Key Labor Aspects for Starting Operations in Chile: A Practical Guide for Foreign Companies

The process of opening companies in Chile involves not only business and tax decisions but also a proper understanding of the Chilean labor framework and the key labor aspects, which is characterized by a high level of regulation, oversight, and increasing regulatory sophistication.

For those considering starting operations in the country, anticipating the main labor risks and obligations is essential to avoid contingencies, optimize costs, and ensure an orderly implementation from day one.

One of the first elements to consider is that, in Chile, the employment relationship is established on the principle of primacy of reality, meaning that, beyond what is formally agreed, what happens in practice will prevail. This is especially relevant in initial structures where companies tend to operate with consultants, service providers, or flexible arrangements. Correctly distinguishing between dependent employees and independent contractors is critical, as misclassification can lead to significant contingencies, including administrative fines, retroactive payment of social security contributions, and potential labor lawsuits.

In line with the above, Chilean labor law requires the formalization of written employment contracts within specific deadlines, regulating essential matters such as working hours, remuneration, job duties, and workplace location. In the current context, it is particularly important to consider the progressive implementation of reducing the workweek to 40 hours, a public policy that, by 2026, is in an intermediate phase with a 42-hour workweek. This obliges companies to redesign shifts, adjust cost structures, and review productivity schemes.

Another central aspect for companies starting operations in Chile is compliance with remuneration and social security obligations. The Chilean system mandates compulsory contributions that must be paid by the employer, including pensions, health, unemployment insurance, and work-related accident insurance. The latter is governed by Law No. 16.744 and requires affiliation with an administering body, which has not only economic implications, but also implications for preventive risk management and compliance with safety standards.

In recent years, the concept of labor compliance has gained significant relevance in Chile, especially following reforms that have raised the standard of diligence required from employers. In this context, the so-called “Karin Law” (Law No. 21.643), in effect since August 2024, has marked a turning point by introducing specific obligations for the prevention, investigation, and sanctioning of workplace harassment, sexual harassment, and workplace violence. This regulation not only broadens traditional definitions but also requires companies to implement mandatory protocols, formal reporting channels, employee training, and protective measures for affected individuals.

Proper implementation of the Karin Law is now a key element of labor due diligence in Chile, as non-compliance can lead to administrative sanctions, reputational damage, and complex litigation. It has also brought about a cultural shift within organizations, focusing on the prevention of psychosocial risks and the promotion of safe, respectful work environments, leading to a significant increase in complaints and inspections by the Labor Directorate.

Additionally, it is essential to consider employment termination regulation, an area with high levels of litigation in Chile. The system contemplates specific grounds for dismissal, with severance payments that vary depending on the grounds invoked and the employee’s length of service. Properly invoking grounds and complying with legal formalities are essential to avoid additional severance charges that can significantly increase termination costs.

The Labor Directorate plays a leading role as the supervisory authority, with broad powers to inspect, sanction, and require information from companies. In practice, this means that companies entering the Chilean market must operate with a permanent standard of compliance, not only in documentation but also in operations. The existence of internal policies, rules on order, hygiene, and safety, and clear human resources processes is not only recommended but a basic requirement for proper operation.

Another relevant aspect concerns new workplace trends, particularly telework and hybrid work models. Chilean regulations expressly govern these modalities, establishing specific rights and obligations, including the employer’s duty to provide work tools, respect working hour limits, and guarantee safety and health conditions. Proper structuring of these modalities is especially relevant for foreign companies seeking to operate with distributed teams or lean structures in their early stages.

In this scenario, starting operations in Chile from a labor perspective requires a strategic approach that combines regulatory compliance with organizational efficiency to design sustainable labor structures aligned with local regulations and the expectations of an increasingly demanding market.

Proper labor planning from the outset not only mitigates risks but also generates competitive advantages, facilitating the attraction and retention of talent, improving organizational climate, and strengthening corporate reputation.

In an environment where oversight is active and regulations evolve rapidly, specialized advice on Chilean labor law is a key factor in the success of any investment project.

Key Labor Aspects for Starting Operations in Chile