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Decrypting Chile's Labor Environment

Author:TMF Group
Profession:TMF Group

With a mixture of emerging and booming economies, political uncertainty and extreme contrasts in business customs, the Americas can never be categorized as one homogeneous whole.

Chile has significantly improved its complexity ranking since last year, strengthening its position as one of the top countries to do business in Latin America and the world. Still, having local knowledge is crucial for any business looking to operate in the country. Here we take a look at how HR & Payroll works in Chile.

Social Security System

Social Security System in Chile comprises:

Pension Fund: every employee must be affiliated to the Pension Fund Administrator (AFP) of choice. The Pension Fund Administrator contribution consists of: Contribution to Survival and Disability Insurance: 1.41%, covered by the employer Contribution to Individual Saving Insurance: 10%, covered by the employee A commission of between 0.41 and 1.54% charged to each affiliate Health Insurance: paid to either to the state National Health Fund (FONASA), or to a private Health Insurance Institution (ISAPRE), as per the employee's choice. The minimum legal contribution is 7%. Labor-related Accident Insurance: This is 0.95% to 3.4% of employee's salary depending on the risk of the employment activity. Unemployment Insurance: 2.4 to 3% of the employee's salary paid to the Unemployment Fund Administrator (AFC). Hiring/Retrenchment Issues

The work contract must be written. The Chilean Labor Code allows the employer to terminate an employee's contract, based on the organisation's needs. The termination notice must be delivered to the employee 30 days in advance and personally or by certified mail. A copy of such notice must be sent to the appropriate labour inspector. The employer may choose to pay the employee 30 days salary, in lieu of such prior notice. Foreign Personnel

The Chilean Labor Code states at least 85% of a company's employees must be of Chilean nationality (on companies with more than 25 employees). Exceptions to this rules: Technical personnel not available locally Foreigners married to a Chilean Foreigners who have been residing in Chile for more than five years Chile does not issue business visas, therefore, potential foreign investors must enter to the country under a "tourist" condition and may stay in the country for up to 90 days ("tourist visa" required for certain nationalities). Temporary Visas

Visas could...

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