The Importance of PEO’s or Human Resource Agencies in Chile
One of the most stable economies in Latin America is the Chilean economy. It is the world’s leading producer of copper. It exports minerals, wood, fruits seafood and wine. These contribute immensely to the continued GDP growth of the country. Due to this, a good number of companies are using the services of human resource agencies in Chile. The following points are some facts about the country:
- According to the ‘’Doing Business ‘’ report conducted by the world bank, Chile is ranked 5
- 25% of the annual remuneration and 30% of annual net profits, Chilean employers must share the profits with their employees
- Many multinational companies are Chile-based
- Foreign trade dominates over the country’s economy
- One of the pillars of the Chilean economy is the mining sector and the government. It strongly upholds foreign investment in this sector. It has modified its mining industry laws and regulations to create a favourable investment environment for foreigners
Ranked as a high-income economy by the World Bank, it is considered as South America’ most stable nation, it leads the continent competitively, income per capita, globalization, economic freedom and low corruption rate.
It is of utmost importance to know the different ways to hire local staff, before opening a company in Chile.
Hiring Staff in Chile
Complying with local labour laws is vital when establishing a business abroad. The following are the most important Chilean Labor Law:
- Employment Contracts: It has to be in the written format and completed within the next 15 days from the start of service
- Fixed-Terms Contracts: They have a maximum duration of 1 year. This prevents extensions to two years for managers or individuals who have obtained a professional or technical degree delivered by a state-recognized institution.
- Foreign Workers: As stated by the Labor Code, at least 85% of the workers who work for the same employers must be Chilean nationals.
- Committees: There are two committees as stated by the legislation. The first committee concern health and safety. It takes care of identifying and assessing the risks of accidents and occupational diseases whenever there are over 25 workers. The second is a bipartite committee. It promotes the training of employees in companies with over 15 workers.
- Unions: workers have the right to form labour unions that represent them before the company. There are different types of unions like a company labour union, intercompany labour unions, temporary labour unions recognized by the Chilean law.
- Termination: the company has to send an information letter to the employee one month in advance so as to notify the concerned about the labour contract termination unless the employer will pay a compensation equivalent to 30 days of work.
Employee Benefits in Chile
The following employee benefits are important:
- Working Hours: The Labor Code states the number of working hours per week are 45, distributed between 5 and 6 days. This term excludes managers, employees with the power to manage and employees without direct control exercising from home or other location than the workplace from the above limits. Moreover, ordinary work per day cannot exceed 10 hours, with 2 hours of overtime allowed.
- Overtime: Those not excluded from the working hours in the previous point, are overtime pay entitlement. Calculated as one-and-a-half times the normal hourly salary.
- Annual Vacation: You have 15 days of holidays each year. It is increased by 1 day every 3 years I employment with the same employer after the first 10 years of work for one or different employers.
- Sick Leave: A sick worker does not have a limited number of days. A sick worker has the right to sick leave days according to a doctor’s order. In addition, the respective health institution pays an amount equal to their salary which they receive during this period.
- Maternity Leave: Female employees have the right to a paid maternity leave starting from six weeks before delivering to twelve weeks after haven given birth.
- Probationary Period: the code does not indicate a probationary period.
Since it is difficult for foreign investors to understand the local employment law, however in Chile a Professional Employer Organization (PEO) simplifies the recruitment process easier.
Getting Acquainted with PEO / Employer of Record?
A PEO also called ‘employer of record’, is a company that recruits workers legally on behalf of companies who do not have an establishment in a certain Country. Therefore, the PEO takes care of all human resource related functions.
Moreover, PEOs collaborate with companies and provide them with complete HR solutions. They work by sharing many various responsibilities with the company.
For example, a Canadian company wants a bi-lingual Chilean IT consultant for their job offer. Therefore, to avoid so many administrative processes, they can get a Chilean PEO to help hire an individual with all the requirements.
Benefits of Using a PEO in Chile
- They minimize your risks of infringing the local law
- Low amounts of administrative HR work
- Another advantage is being able to have HR services without necessarily adding personnel
- Your recruitment is faster, in line with Chilean law, and you do not have to open and maintain a local Chilean agency
You only benefit through a PEO when opening a business in Chile. This allows you to start commercial activities in the first phase of expansion in the region. Companies usually decide to open a local entity once they have a good mastery of the local market.
Do You Need the Services of an Employer of Record in Chile?
Chile has the best-qualified economies in South-America and looked upon as an emerging economy. It is due to its constant economic growth and social progress, coupled with the government’s desire to attract Foreign Direct Investments. A PEO will enable you to have control over your employees, while the PEO takes responsibilities of all risks mitigation, compliance, payroll and employee benefits.
Fill free to write to our Country Manager, Allan at Chile Office to have more information on how we can assist you in your recruitment process in Chile.
If interested in entering the Latin America market or in need of support? Click this link to find out how we can help you.