Hiring in Chile as a foreign company: employer of record versus your own entity, the EOR exit, Labor Code essentials and work visas under Law 21.325.
Vendor-neutral, bilingual counsel for foreign employers and their home-country advisors.
Hiring Employees in Chile
EOR or your own entity: how a foreign company employs people in Chile, what leaving an EOR actually involves, the labor rules that bind from the first hire, and the visas that decide when a relocated executive can start work. Written for the teams that make the call and the advisors who accompany them.
A foreign company can hire in Chile through an employer of record (EOR), with no local entity, or directly through its own SpA or branch. The EOR buys speed at a recurring per-employee fee and limits on control; the entity takes setup effort but scales. The decision point arrives sooner than most teams expect.
This guide compares the two routes, walks through the exit from an EOR, summarizes the employment rules that bind a foreign employer and puts executive visas where they belong: at the start of the timeline.
The two hiring routes
Both routes are lawful. They differ in who employs, what you pay and how much control you keep.
Employer of record: speed without an entity
The EOR is the legal employer in Chile: it signs the employment contract, pays remuneration and social security contributions, and answers to the labor authority. Your company directs the day-to-day work under a services agreement and pays a recurring per-employee fee for as long as each employment lasts. Hiring can start without an incorporation, a tax ID or a local bank account.
Your own entity: control that scales
You incorporate an SpA or register a branch, and the group employs directly. Setup takes real effort (deed, tax registration, banking, payroll) and adds fixed accounting costs, but each additional hire costs little at the margin. IP assignment, confidentiality and internal policies run through your own contracts, and enterprise clients see a local operating company. The entity guide covers the setup.
The same comparison, dimension by dimension:
| Dimension | Employer of record | Your own entity |
|---|---|---|
| Legal employer | The EOR’s Chilean entity; you direct the work through a services agreement | Your SpA or branch; the group employs directly |
| Speed to first hire | Days to weeks; no incorporation, tax ID or bank account required | After incorporation, tax registration and banking; a longer sequence |
| Cost structure | Recurring per-employee fee that grows in line with headcount | Front-loaded setup plus fixed accounting; low marginal cost per additional hire |
| Control, IP and confidentiality | Indirect: assignments and policies run through the vendor’s contract chain | Direct: your entity signs the contract, the IP assignment and the internal policies |
| How enterprise clients and regulators read it | A third party employs your team; some counterparties and licensing processes ask questions | A local operating company; the standard footprint for regulated or enterprise sales |
Neither route changes the regulatory perimeter: data protection, cybersecurity and sector rules follow what the business does, not how it employs. The regulatory scoping guide maps those duties. What the route does change is who performs the employment duties of the sections below, and at what price.
What EOR marketing does not cover: the exit
Vendors publish onboarding guides, not offboarding ones. Yet most companies that grow in Chile eventually leave their EOR.
The trigger is usually one of three: headcount grows until the recurring fees exceed the cost of running an entity; an enterprise client or a licensing process expects direct employment; or the group decides to hold IP and confidentiality in its own hands. Whatever the trigger, the legal move is the same, because Chilean law provides no automatic transfer of employment from the EOR to your entity.
- Stand up the entity first
The new employer must exist, hold a tax ID, have a bank account and be able to run payroll before anyone moves. The entity guide covers that sequence; it runs in parallel with the negotiation.
- Terminate and rehire
Each worker ends one employment with the EOR and signs a new contract with your entity. How each exit is grounded and settled in the finiquito involves three parties: the worker, the vendor and you.
- Negotiate seniority recognition
Years served under the EOR do not carry over by default. Workers reasonably ask the new contract to recognize prior service for severance purposes; whether the vendor settles severance at exit or your entity assumes the seniority is the central commercial point of the migration.
- Migrate benefits and terms
Health coverage, bonuses, remote-work arrangements and anything else the EOR contract granted must be replicated or renegotiated in the new contract. Reducing a benefit needs the worker’s consent, so map the differences before making offers.
- Work the vendor’s notice terms
The services agreement sets notice periods, offboarding steps and final invoicing. Read them before fixing a migration date, and sequence the moves so no one is left without an employer, a salary or social security coverage in between.
None of this makes the EOR a bad first move. It prices the option: speed now, a negotiated exit later. The companies that come out well are the ones that model the exit when they sign, not when the scheme no longer fits.
Chilean employment law essentials for a foreign employer
These rules bind whoever employs in Chile. With an EOR the vendor performs them, but you feel their effects in cost and flexibility; with your own entity, they are yours to run.
- A written contract, on a statutory deadline
The employment contract is consensual, but article 9 of the Labor Code requires it in writing within 15 days of the worker starting, or within five days for contracts for a specific task or shorter than 30 days. Missing the deadline costs a fine of one to five UTM and, worse, creates a legal presumption that the contract terms are those the worker declares.
- The 85% Chilean-worker rule
At least 85% of the workers serving one employer must be Chilean (article 19). The rule only binds employers with more than 25 workers, and article 20 sets the arithmetic: the count is nationwide rather than per branch, specialist technical personnel are excluded, and foreigners count as Chilean if they have a Chilean spouse, civil partner or children, are widowed of a Chilean, or have lived in Chile for more than five years.
- Fixed-term contracts convert quickly
A fixed-term contract may not exceed one year, or two for managers and holders of a professional or technical degree (article 159 No. 4). A second renewal converts it into an indefinite contract, and so does letting the worker keep working after the term expires.
- Termination requires a legal cause
Chile has no at-will employment. Contracts end on the causes of articles 159 to 161: mutual agreement, resignation, expiry of the term, conclusion of the work, force majeure, misconduct (article 160, no severance but heavily litigated) or business needs (article 161, the standard employer route). Only managers holding general powers of administration may be dismissed by simple employer notice (desahucio).
- Severance follows a statutory formula
Dismissal for business needs takes 30 days’ written notice or one month’s pay in lieu (articles 161 and 162). After one year of service it also triggers the indemnización por años de servicio: 30 days of the last monthly remuneration per year worked and fraction over six months, capped at 330 days and at a salary base of 90 UF (articles 163 and 172).
Where foreign employers get caught
- Dismissing with unpaid social security contributions does not end the contract: remuneration keeps accruing until the employer cures the debt (article 162).
- A cause that fails in court adds surcharges of 30% to 100% on the severance, depending on the cause invoked (article 168).
- An unwritten contract shifts the burden of proof: the law presumes the terms are those the worker declares (article 9).
One more duty applies from the first hire: Law 21.643 requires every employer to keep a prevention protocol for workplace and sexual harassment and workplace violence, and our Ley Karin guide covers it in depth.
Executives who relocate: start the visa first
Immigration is the slowest workstream of a market entry. It belongs at the start of the sequence, not after incorporation.
Law 21.325 rebuilt Chile’s migration framework and the Servicio Nacional de Migraciones (SERMIG) administers it. For a hired or transferred executive, the permit that matters is temporary residence. Three rules organize the planning:
The right category
Temporary residence authorizes work (article 73). The subcategories are set by decree and published by SERMIG; the one that fits employed staff is the permit for people who perform lawful remunerated activities, and SERMIG also lists a subcategory for investors and related personnel. Applications from abroad may be filed remotely (article 69).
What a tourist permit does not cover
Transitory stay does not authorize remunerated work; the law only allows a special permit for specific and sporadic activities, such as speakers or visiting technical experts (article 50). And a tourist already in Chile may apply for residence only in qualified cases, such as family ties (article 58). The safe route is to file before traveling.
While the application is pending
Whoever lawfully files a residence application inside Chile can request a work permit that the Service grants immediately and that stays valid while the application is resolved (article 73). Dependents of a temporary resident, spouse or partner and children, are authorized to work as well (article 74).
On the employer’s side, four moves protect the start date:
- Define the role, salary and contract terms early: the visa file and the employment contract must tell the same story.
- Collect apostilled personal and corporate documents while the entity work advances in parallel.
- Plan for months, not weeks: SERMIG does not publish guaranteed processing times, so build slack into start dates instead of building the plan around a number.
- Count relocated foreign staff against the 85% rule if headcount will pass 25, keeping the exclusions of article 20 in mind.
This is why immigration opens the entry sequence in our market-entry guide: a late visa is the most common reason a launch date slips.
Frequently asked questions
Can we hire in Chile without a local entity?
Yes. An employer of record hires the worker under Chilean law on your behalf, runs payroll and social security, and charges a recurring per-employee fee, so no entity is needed. Genuine independent contractors are also possible, but services rendered under subordination and dependence are presumed to be employment under articles 7 and 8 of the Labor Code, whatever the contract says.
Is an employer of record legal in Chile?
Chilean law does not regulate the EOR model by name; it regulates who the employer actually is. The arrangement works lawfully when the provider genuinely acts as employer: it signs the written contract, pays remuneration and social security contributions, and answers to the Dirección del Trabajo. Because labor law follows reality over form, the services agreement should match how the work is directed in practice.
What does switching from an EOR to our own entity involve?
There is no automatic transfer. Your entity must exist and be able to run payroll first. Each worker then ends one employment with the EOR and signs a new contract with your company, which makes seniority recognition a negotiation point: either the EOR settles severance at exit or your entity assumes the prior service. Benefits migrate contract by contract, and the vendor’s notice terms set the calendar.
How does the 85% Chilean-worker rule work, and when does it bind?
Article 19 of the Labor Code requires that at least 85% of the workers serving one employer be Chilean. It only binds employers with more than 25 workers. The percentage is computed on the nationwide headcount, not per branch; specialist technical personnel are excluded; and foreigners count as Chilean if they have a Chilean spouse, civil partner or children, or more than five years of residence.
What severance exposure do we take on with each Chilean hire?
Dismissal for business needs (article 161) after one year of service costs 30 days of the last monthly remuneration per year worked, plus any fraction over six months, capped at 330 days and at a salary base of 90 UF, plus one month of pay if the 30-day notice was not given. If a court rejects the invoked cause, surcharges of 30% to 100% apply on top (article 168).
Can our transferred executive start working while the visa is pending?
It depends on where the application was filed. Someone who lawfully files a residence application inside Chile can request a work permit that the Service grants immediately and that remains valid while the application is resolved (article 73 of Law 21.325). A tourist permit does not authorize employment, and switching from tourist to resident in-country is restricted. The safe rule: apply from abroad before travel and do not start work without a valid permit.
Official sources
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