Outsourcing to Chile: Benefits, legal aspects, best practices

by Andy Nguyen
Outsourcing to Chile

Chile has emerged as one of the best outsourcing markets in Latin America thanks to its business-friendly environment and advanced infrastructure facilities.

The country’s BPO and IT industry is thriving and provides high-quality services to local and global clients. And from Accenture to TCS, several companies run software development operations from the country.

Outsourcing to Chile becomes all the more lucrative for businesses based in North America, thanks to the geographical proximity and minimal time zone differences between the two regions.  

In this article, we’ll share why and what you should outsource to Chile, along with three legal aspects and some essential tips for efficient outsourcing.

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4 major benefits of outsourcing to Chile

Asian outsourcing giants like India and China have long been the favorites of top multinational companies. However, many countries in Latin America have also taken some big strides in boosting their outsourcing industry and attracting global clients.

So how does Chile stand out from the competition?

Let’s take a detailed look at the major benefits of outsourcing to Chilean companies:

1. Cost-efficiency

Most small and medium businesses outsource their business functions to reduce expenditures (salaries, equipment, maintenance, etc.) and increase profits.

Chile is a relatively new entrant to the sector, and companies here offer high-quality services and support at competitive prices. 

How do they manage that?

Due to the low cost of living in the country, outsourcing companies can operate with cheaper resources than companies in Europe and the United States of America. 

The operating cost in Chile is at par with other Latin American countries like Mexico, Colombia, Brazil, Costa Rica, and Argentina. Additionally, low labor costs and employee salaries make Chile a very affordable outsourcing market in Latin America.

As per Glassdoor, the average annual salary of a programmer based in Chile’s capital Santiago is much lower (USD 16,572) than that in San Francisco, USA (USD 84,962). 

So, hiring Chilean developers through nearshore outsourcing would be a more affordable option for an American company. 

Moreover, the Chilean outsourcing sector is not as competitive as India or even Brazil, further reducing the cost of hiring quality professionals.

Read our detailed guide on nearshoring to Mexico to see how it compares with Chile.

2. High-quality workforce

A country’s outsourcing potential is as good as the quality of its local workforce. 

Fortunately, Chile has a competent and technically adept workforce, thanks to its solid education system.

The educational reforms in the country began during the early 2000s when the Chilean government started investing heavily to revive the system. In 2017, the government spent 21.3% of the GDP (Gross Domestic Product) on the education sector.

These initiatives produced great results, and as per the latest reports, the literacy rate in Chile is 96.4% — higher than the Latin American average of 93.9%

In 2021, the University of Chile and the Pontifical Catholic University of Chile were ranked at 290 and 390, respectively, on the Best Global Universities index. The latter is also the top-ranked university on the QS Latin America University Rankings 2021.

Now, a major concern for foreign companies outsourcing to Chile is the English proficiency of Chilean employees. This was indeed a hindrance in the country’s bid to become an outsourcing hub until a few years ago. 

Thankfully, there’s been a significant improvement in recent years due to sustained efforts in the education sector. Students willing to improve their English skills can access several scholarship programs at both school and college levels. 

On the EF English Proficiency Index 2020, Chile is placed third in Latin America and moved up to 37 globally (from 45 in 2017).

The improved English skills of Chilean employees make it much easier for global companies to collaborate with them efficiently. Besides, Chileans speak Spanish as their first language, making it a solid option for companies with Spanish clients.

3. Business-friendly environment

For businesses to flourish, a country must have a stable socio-economic environment and pro-business policies. 

While other Latin American countries have faced high crime rates and unstable political climates in the past, Chile has always been a safe haven for businesses.

The country has one of the lowest instances of drug-related crimes in South America and is the safest Latin American country on the Global Peace Index.

Moreover, Chile being the top-ranked Latin American country on the Global Competitiveness Index 2019, is a testament to its socio-economic stability. On the 2020 Ease of Doing Business Index, Chile is placed at the 59th position globally (out of 190 economies).

The country’s pro-business policies have laid a solid foundation for its outsourcing industry to flourish. 

Additionally, the Production Development Corporation (CORFO) is a public-sector organization that has launched programs like Start-up Chile and InvestChile, which offer funding, incentives, subsidies, and guidance to new ventures. 

Here are some more factors that make Chile a hotbed for businesses:

  • Chile is the top-ranked country (among 18 South American and Caribbean economies) on the Global Innovation Index and is one of the highest spenders on business R&D, resulting in a better overall business climate.
  • The country has low corporate tax rates and easy-to-understand tax laws, making it easier for a foreign company to delegate business here.
  • It is a member of OECD (Organization for Economic Co-operation and Development) and one of the two South American countries on APEC (Asia-Pacific Economic Cooperation) besides Peru, facilitating enhanced trade co-operations with other economies.

4. Robust infrastructure

Chile’s capable infrastructure is another reason companies outsource to the country. 

Chile is often credited as being Latin America’s best tech hub and is referred to as the ‘Chilecon Valley,’ a reference to the Silicon Valley in the USA.

The capital city of Santiago has always been a center for IT companies and other businesses. But over the years, other Chilean cities like Valparaíso, Concepción, and Viña del Mar have emerged as highly efficient business centers.

These cities are home to technology parks and hubs, which give companies access to world-class digital infrastructure and research facilities. 

Here are a few technology parks, hubs, and start-up accelerators in Chile:

  • Laguna Carén Scientific and Technological Park, Pudahuel, Santiago.
  • Pacyt Bíobio Scientific and Technological Park, Concepción.
  • Hubtec.
  • Hubapta.
  • Know Hub Chile.
  • Chile Global Ventures.
  • Imagine Lab.

Moreover, Chilean telecom providers offer fast and accessible internet connectivity (broadband and 4G networks) throughout the country, enabling companies to offer global services. 

In recent years, major cities like Santiago have seen a rise in co-working spaces that provide cutting-edge working solutions to small teams and freelancers. 

Smaller companies and independent workers can also outsource their IT hardware needs using the widely available Hardware as a Service (HaaS) and Device as a Service (DaaS) solutions across Chile.

What should you outsource to Chile?

The Chilean outsourcing sector caters to various industries like telecommunication, banking, etc., and offers several core and value-added services. 

Here are some of the business functions that you can outsource to Chilean vendors:

1. IT outsourcing

Today most business processes are carried out digitally and require a dedicated IT team. 

But start-ups and small businesses may not always have the resources to run full-scale IT operations in-house. 

IT outsourcing is a cost effective option for such companies to get expert IT services without investing in an in-house team. Even large companies prefer to delegate their IT operations to the country for its world-class software outsourcing capabilities. 

IT companies in Chile are well-equipped to handle projects of any scale and size. In fact, software development is one of the most outsourced services to Chile. 

Chilean software developers are known for their solid programming skills and consistently rank in various coding competitions.

Some of the IT-related operations you could nearshore or outsource to Chile include:

  • Agile-based software development and testing.
  • Application programming and maintenance.
  • Website design and development.
  • Blockchain development.
  • IT staffing solutions.
  • Technical support.
  • Datacenter management.
  • Hardware as a Service (HaaS) and Device as a Device (DaaS) solution for IT peripherals and server hosting.

You can outsource IT-related tasks and projects to a top Chile-based outsourcing service provider like Accenture, Quintec, Capgemini, Adexus, Sonda, etc. 

For more information, check out our informative guide on IT outsourcing.

2. HR and payroll outsourcing

Many foreign companies in Chile prefer to outsource their HR and payroll management to local PEO (professional employer organization) service providers. 

This helps them scale their operation rapidly without having to worry about:

  • Recruitment and employee engagement
  • Timely salary payments.
  • Handling international payroll.
  • Following local payment laws.
  • Managing taxes and compliance.
  • Handling mergers and acquisitions.

In recent years, even local businesses have started outsourcing their HR and payroll to these services to focus more on their core operations.

You can look at PEO companies like New Horizons, Chile Business, Velocity Global, etc., to delegate payroll and HR in Chile.

3. Customer service and telemarketing

A majority of US-based Spanish speakers trace cultural origins to Latin America. 

This makes Chile, a predominantly Spanish-speaking country, a good base for setting up client facing operations catering to Spanish-speaking Americans.

Besides, Chile already has the technology, infrastructure, and trained workforce needed for delivering world-class customer service experience. 

Call centers and contact centers in Chile can provide services like:

Some of Chile’s top contact and call center service providers include Switch, Asicom, Open Agents, etc. 

When outsourcing to Chile, it’s essential to factor in the relevant legal aspects before making a decision. 

Here are three important legal aspects you should consider before outsourcing to Chile:

1. Outsourcing contracts 

Based on the standard supplier-customer model, two types of systems define an outsourcing transaction in Chile:

A. Contractor/subcontractor system

In this system, a customer (contractor) hires an outsourcing supplier (subcontractor) to perform a specific type of service(s). 

This type of transaction is regulated through a ‘service agreement’ between the two parties. The agreement specifies the exact term of the services and helps protect the rights of both parties.

In this scenario, the customer exerts no control over the supplier’s employees, even if they are directly involved in the customer’s line of business. Also, the customer is not required to convert any outsourced employee into a regular employee, regardless of the service duration.

B. Employee’s provision by a temporary services company (Empresa de Servicios Transitorios)

In this type of outsourcing system, the customer company hires a temporary services company to provide employees for specific job duties.

These outsourced employees are subject to the direction and rules of the customer company. These employees shall be considered regular employees of the customer company after providing services for a specific time limit. 

However, a customer company can avail this type of temporary employee service only in certain specific scenarios.

Both the customer and supplier companies may face penalties and fines from the Labour Authority if they fail to meet the legal requirements of the above systems.

2. Employee transfer

In Chile, a voluntary or contractual transfer of an employee between the customer and the supplier company is not possible without the consent of the said employee.

After getting the employee’s consent, the current employer must first terminate the existing contract and pay any appropriate compensation.

The new employer can then establish a new employment relationship.

3. Data processing and security

With legal authority or with an employee’s consent, a company can collect and process personal data.

The company must inform an employee about the reason behind collecting the data and any transfer of personal information to a third party in the future.

However, in certain circumstances, this authorization is not required. For example, when collecting financial or banking information that’s already available publically.

Quick tips to work efficiently with a Chilean team 

With such lucrative benefits, you must be already making plans to outsource your business function to Chile. 

Here are four quick tips to make this transition more efficient and fruitful:

  • Ensure you understand the business and tax laws in Chile. It’ll help you protect your rights and intellectual property.
  • Try to know more about the local culture and business practices to better connect with your team. A basic understanding of Spanish would go a long way in building rapport.
  • Be clear on your current and future outsourcing needs. It helps you create a cost estimation and find the most suitable vendor for your budget.
  • Examine your vendor’s track record and see what previous customers have to say about them.

Final thoughts

Chile is one of the safest and most promising outsourcing destinations in the LATAM (Latin America) region.

When offshore outsourcing to the country, you’ll get access to top-notch infrastructure and highly skilled human resources.

Use the information shared in this article to understand the Chilean outsourcing market and make the entire process smooth and profitable for your business.

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