Problems we solve

Services

Solutions

Why CXC

Resources

Connect

Global Hiring Contact us

Let´s talk

OUTLINE

Hiring in Chile

Background checks in Chile

Hiring options in Chile

Language used in Chile

Corporate presence requirements and payroll setup in Chile

Employer of record in Chile

Hiring employees in Chile usually means setting up a local legal entity, which can be expensive and time-consuming. There is a better way: working with an employer of record (EoR) for compliant, secure engagements.

What is an employer of record (EoR)?

An employer of record is an organisation that engages workers on behalf of other organisations. Many businesses use EoR services to hire workers in countries where they don’t yet have a legal presence, since it allows them to do so without setting up a legal entity. As well as compliantly engaging workers, EoR providers may also offer various HR services, including payroll, benefits administration, onboarding, and more. They are also responsible for ensuring local labour laws are adhered to and withholding and paying taxes and social security contributions for each employee.

Using an employer of record in Chile

Working with an employer of record in Chile allows you to securely engage workers there, even if your company does not have a legal presence in the country. This makes it a practical solution for companies that want to enter the market quickly without the hassle and expense of setting up a local branch or subsidiary. An EoR in Chile may also take on various HR tasks on your behalf — leaving you to focus on growing your business.

Hiring in Chile with or without an EoR

Whether or not you choose to engage an employer of record in Chile, it is important to have an understanding of the rules and regulations that apply there. If you choose to hire employees on your own, you will need to understand the rules so you can ensure your operations are compliant. And if you do work with an EoR, understanding at least the basics will enable you to choose the right provider for your organisation and have confidence that they will keep your business safe.

Hiring in Chile

Chile combines a stable, growth‑oriented economy with a well‑educated and tech‑savvy workforce, making it an increasingly attractive destination for international companies. The country offers competitive labour costs, excellent infrastructure, and time‑zone alignment with North America — all of which support smooth nearshoring and regional business operations.

But hiring in Chile also requires a strong understanding of local labour regulations, including mandatory written contracts, evolving working‑hour rules and employer contributions for social security and tax. Read on to find out what you need to know before hiring in Chile.

Labour laws in Chile

Employers in Chile must be aware of certain key pieces of employment legislation, which govern work and employment. These include:

Chilean Labour Code (Código del Trabajo): This key piece of legislation sets the rules around hiring, pay, working hours, overtime, ending employment, mandatory benefits, and union rights. This is the main piece of legislation employers should be aware of when hiring in Chile.
Law No. 21.561 (2023 Working Hours Reform): This law was introduced in 2023 to gradually reduce the standard workweek from 45 hours to 40 hours by April 2028 without impacting pay.
Law No. 16.744 (Workplace Safety & Occupational Accidents): This law mandates employer contributions to occupational accident and health insurance funds and requires larger employers to organise internal safety committees to prevent workplace risks.
Law No. 20.609 (Anti‑Discrimination Law, Ley Zamudio): This piece of legislation protects employees from discrimination on the grounds of race, gender, sexual orientation, disability, religion, or other protected traits, and provides legal remedies for victims of discrimination.

Employment contracts in Chile

Employers hiring in Chile must provide each employee with a written employment contract within 15 days of employment. This must generally be concluded in Spanish, the official language of Chile, and there are rules on the information that must be included. Employers that fail to comply with these requirements could be fined up to 5 monthly tax units (UTM).

Tax and social security obligations in Chile

Employers in Chile are responsible for withholding income tax and social security contributions from their employees’ wages and remitting them to the relevant authorities. These payments amount to roughly 17.6% of salary for employees and 4.24% for employers However, a significant pension reform will gradually increase employer contributions to a total of 8.5% by 2033. Income tax rates are progressive, ranging from 0% to 40% based on income levels.

Working hours in Chile

Full-time working hours in Chile are being gradually reduced from 45 to 40 hours per week. This change is being implemented in phases as follows:

From 26 April 2024: 44 hours.
From 26 April 2026: 42 hours.
From 26 April 2028: 40 hours.

Employees and employers in Chile can agree to distribute these hours over four, five, or six days per week. Overtime is permitted but must be compensated at a higher rate.

Unions and labour organisations in Chile

Workers in Chile have the legal right to form and join trade unions freely. However, union density remains relatively low compared to some other countries. Collective bargaining is permitted under Chilean law but is tightly regulated and restricted to negotiations at the company level. While strikes are allowed, they are subject to limitations. Chile’s largest and most influential labour union is the Workers’ United Center of Chile (CUT).

Background checks in Chile

Employers in Chile may choose to perform background checks on potential employees to determine their suitability for a role and verify information obtained during the recruitment process. However, there are certain limitations on the checks that can be performed — read on for what you need to know.

Required background checks in Chile

There are no mandatory background checks under Chilean labour law. However, employers are strongly advised to ensure foreign nationals have the right to work in the country by checking their visa or work permit.

Other permissible background checks in Chile

Here are some other types of permissible background checks in Chile:

Education history checks: Verifying a candidate’s educational qualifications and credentials is a crucial part of the hiring process for many employers in Chile.
Employment history checks: Similarly, it is common for Chilean employers to confirm employment history and experience to establish suitability for a role.
Reference checks: Employers in Chile may also carry out reference checks to help them understand a potential employee’s past performance and work ethic.
Criminal record checks: Criminal records checks are permitted in Chile in certain sensitive sectors, including financial services, healthcare, and education.
Drug tests: Drug tests may also be permissible for some roles, although they are not common for most jobs.
Credit history checks: Checking a candidate’s financial history is generally only permitted in Chile if it is relevant to the role (e.g. for roles involving management of company finances).
Social media screening: Screening candidates’ social media profiles is becoming increasingly common in Chile. However, employers should be careful not to violate the candidate’s right to privacy if they choose to run this type of background check.

Limitations on background checks in Chile

Employers must obtain explicit consent from candidates before performing any type of background check in Chile and must only collect information that is directly relevant to the role in question. Employers must also follow the rules on personal data processing, which view health, political beliefs, union membership, pregnancy, financial status, and other personal characteristics as sensitive data requiring explicit authorisation or legal basis.

Hiring options in Chile

Before hiring employees in Chile, it’s important to consider whether this is the right option for your organisation. For example, if you only need a worker for a short period, engaging an independent contractor could be a better option — but you’ll need to ensure you don’t fall foul of worker classification laws. Read on to learn what you need to know about the different hiring options available in Chile.

Main hiring options in Chile

Here are the main engagement options for employers wanting to hire in Chile:

Employee: An employee is engaged by an employer through an employment contract. Employees in Chile can be hired on an indefinite, fixed-term (up to 12 months), or task-specific basis. They may work full-time or part-time (up to 30 hours per week). Fixed-term contracts can be extended to 24 months in limited cases. However, this this is rarely used in practice.
Independent contractor: Independent contractors are self-employed professionals not subject to the direct control or subordination of the hiring company. They are responsible for declaring and paying their own taxes and social security contributions. Employers should be careful to avoid misclassifying workers as independent contractors when they are really employees, as this can carry serious consequences.
Agency worker: Agency workers are workers who are employed by a personnel supply company (temporary work agency) to perform services for a third party. In Chile, employers may only use temporary agency workers to cover temporary needs, such as filling in for an absent employee. The agency is responsible for employment obligations, but the host company may be held jointly liable if these are not met.

Employee misclassification risks in Chile

Businesses hiring in Chile must take care to properly classify their workers, or they could face legal consequences like labour court fines and penalties, retroactive taxes, benefits and social security contributions, and even legal action. Misclassification of workers can also seriously damage a company’s reputation since it looks like an attempt to avoid granting workers mandatory rights and benefits.

Chilean labour law does not provide a precise definition of an independent contractor vs. an employee. However, the courts have established certain key characteristics that are usually considered in misclassification cases, including:

Work agreements: Employees are engaged through employment contracts, while independent contractors operate under civil or commercial contracts.
Degree of control: Employees are subject to employer control over how, when and where work is performed, whereas contractors retain autonomy over these aspects.
Taxes: Employees have tax and social security withheld and remitted by the employer. Independent contractors are responsible for their own tax filings and social security contributions.
Benefits and protections: Employees are entitled to statutory benefits like paid leave, severance, and notice periods under the Labour Code. Contractors do not have access to these rights.
Right to substitution: Independent contractors can subcontract or delegate work. Employees, on the other hand, are expected to deliver services personally and cannot appoint substitutes.

Language used in Chile

The main language used in Chile is Spanish — specifically Chilean Spanish. It’s spoken by over 99% of the population, and is the country’s official language for government, education, business and daily life. There are also several indigenous languages in Chile, including Aymara, Kawésqar, Mapudungun, Quechua, and Rapa Nui. Foreign languages spoken in Chile include English, German, French, Italian, and Portuguese.

Language requirements for employment documents in Chile

All employment contracts and mandatory workplace notices issued to employees in Chile must be drafted in Spanish. Bilingual documents are permissible, but the Spanish version is usually the only legally binding one in case of disputes.

English language in Chile

English is the most widely taught foreign language in schools in Chile, which means it is spoken by a reasonably large percentage of the population. According to EF’s English Proficiency Index, Chile ranks 47th in the world and 8th in Latin America, representing moderate proficiency. English is more likely to be spoken in large cities such as Santiago and Valparaiso.

Corporate presence requirements and payroll setup in Chile

A foreign company can employ workers in Chile without setting up a legal entity. However, they must appoint a representative in Chile to act on their behalf in case of any review by the labour and social security authorities. Alternatively, an employer could choose to work with a partner like an employer of record (EoR), which employs workers on behalf of the foreign business.

Steps to set up payroll in Chile

If you would like to set up your own legal entity and manage payroll in Chile yourself, here are the basic steps you will need to follow:

Establish a legal presence: New businesses in Chile must register a local company via the Public Commerce Registry and publish their incorporation in the Official Journal (Diario Oficial). They must then complete the Inicio de Actividades process with the Servicio de Impuestos Internos (SII) to obtain a business RUT (tax ID).
Complete payroll and social security registrations: Next, you will need to set up accounts with the SII for tax obligations, register on PreviRed for pension and health contributions. You will also have to sign up with the Unemployment Funds Administrator (AFC) and a Mutual de Seguridad provider for accident insurance, and secure disability/survivor insurance (SIS) for your workforce.
Register employees with the labour authorities: Each new employee must be registered with the Dirección del Trabajo within 60 days of hiring. Employers must also register employees who leave their company within the same timeframe.
Process monthly payroll: Each month, employers in Chile must calculate gross wages, deduct employee social security (AFP, health, unemployment), apply income tax withholding, calculate and pay employer-side contributions (unemployment, SIS, mutual insurance), and file declarations via SII and relevant social security platforms like PreviRed and AFC.
Pay wages and issue payslips: Employers must pay wages at the end of each month and issue employees with a payslip showing itemised deductions and net pay.

Do you need a local bank account to run payroll in Chile?

Yes, opening a local bank account is necessary to make payments to the tax authorities and to pay salaries to employees. Salaries must be paid in Chilean pesos (CLP). Employees themselves must also have a local bank account to receive wages.

Easily hire employees in Chile with our EoR solution

Hiring employees in Chile usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.

Through our EoR solution, you can confidently hire employees in Chile, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.

Read about EoR services

Compliantly hire employees anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

Our EoR solution

DISCLAIMER: The information contained on this website is provided for general informational purposes only and should not be construed as legal, tax, or other professional advice on any subject matter. While we endeavor to ensure that the content is accurate and up to date, we make no warranties or representations of any kind regarding the completeness, accuracy, reliability, suitability, or availability of the information contained herein. The content on this site is not intended to be a substitute for professional advice. Users should not act or refrain from acting based on any information on this website without seeking the appropriate legal, tax, or other professional advice tailored to their specific circumstances from qualified professionals. We expressly disclaim all liability in respect to actions taken or not taken based on any or all of the contents of this website. Use of the information on this site does not create an attorney-client, tax advisor-client, or any other professional-client relationship between the user and the website or its authors.

BLOG

Helping businesess to compliantly engage talent since 1992