Independent Contractors & Employment Guidelines in Chile
Contract length allowance
There are no limits to the use of a genuine independent contractor. However, a service contract will become an employment contract when the elements of an employment contract are present.
Fixed-term contract limitation
Fixed-term contracts are limited to one year and can be renewed once. The duration of a new contract term can be up to but no more than one year.
Certain contracts, such as those of managers, highly qualified professionals, or technical staff, may be renewed once for a total of two years as fixed-term contracts. Contracts that are renewed or continued beyond that point become indefinite permanent contracts.
What makes someone an employee
The law defines independent contractors and employees differently:
- Independent contractors execute work or services at their own expense and risk, and with employees under their dependency, for an individual or a legal entity that is the owner of the works, company or operation
- Employees enter into an employment agreement with the company by which employer and worker commit themselves reciprocally, the latter to render personal services under dependence upon and subordination to the former, the former to pay a determined remuneration for these services
Therefore, a worker is classified as an employee when the relationship involves subordination and dependency between the parties.
Penalties for misclassification in Chile
Companies guilty of misclassification may receive fines between UTM 80 and UTM 500 (CLP 4,227,360 to CLP 26,421,000) for not complying with the Labour Code plus 30 UTM (CLP 1,585,260) per misclassified employee. Moreover, the worker’s contract is changed from independent to indefinite permanent employment.
