Foreigners settling in Chile for the short or long term, and especially those with business interests here, will likely be affected by the country’s labor laws in significant ways. Those laws may differ from those of your home country, and certain aspects of the law may be problematic for you or your business if you don't understand them and prepare for them properly.
Whether you’re launching a local business, hiring local labor for a foreign company, or working as an employee or contractor for an Chilean company, understanding Chilean labor law and avoiding the most common pitfalls will be crucial to your success.
The purpose of this book is to explain Chile’s labor laws in clear and simple terms, answering every crucial question you might have. We’ll emphasize the most unusual aspects of the law, explaining how they manifest in the workplace, on the employer’s balance sheet, and in the employee’s wallet.
In the chapters that follow, we’ll cover:
- Hiring: process and requirements, including tips for drawing up optimal labor contracts
- Salaries, bonuses, work hours, vacations, and non-work days: regulations, common practices, and important considerations
- Payroll taxes: rates, definitions, and important considerations
- Internships: regulations and common practices
- Unions: their role and important regulations concerning them
- Terminating labor engagements: process and requirements, including severance payments and related penalties employers should anticipate facing
- Other important considerations for employers, including how to calculate the total cost of each employee
This book will lay out many important facts and advice for employees and employers to bear in mind when working or running a business in Chile, but here are some fundamental considerations to help orient you from the beginning:
- By design and in practice, the law heavily favors the worker/employee: The vast majority of the many strict regulations that constitute Chile’s labor laws protect and support the worker.
- It is easier for large companies to circumvent these laws: Chilean labor law is, therefore, most burdensome for small companies.
- When there are labor-related disputes between an employee and an employer, the employee is given the benefit of the doubt, and very often wins. Aggrieved workers, for example, almost always win labor-related disputes.
- Labor is never free: No matter what the contracts or papers say, the employer will always be required to pay at least minimum wage for any work that others do on a regular basis.
- A labor relationship should always be established by a labor contract: While illegal employment is not a big problem in Chile, there are many cases when an employer will sign a boleta de honorarios with an employee, instead of a labor contract. The boleta de honorarios establishes a civil relationship, not a labor relationship; it is only appropriate in certain circumstances, such as for internships. Employees who work under a boleta de honorarios do not receive any labor-related protections. It is essential that employers create and sign labor contracts when they law calls for it, in order to avoid problems with the authorities.
Chilean labor law for private companies is regulated by the Codigo de Trabajo, with articles 1-211 treating the individual labor contract. Some particularly relevant articles include
- 19, which regulates foreign employers
- 159, 160, and 161, which regulate the grounds for termination of a labor contract
- 10, which regulates minimum requirements of any labor contract.
Relevant complementary laws include:
- D. L. 3500, which regulates AFPs (pension funds)
- Ley 18933, which regulates Isapres (health insurance)
- Ley 16744, which regulates professional illness and accidents at work.
The most important labor-related agencies in Chile are the following:
- Ministerio de Trabajo y Prevision Social (Ministry of Labor: www.mintrab.gob.cl)
- SII (Servicio de Impuestos Internos, the Chilean federal tax authority: www.sii.cl)
- Superintendencia de AFP (The governmental regulator of pension funds)