Are you considering hiring an employee in Chile? Understanding the cost of hiring a Chilean employee is key to making the right decision for your business. Let's dive in and find out exactly how much it costs to hire an employee in Chile.
Reasons to Hire from Chile
Hiring Chilean employees can offer several benefits for employers. Firstly, Chile's labor laws are relatively straightforward, offering employers clear guidelines and expectations when it comes to hiring, compensation, and benefits.
The cost of hiring new employees in Chile is also often lower than in other countries, and they are in an ideal time zone for US and Canadian employers. Chile’s pool of diverse, bilingual professionals also makes it easy for foreign companies to communicate effectively with their employees and grow their businesses in a range of industries such as engineering, finance, IT, and more. All of this makes Chile an attractive option for businesses looking to expand or replace their workforce in Chile.
Required Costs of Hiring in Chile
There are several costs that employers must consider when hiring from Chile. For example, wages and salaries must be paid according to laws set out by Chile's Ministry of Labor, meaning that the minimum wage is government regulated. Here are some of the key requirements:
Minimum wage
As of March 2023, the minimum wage in Chile is CLP410,000 per month (USD513 per month) for workers over 18. However, employers should note that some industries and regions may have higher minimum wages. Salaries per month can range from CLP473,000 to CLP8,340,000. The highest-paying industries include engineering and financial services.
Paid Time Off, Sick Leave & Parental Leave
Chilean law requires employers to provide employees with 15 days of paid vacation and 14 public holidays annually. This increases to 20 days after five years of employment. In addition to vacation, employers must provide employees with 30 days of paid sick leave per year and 30 weeks of maternity leave. Fathers can take five days off after the birth of a child and receive paternity leave of up to six weeks, or 12 half-weeks, at 100% of the employee's regular salary.
Statutory Social Security Contributions
Employers must contribute up to 2.4% of employees’ salaries to their employees' unemployment insurance and pension plans. A government-run entity called the National Pension Fund (AFP) manages the latter. Statutory social security contributions are one of the primary costs employers face when hiring staff in Chile.
Contributions are made up of two parts: a base contribution and a supplementary contribution. Both the employer and the employee pay the base contribution, while the supplementary contribution (10%) is only paid by the employer regardless of salary level or job title. In total, employers could fork out up to 20% of the employee’s salary. The rates for both contributions vary depending on the employee’s salary.
Recruiting & Training
Another major cost employers face when hiring in Chile is the cost of recruiting and training new employees. This includes things like advertising for vacancies, interviewing candidates, and providing training once they have been hired. To attract the best talent, many businesses choose to offer potential employees a relocation allowance or other financial incentives.
Payroll Tax
Finally, employers must also pay payroll taxes on employee salaries at 7%. Employers can also take advantage of certain tax breaks to encourage employment growth in Chile, such as deducting up to 20% from monthly payroll expenses when hiring young workers or those over 45 years old from certain areas.
Overtime Pay
Working hours are typically 8 hours per day, 40 hours per week. Monday through Friday is the standard workweek. Overtime pay is 150% of the regular rate for overtime hours. Employees can only work a maximum of 2 overtime hours per day or 10 overtime hours per week.
Statutory Bonuses
In Chile, profitable companies must provide employees with statutory bonuses annually in addition to their base salary. Employers can either divide 30% of the total company profit among all employees and proportionate to their income or pay the employee 25% of their annual salary regardless of profits.
Optional costs of hiring in Chile
While the above costs are required by law, there are also several optional benefits that employers may choose to offer their employees, including
Health plans: Many employers in Chile provide their employees with private health insurance plans, which can cover a range of medical expenses.
Fitness memberships: Some employers offer their employees gym memberships or other wellness benefits to promote a healthy lifestyle.
Other perks: Depending on the industry and type of work, employers may offer other benefits such as transportation subsidies, meal vouchers, or flexible work arrangements.
Average Salary vs. Gross Salary In Chile
When it comes to determining the average salary in Chile, there are a few factors that must be considered. For starters, wages vary across different sectors, with some industries paying higher salaries than others. Additionally, wages also vary by geographic location and experience level.
The average salary in Chile is generally lower than in South American countries such as Mexico. According to Statista, the gross monthly wage for a full-time employee in Chile was USD 576 compared to USD 637 in 2022. The highest-earning industries include engineering and construction services, informatics, health, and education.
We’ve talked about average salaries so far, but when hiring an employee in Chile, employers must consider the gross salary cost, including taxes and contributions. The employer is responsible for making these payments for their employees in Chile. It is important to understand that the taxes and contributions due will depend on the employee's salary.
It is important for employers to accurately calculate gross salaries when hiring an employee in Chile as this ensures compliance with local laws and regulations while ensuring that employees receive fair wages. Additionally, accurate calculations can help employers ensure they are budgeting correctly for their staffing costs while avoiding any costly surprises later down the line.
Estimated Cost to Employer in Chile
When employers are considering the cost of hiring an employee in Chile, employers must also factor in social security contributions, payroll taxes, employee benefits, and other costs on top of their salary. The exact cost to employers will depend on a variety of factors, such as training.
Overall, employers should expect to pay an average monthly salary between USD 1,588 and USD 2,000 per month when hiring an employee in Chile. This depends on their experience levels and job requirements. Depending on the salary, as a rough estimate, if the salary is not within the range, employers should expect to pay at least 1.5 to 2 times the employee's gross salary in additional costs, including social security contributions, taxes, and benefits.
By factoring all these costs together accurately before committing to hiring, employers can ensure they comply with local labor legislation while making sure their staffing budgets remain efficient at all times.
Save on Hiring Costs from Chile with Borderless
While hiring in Chile can offer many benefits to employers; it's important to carefully consider and plan for the costs associated with hiring and retaining staff. Employers can make informed decisions by understanding the required and optional costs and the average salaries in various industries. Borderless is an EOR company that can help; book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
