Do I Need a Local Entity to Hire in Chile?

In Chile, a "local entity" refers to a legally recognized presence that allows you to act as an employer; this typically means establishing a subsidiary or branch office. This setup is crucial for managing payroll, tax obligations, and compliance with local labor laws.

Without a local entity, you can't effectively register as an employer, manage mandatory social security contributions, or issue compliant employment contracts. An EOR can serve as your local employer, handling these responsibilities without the need for your own entity.

What is Required to Employ Someone in Chile?

• Local employing entity required to directly employ? Yes (you must register with the Chilean tax authority, Servicio de Impuestos Internos)
• Payroll registration required? Yes (mandatory for all employers through the same tax authority)
• Withholding/tax remittance required? Yes (employers must withhold income tax from employee salaries)
• Social contributions required? Yes (mandatory contributions to the social security system)
• Local employment agreement required? Yes (written contracts are standard practice in Chile)
• Mandatory benefits to budget? Yes (includes health insurance, pensions, and vacation pay)
• Works council/collective agreements considerations? Often (many sectors have collective agreements that influence employment terms)

Best Options If You're Hiring in Chile

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should proceed with caution. While hiring contractors can bypass the need for a local entity, Chilean labor laws are strict about worker classification.

Misclassifying a contractor as an independent worker can lead to significant legal risks if the relationship resembles employment. Here are some key points to consider:

• Ensure the contractor has autonomy over their work.
• Avoid controlling their hours or methods of work.
• Be cautious if the work is integral to your business operations.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Chile, depending on required registrations and notary involvement.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 300,000–800,000 CLP per month ($375–$1,000)
• Payroll provider: Estimated 50,000–150,000 CLP per employee per month ($62–$187)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated 1,000,000–3,000,000 CLP per year ($1,250–$3,750)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 p/month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions, typically around 20% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Chile

Hiring in Chile can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Chile quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.