This exemption only applies to the payments related to the pension scheme. Health insurance and unemployment insurance have to be paid in Chile

In Chile, foreign workers that have the “technical” quality, as defined by Chilean law, are not required to pay contributions to Social Security.

For this exemption to apply, the law establishes the following rules:

• Workers must be “technical”, at least. “Technical Workers” are defined as those who have knowledge of a certain science or art that can be proven by documents that show professional or specialized studies. Of course, these documents must be legalized and, if necessary, translated by the Foreign Relations Ministry.
• The worker must be affiliated with a foreign Social Security system that covers at least sickness, disability, old age, and death. This can be proven by a certificate from the foreign Social Security institution that the worker belongs to, properly legalized, that shows coverage of this benefits, and can be also applied to workers that are already receiving a pension.
• The employment contract must show the employee’s will to maintain the required affiliation (except for workers already receiving a pension).

The employer has to give notice to the corresponding Chilean Social Security institution via written letter, and the exemption will apply from the date of this notice, and the employer must also be ready at all times to prove to the administration or the corresponding Social Security institution that this exemption applies, by the means listed above.

The employees have also the chance when they leave the country because their work contract has ended, to receive the payments made to the AFP back, and to receive the insurance payment, even if they have resigned.  In this case, they must make an application to the AFP with a copy of the document that proves he or she is a “technical worker”, among other documents.

La entrada Exemption of social security payments for foreigners se publicó primero en Brokering Abogados.

The Chilean labor law must be considered when hiring the staff that will provide their services in Chile.

Employment contract

If a Chilean company hires someone, the labor contract must be written in Spanish. There is no problem with having an English version when the parties are more familiarized with such language. However, the official version will be the Spanish version. 

Ord. No. 1124/29 from the Government Labor Agency (“Dirección del Trabajo”) has established that if not drafted entirely in Spanish, an employment agreement must be drafted at least in Spanish. If there is another language involved, say English, as in a bilingual contract, that contract might be valid only whether one of the following conditions are met:

• The translation has been agreed upon by the appearing parties, or
• The translation has been drafted by a judicial expert.

That means that a two-column English-Spanish version of a work contract can be valid only if there is a provision or clause within clearly stating that it is a free translation and that translation has been agreed upon by both parties. It goes without saying that every contract drafted this way will have to be checked legally before signature and being uploaded to the Dirección del Trabajo website.

In any case, the Spanish version will always prevail if judicially disputed. All content in English will be disregarded.

A company can hire a worker for an indefinite period as a permanent position, for a limited period that cannot exceed the 2 years or for a certain project.

These contracts also contain provisions about allowing the employer to make any kind of deductions of the wages. Article 58 of the Labor Code states which deductions can be made from the salary. If the amount to be deducted is not one of the cases listed in that article, then the maximum amount that can be deducted is 15%. If the employer gave the employee a loan, he can deduct the total amount still due to the compensation.

Employees in Chile are entitled to some part of the profits of the company, the so-called “gratificaciones”. There 2 ways to pay it, either 30% of the company’s profit is distributed among the employees or the employer pays a fixed amount of 25% of the salary with a cap of about USD1,910 per year. The employer is free to choose which system suits him better.

Work contracts as need to contain both the email of the employer as well as the employee, because all notification should be made via email. However, contracts and its modifications can be signed digitally by both parties. Employers are also obliged to upload the work contracts on the platform of the Labor Superintendence https://www.dt.gob.cl/portal/1626/w3-propertyvalue-26863.html

Overtime

In accordance with the Chilean labor law, overtime has to be paid together with the respective salary, e.g. September overtime is paid with the September salary. And between each salary payment, it should not take longer than 30 days (31 days in the respective months).

However, you are not obliged to pay on the last day of the month, e.g. September 30, or the first day of the next month, e.g. or October, 1st.

You can adjust maybe the payment to the 5th or 10th day of the next month and you will have the required time to be able to collect all the information about the extra hours.

cannot be deducted from the compensation the worker is entitled to.

Home office regulation

Chile passed a law about home office to make it easier for employees to work from home during the Covid-19 pandemic.

Holidays

If an employee has taken more holidays than he was entitled to, these holidays cannot be deducted from his compensation. Workers are entitled to take holidays only after they have worked for a year for their employer. The employer may allow them to take holidays during the first year, but he is not obliged to. To take holidays after the first year, workers need employer’s permission (which cannot be unreasonable upheld). Therefore, because the employer allowed the worker to take more holidays than he was entitled to, these days

In case an employee has accrued the right to take holidays of two consecutive years before he accrues the right for the third period he must take at least the holidays he is entitled to for the first year.

The way the untaken days of holidays that are to be paid by the employer if he dismisses someone is calculated as follows:

• 25: 12 = 2.08 (days of holidays for each month worked)
• 2.08: 30 = 0.069 (days of holidays for each day worked)
• For example: 2.08 x 8 months = 17 days
• 0,069 x 18 days= 1.3 days
• Total amount of days = 18.3 days
• The 18.3 days should be counted following the day the employee was fired (from Monday to Friday)
• In addition, the Saturdays, Sundays and other national holidays within the 18.3 days should be included. This will give the total amount to be paid for non-taken holidays

Employee’s privacy

In Chile, no employer can oblige a worker to give private information about his health. An employer can ask for a health certificate stating that the person is capable of performing the duties he will be hired for but cannot ask for details. Regarding emails, the employer has no right to monitor or record the employer’s communications. They can agree that the employee has to send him a copy of every mail sent or inform him about his daily phone or conference calls.

Penalties for employees

Provisions in labor contracts containing penalties to be paid by the employee to the employer are considered illegal. The companies can have some code of conduct and if this code is not upheld by some workers, they can pay a fine, which amount is limited by the law. However, this money is not for the company but for performing actions or buying stuff that will be useful for the whole workers of the companies (e.g. organize a party).

If the company wants to receive some compensation for damages caused by an employee, she has to sue him at a Civil Court. Being that said, it has to be also pointed out that Courts are very reluctant to order workers to pay compensation to companies unless there is a felony or crime involved.

Termination of employment relationship

Another issue to be considered is that the Chilean Labour Code established a list of motives allowing the employer to dismiss an employee. There are some circumstances or actions of the employee that allows the employer to dismiss the worker without paying any compensation (such as not showing to work for a certain period, stealing, etc.). The employer is allowed to dismiss employees for the company’s necessities i.e. company running badly or in need to be restructured (it can also be only the department or position of the worker, e.g. needing someone who speaks a foreign language). In case of CEOs, they can be dismissed without naming any reason, but they are also entitled to severance payment.

Under Chilean law, an employer cannot dismiss an employee if the employee’s social security is not paid in full. If the employee is fired, the employee is entitled to his or her monthly salary until the social security contributions are paid in full. This is a penalty for employers who fail to pay social security contributions on time

Therefore, being a bad worker is not a legal reason to dismiss someone in Chile. In the work contract, certain specifics tasks or behaviors can be included, which if the worker does not fulfill them will allow the employer to dismiss him without any compensation. Such tasks or behaviors should be relevant for the kind of work the employee is performing (e.g. salesperson visiting at least a minimum number of clients per month). Being ill or in bankruptcy are not legal motives to dismiss someone. During illness is usually the health insurance the one paying the salary (there is a limit for high wages).

In the case of resigning as the Director, it is not a legal reason to dismiss a CEO, because usually, the Board of Directors’ duty is to make sure that CEO is doing his job properly, therefore it cannot be a natural task of a CEO to be member of the Board of his own company. This clause can be only applicable if he is the CEO of a holding company and in order to make sure that the subsidiaries are run by their respective CEOs properly he has to be a member of the Board of the subsidiaries.

Usually, foreign contracts contain provisions about being able to dismiss an employee if his ill for a certain period. In Chile in accordance with article 160 of the Labor Code, a worker cannot be dismissed during the period his ill, unless he has committed some of the actions that allow the employer to dismiss him without any compensation.

In Chile, if someone is entitled to receive a compensation for being dismissed the employer has two options, either give him the person a notice and the employee will have to work properly until the period of notice is due or to make the person leave the company right away and pay him the period of notice. What cannot be done under any circumstances is to have someone at the office and not giving him work to perform the duties he is supposed to under his work contract, because the employer will not be performing his duties (i.e. paying the salary and giving work to do) and can be suited for that reason.

In case the worker finds a new job during that period he could resign and not received any compensation. However, he starts a new job even the day after the period of notice is due or he had to leave the company and the period of notice was supposed to be paid, he is fully entitled to his compensation and the salary for the period of notice and no reimbursement or deduction shall be made.

La entrada Some considerations about Chilean Labor Law se publicó primero en Brokering Abogados.

1.- Hiring people

You can bring your technicians from abroad and you can pay them from abroad and they will be eligible for a special working visa. However, if they stay in Chile for longer than 6 months you might end with a permanent establishment in Chile and being subject to taxation in Chile for the services provided.

If you decide to hire someone in Chile, local or foreigners, you will need a branch or form a local company. It is unlikely that you will find someone willing to hire the manpower you need, unless you use special companies formed for that purpose, because if you don’t pay their social security, the manager of the company who hired them will be liable himself for the payment and can even end up in jail for not paying.

2.- Outsourcing: Your obligations towards the Principal

Outsourcing in Chile is allowed but is subject to many regulations. The Chilean law for contractors and subcontractors, that amended the Labor Code, sets forth several principles to secure the contractors and subcontractors employee’s rights.

The law provides that the contractor’s employees the right to sue either his own employer or the owner of the site or both at his own choice for unpaid salary and holidays as well as compensation for dismissal. In accordance to the law, to avoid joint and other liabilities, the owner of the site shall ask the contractor for a form, given by the Labor Direction, that states that all legal obligations related to its employees are paid, including salaries and social security. This will allow him in case of non- payment not to be jointly responsible with the contractor or subcontractor.

3.- Health and safety obligations in the work field

Not only you, but also and, also the owner of the site, the so-called Principal, have to make sure the that the site is a safe workplace.

The law prescribes that a regulation will lay down all the specific requirements that the owner of the site should fulfill.

The Principal has to give the contractors and subcontractors a handbook containing all the safety rules inside the working field and it is entitled to do regular checks to make sure the contractors and subcontractors stick to those rules.

La entrada Outsourcing in Chile se publicó primero en Brokering Abogados.

If the employer fails to do so, he can be liable for the payment and this evasion can be considered a felony.

 Workers in Chile have to pay health insurance and provisions for a retirement pension. They give 7% of their gross income to health insurance and about 12.5% to provisions for a retirement pension.  Health insurance does not only cover medical treatment but also medical leave. If people are sick, the 3 first days are not paid by the health insurance nor by the employer.

Foreign workers are allowed to withdraw the money they paid as provisions for a retirement pension when they leave the country.

Additionally, there is the unemployment insurance that is paid partly by the employer (2.4%) and partly by the employee (0.6%). Part of this money goes to an employee’s private account and the other part to a common solidarity account. To be eligible to receive money from the solidarity account they must fulfill some rules, like registering themselves in a public work center.

The direct cost of the company is to work accidents’ insurance. Usually, the cost is 0.95% of the employee’s salary. This amount may rise if the company has accidents. This payment also entitles de company to receive free of charge advice about health and security at the work place from entities that are in charge of the administration of this insurance.

All these social security payments are done online through a website called www.previred.cl

Employees are entitled to receive part of the benefits of the company. The employer has the right to choose between two systems: either the company shares 30% of the company’s profit among the workers or the company pays them a fixed amount of 25% of their income with a limit of 4.75 minimum wages (that is about U$120 monthly).

La entrada Social security payments and related benefits se publicó primero en Brokering Abogados.