Hire in Chile with Confidence
Our workforce compliance guide to Chile covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Chile.
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Our workforce compliance guide to Chile covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Chile.
Worksuite offers a whole range of professional services and compliance tools, making it easy to compliantly engage independent contractors in Chile.
We work with the best legal partners in Chile to create contract templates that are compliant with local laws to protect you and your contractors from fines and penalties.
Our bespoke onboarding workflows and screening questioners will help you determine the worker status in compliance with Chilean law, based on which you can decide to engage a worker as a contractor or full-time worker—all without needing to set up your business entity.
Any business hiring in Chile should understand the important legal distinction between who classifies as an independent contractor and who can be hired as an employee. Fines or penalties may be issued to businesses hiring independent contractors under the guise of employment.
Understanding the distinctions between employees (empleado) and independent contractors (contratista independiente) is critical to compliantly engaging workers in Chile. It is important to work with a partner like Worksuite to ensure you put in place an engagement framework that accurately classifies freelancers as independent contractors for you and lets you know when freelance talent must be engaged as an independent contractor (and therefore governed by the Civil Code) or employed directly (and therefore governed by the Labour Code and other employment laws).
This is critical to compliantly engaging workers in Chile and thereby avoiding severe legal, financial, and other penalties.
Employment laws include:
Beyond the Civil Code, the hiring of independent contractors is not regulated by any specific employment laws.
Hiring practices are similar to many other countries. Hiring companies will typically advertise online using job boards. Candidates will typically submit a CV (which may include a photo) and a cover letter. Hiring steps include one or more rounds of interviews and, if necessary, assessments. Employers issue successful candidates with an offer letter, after which the employment contract is signed.
Minimum provisions to be contained in the contract include:
It is generally illegal to require an economic background check, pregnancy certificate, or HIV check. Laws also prohibit discrimination on the basis of certain protected characteristics, including race, gender, language, religion, sexual orientation, or union affiliation.
Independent contractors can be hired directly or via an intermediary, such as a staffing agency or umbrella company. Independent contractors may be found via word of mouth, job boards, social networks, industry bodies, or other forums. Although the hiring practices vary, the independent contractor may be asked to provide a CV, portfolio, and references and possibly sign an NDA.
The four most common categories of an independent contractor are:
Employees do not typically need to file their own income tax returns unless they work for more than one employer.
Independent contractors operating on a self-employed basis (see below) pay personal income tax, ranging from 4% to 35.5%. Contractors operating as an incorporated business typically pay First Category Tax (FCT). This ranges from 25% (from 2023 onwards) for SMEs up to 27% for entities operating on the Partially Integrated System (PIS).
Income taxes are filed electronically with the internal revenue service (Servicio de Impuestos Internos, or SII) by the 15th of each month. Final taxes are filed and paid on an annual basis by 30 April following the tax year.
Most independent contractors are also required to pay social security contributions via a Pension Fund Administrator (AFP). Exemptions include women over 50 and men over 55, and self-employed workers who have a total disability or old-age pension.
Contractors operating as an incorporated business are subject to the standard 19% VAT rate, which is paid monthly. Contractors who are self-employed do not pay VAT.
The tax year aligns with the calendar year (1 January to 31 December). The currency is the Chilean Peso (CLP) (CLP 1 = USD 0.0011).
Employees’ income tax is deducted from their salary at source. The personal income tax rate is progressive and applies to total annual worldwide income.
The tax rate on global income (Global Complimentary Tax, or GCT) ranges from 4% (for incomes between USD 11,368 to USD 25,262) to 35.5% (for incomes of USD 101,050 and above).
Chile has a privatised and compulsory social security system called Sistema de Capitalización Individual. Employees pay a 20% social security contribution. Unemployment insurance is 3% (0.6% contribution from the employee and 2.4% from the employer).
Contractors operating on a self-employed basis may be subject to a mandatory social security contribution of 10% of their gross annual earnings (as part of personal income tax payments) if their annual gross income is more than the equivalent of five minimum monthly incomes. This contribution must be deducted, paid, and reported through Previred online portal. Apart from that, they are also responsible for reporting and paying their annual personal income tax.
Payer’s Withholding / Reporting Requirements for Independent Contractors:
N/A
Employees are typically paid via cash, cheque, or bank transfer. Under the Chilean Labor Code, profit-making companies must distribute at least 30% of net profits to employees in proportion to each employee’s salary; this is paid via an annual bonus to each employee.
Independent contractors are paid according to a schedule defined within the contract.
Workers’ rights include:
There are no statutory workers’ rights for independent contractors.
Employee benefits include:
Beyond social security, which is the contractor’s responsibility, additional independent contractors’ benefits may be stipulated in the contract.
Employees are paid on a monthly basis, typically in arrears on/before the last working day, unless otherwise stipulated in the employment contract.
Independent contractors send an invoice (or another form of payment request) and typically require payment within 14 days or 28 days of submission unless otherwise stipulated in the contract. Independent contractors are not paid by payroll in most cases.
Employment laws include:
Hiring practices are similar to many other countries. Hiring companies will typically advertise online using job boards. Candidates will typically submit a CV (which may include a photo) and a cover letter. Hiring steps include one or more rounds of interviews and, if necessary, assessments. Employers issue successful candidates with an offer letter, after which the employment contract is signed.
Minimum provisions to be contained in the contract include:
It is generally illegal to require an economic background check, pregnancy certificate, or HIV check. Laws also prohibit discrimination on the basis of certain protected characteristics, including race, gender, language, religion, sexual orientation, or union affiliation.
Employees do not typically need to file their own income tax returns unless they work for more than one employer.
The tax year aligns with the calendar year (1 January to 31 December). The currency is the Chilean Peso (CLP) (CLP 1 = USD 0.0011).
Employees’ income tax is deducted from their salary at source. The personal income tax rate is progressive and applies to total annual worldwide income.
The tax rate on global income (Global Complimentary Tax, or GCT) ranges from 4% (for incomes between USD 11,368 to USD 25,262) to 35.5% (for incomes of USD 101,050 and above).
Chile has a privatised and compulsory social security system called Sistema de Capitalización Individual. Employees pay a 20% social security contribution. Unemployment insurance is 3% (0.6% contribution from the employee and 2.4% from the employer).
Employees are typically paid via cash, cheque, or bank transfer. Under the Chilean Labor Code, profit-making companies must distribute at least 30% of net profits to employees in proportion to each employee’s salary; this is paid via an annual bonus to each employee.
Workers’ rights include:
Employee benefits include:
Employees are paid on a monthly basis, typically in arrears on/before the last working day, unless otherwise stipulated in the employment contract.
Beyond the Civil Code, the hiring of independent contractors is not regulated by any specific employment laws.
Independent contractors can be hired directly or via an intermediary, such as a staffing agency or umbrella company. Independent contractors may be found via word of mouth, job boards, social networks, industry bodies, or other forums. Although the hiring practices vary, the independent contractor may be asked to provide a CV, portfolio, and references and possibly sign an NDA.
The four most common categories of an independent contractor are:
Independent contractors operating on a self-employed basis (see below) pay personal income tax, ranging from 4% to 35.5%. Contractors operating as an incorporated business typically pay First Category Tax (FCT). This ranges from 25% (from 2023 onwards) for SMEs up to 27% for entities operating on the Partially Integrated System (PIS).
Income taxes are filed electronically with the internal revenue service (Servicio de Impuestos Internos, or SII) by the 15th of each month. Final taxes are filed and paid on an annual basis by 30 April following the tax year.
Most independent contractors are also required to pay social security contributions via a Pension Fund Administrator (AFP). Exemptions include women over 50 and men over 55, and self-employed workers who have a total disability or old-age pension.
Contractors operating as an incorporated business are subject to the standard 19% VAT rate, which is paid monthly. Contractors who are self-employed do not pay VAT.
Contractors operating on a self-employed basis may be subject to a mandatory social security contribution of 10% of their gross annual earnings (as part of personal income tax payments) if their annual gross income is more than the equivalent of five minimum monthly incomes. This contribution must be deducted, paid, and reported through Previred online portal. Apart from that, they are also responsible for reporting and paying their annual personal income tax.
Payer’s Withholding / Reporting Requirements for Independent Contractors:
N/A
Independent contractors are paid according to a schedule defined within the contract.
There are no statutory workers’ rights for independent contractors.
Beyond social security, which is the contractor’s responsibility, additional independent contractors’ benefits may be stipulated in the contract.
Independent contractors send an invoice (or another form of payment request) and typically require payment within 14 days or 28 days of submission unless otherwise stipulated in the contract. Independent contractors are not paid by payroll in most cases.
The key criteria in determining whether an individual is effectively working as an employee versus an independent contractor include the degree of control that the hiring company or client has over the individual. If the real substance of the company-contractor relationship proves to effectively be an employment relationship, the hiring company may suffer legal and financial penalties, including paying a fine along with any overdue payroll taxes. It is therefore important to leverage an employment service partner like Worksuite when hiring in Chile to ensure that independent contractors fall under the correct working relationship with your business.
Who is an Independent Contractor?
The key determinant of someone being an independent contractor rather than an employee is the level of control they work under. This includes considering the hiring company’s ability to make certain decisions on the individual’s behalf (such as their level of compensation), the authority to directly issue instructions to the individual, and the ability to legally enforce authority over them. However, in reality, a variety of factors are considered. In general, an individual will be considered an independent contractor if they:
There are four main categories under which independent contractors typically operate in Chile.
There are two main types of contracting model for working with independent contractors in Chile.
A. Direct engagement of the contractor as self-employed or via their own company. Under this model, the hiring company engages directly with the independent contractor – as a sole proprietor, partnership, or company (see above) – and establishes a direct contract for the provision of services. The hiring company then pays the independent contractor directly, following the terms of the contract.
B. Third party. These companies come in two forms, and both are specially designed to vet and engage freelancers compliantly as either contract employees or independent contractors on your behalf.
Companies hiring independent contractors in Chile should avoid making payments directly through their payroll system. Beyond these guidelines, there are no specific legal requirements related to paying contractors in Chile. The contract should stipulate the preferred payment method agreed upon by both parties.
The tax year aligns with the calendar year (1 January to 31 December). The currency is the Chilean Peso (CLP) (CLP 1 = USD 0.0011). Employees’ income tax is deducted from their salary at source. The personal income tax rate is progressive, and all individuals who are resident or domiciled in Chile are taxed on total worldwide income. Tax rates for Chilean-sourced income range from 4% (for incomes between USD 947 to 2,105 per year) to 40% (for incomes of USD 8,420 and above). There are no local income taxes. Global Complimentary Tax (GCT) rates on worldwide income also range from 4% (for incomes between USD 11,368 to USD 25,262) to 40% (for incomes of USD 101,050 and above). Contractors must file and pay their own income taxes and social security provisions.
Chile has a privatized and compulsory social security system called Sistema de Capitalización Individual, which operates under the Ministry of Labor and Social Security (Ministerio del Trabajo y Previsión Social). Employees pay a 20% mandatory social security contribution, equivalent to around USD 3,050. Unemployment insurance is 3% (0.6% contribution from the employee and 2.4% from the employer. Employees make payments directly to a Pension Fund Administrator (AFP), most of which charge commission. Employees can pay their contributions using paper forms or electronically via the Previred portal.
Independent contractors operating on a self-employed basis (see below) pay personal income tax, ranging from 4% to 35.5%. Contractors operating as an incorporated business entity typically pay First Category Tax (FCT). This ranges from 25% (from 2023 onwards) for SMEs up to 27% for entities operating on the Partially Integrated System (PIS). Most independent contractors are also required to pay social security contributions via an AFP. Exemptions include women over 50 and men over 55 and self-employed workers who have a total disability or old-age pension.
Contractors operating as an incorporated business are subject to the standard 19% VAT rate, which is paid monthly. Contractors who are self-employed do not pay VAT.