age of 65 and under 18 years;
• Employees who work overtime must receive an additional payment, corresponding to a minimum of 50% of their hourly wage.

HR legislation

• The Chilean Labour Code regulates, among other things, the different types of work contracts, employment regulations, terms and conditions of employment for foreign employees, terms of remuneration and mandatory social security contributions;
• The Work and Social Prevention Ministry (MTPS) is in charge of enforcing any additional labour regulations.

 

Paula Becerra has worked for TMF Chile for 14 years, initially starting as a trainee and later building the internal payroll processing team. She is now payroll manager, looking after 120+ clients that include large banks, energy and telecoms companies. Paula previously worked for Langton Clarke, Arthur Andersen, EY and Acttitude Ltda.

Chile is now one of the top countries with which to do business in Latin America, which means that having local knowledge and some insight into local regulations is crucial for any business looking to operate in the country.

Social security system

Chile’s social security system consists of:

• A pension fund: Every employee must be affiliated to a Pension Fund Administrator (AFP) of their choice. Contributions to the AFP should comprise a:

o Contribution to the Survival and Disability Insurance fund of 1.41%, which is covered by the employer;
o Contribution to the Individual Savings Insurance of 10%, which is paid by the employee;
o A commission payment of between 0.41% and 1.54%, which is charged to each employee.

• Health insurance: This is paid to either the state’s National Health Fund (FONASA) or a private Health Insurance Institution (ISAPRE) in line with each employee’s wishes. The minimum legal contribution is 7% of their housing rental costs;
• Labour-related Accident Insurance: The figure here amounts to between 0.95% and 3.4% of an employee’s salary, depending on how risky their employment activity is considered to be. Employers cover the sum in its entirety;
• Unemployment Insurance: This is the equivalent of 2.4% to 3% of an employee’s salary and is paid to the Unemployment Fund Administrator (AFC). Employers are required to make the payment, although employees may be required to pay an additional 0.6% in some instances.

Hiring and firing

Work contracts must consist of written documents. The Chilean Labour Code allows employers to terminate an employee’s contract based on the organisation’s requirements, but:

o The termination notice must be delivered to the employee 30 days in advance of their leave date either personally or by certified mail. A copy of this notice must also be sent to an appropriate labour inspector;

o Employers may choose to pay employees 30 days salary in lieu of prior notice.

Foreign personnel

The Chilean Labour Code states that, in the case of companies with more than 25 employees, at least 85% must be of Chilean nationality. Exceptions to these rules include if:

o Technical personnel are not available for employment locally;
o Foreigners are married to a Chilean national;
o Foreigners have resided in Chile for more than five years.

As Chile does not issue business visas, potential foreign investors must enter the country under a “tourist” visa and may stay there for up to 90 days.

“The Chilean Labour Code states that, in the case of companies with more than 25 employees, at least 85% must be of Chilean nationality.”

Temporary visas

Visas may be granted to people with proven family ties to Chilean nationals, or if they have interests in the country and their presence is deemed useful. Such visas are issued for a maximum period of one year, but are renewable for up to two years, after which time the individual concerned must apply for a Definite Permanence visa or leave the country. Temporary Visas are assigned to:

o Investors and traders;
o Professionals and senior technicians;
o Employees subject to contract.

It should be noted that applicants from countries in the MERCOSUR trade bloc – Argentina, Brazil, Paraquay, Uraquay and Venezuela - must have no criminal record.

Paid leave

• An employee who has worked for more than a year is entitled to annual paid leave of 15 working days (20 in some regions);
• Every employee that has worked for 10 years or more (continuous or not) for one or more companies is entitled to an additional working day for every three years of work.

Payroll cycles

• Payroll cycles can be set to run daily, weekly, monthly or on piece rate terms as long as they operate no more than monthly;
• The national minimum wage as of 1 July 2017 is 270,000 pesos (US$424) per month for workers aged between 18 and 65 years, but different rates apply for those over the age of 65 and under 18 years;
• Employees who work overtime must receive an additional payment, corresponding to a minimum of 50% of their hourly wage.

HR legislation

• The Chilean Labour Code regulates, among other things, the different types of work contracts, employment regulations, terms and conditions of employment for foreign employees, terms of remuneration and mandatory social security contributions;
• The Work and Social Prevention Ministry (MTPS) is in charge of enforcing any additional labour regulations.

 

Paula Becerra has worked for TMF Chile for 14 years, initially starting as a trainee and later building the internal payroll processing team. She is now payroll manager, looking after 120+ clients that include large banks, energy and telecoms companies. Paula previously worked for Langton Clarke, Arthur Andersen, EY and Acttitude Ltda.