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CHILE: An Introduction to Labour & Employment

COVID-19 in Chile: Labour challenges in Chile in the pandemic context

There is no doubt that the highlight for the period 2020-2021 is the COVID-19 pandemic, which has had countless repercussions that have not been limited to health topics, but have had a strong impact on the social, economic, and political, and of course in the labour field.

In between the complications caused by the pandemic in Chile, we have been able to see a legislative agitation through the several laws promulgated on matters such as telework and remote work, access to unemployment insurance benefits under exceptional cases, the withdrawal of pension funds, and specific legal regime for judicial proceedings, among others. These on numerous occasions have brought us more questions than certainties.

The current overview of the pandemic and the economic crisis that it has generated - in the case of Chile, a crisis carried over from the social outbreak - makes essential that we prepare to cope with different flanks.

First, the most problematic situation on the list: workforce reductions are looming. The contraction of the economy and low productivity have seriously affected some industries, which have spent almost a year on the downside, causing losses. This is a situation that is difficult to recover from in the short term and requires reducing staff to the strict minimum to remain operating.

The Employment Protection Act has acted as a life jacket in the midst of the emergency, leaving workers floating long enough to breathe on the surface while businesses organise how to withstand mandatory quarantines, the stores shut down and the progressive return. Meanwhile, this life jacket - made of ice - starts to melt, bringing up redundancies.

Of the above, legislative efforts to reverse the situation are welcome, and the Employment Subvention is clearly an encouragement to leave the life jacket and reactivate the economy by activating suspended activities and recruiting new staff. However, the situation is not so hopeful when we see that inflation is rising and many companies are bordering the red numbers.

Yet not everything is bitter; from our perspective the time has come to take action creatively and reinvent the way of working in the digital age, to look for new mechanisms and take advantage of the workforce available in the market. Time to reverse the bleak months of the pandemic economy, stay with the good, change the poor and set new goals adapted to the crisis context.

Something similar has happened with trials; lawyers have had to reinvent their litigation skills in order to prevail in virtual hearings. Moreover, the remote trials have brought us a collaborative spirit that we portend is going to become a new politeness rule.

In the framework of the innovation and adaptation, one of the main challenges for companies has been and will be learning to adapt themselves to the new needs of employees and the markets. With thousands of people working from home and other thousands returning to face-to-face work, companies must take over the problems that are exposed. In this manner, for employees who are still at home, the psychological component will start to concern and the isolation will be hard to manage. Being able to observe the problems in performance and motivate teams is a must. On the other hand, returns to the workplace should be gradual, flexible and well thought out, analysing the risk factors in the workplace and the ways of accessing it. Never forget, the employers must provide measures to ensure the health and safety of their dependants.

It is worth noting that we do not have a legal response for a mixed system of face-to-face work along with work from home – alternating them - which is key to the safe return process. Fortunately, there are alternatives that can be accessed in order to grant flexibility and minimise the risks of excessive regulation of telework.

It is clear that the regulations generated for telework and remote work are not applicable to an emergency situation such as the one we are experiencing now. The rules are oriented towards the voluntary decision to change the working way to digital media or outside the workplace. That assumption has not occurred in fact, since it has been an external factor – COVID-19 - that has forced employers to move the workplace to their employees’ homes to continue operating and to protect their employees. These days, telework in Chile is not an intended business decision, it is the result of a world emergency and may - or may not - be considered as a long-term solution for the companies.

Another story happened with collective bargaining, which was left out from the legislative agitation. Thus, the restrictions of the pandemic were not sufficient for the legislature to adopt special measures, leaving both trade union and companies in the hands of the Labour Direction’s interpretative turns on the suspension of proceedings and about the opportunity for strikes.

Nonetheless, as a final topic, we cannot ignore the social security impact of the COVID-19 pandemic in Chile. We have already mentioned the role of the Employment Protection and Ten Percent Retirement Act, but how will this affect things in the short and medium term?

With regard to the above, we can appreciate two different but related situations, since we acknowledge that both institutions - the Unemployment Funds Administrator and the Pension Funds Administrator - are private institutions.

On the one hand, the application of the Employment Protection Act has used the Individual Funds of employees and afterwards the Solidarity Funds of the Administrator. This being the case, today the employees covered by this regulation have little or nothing at all of savings in their Individual Accounts and in the event of redundancies they will have to ask for access to the benefits of the Solidarity Unemployment Fund, which will continue requiring injections of public money for its operation.

On the other hand, there is the situation of the Pension Fund Administrators, which for years have been lacking in legitimacy. This was mainly caused by the constant decrease in the gross amount of pensions, which is not remotely close to what was promised in the 1980s when the new system was created.

In this way, the withdrawal of ten percent of the pension funds has meant deepening the discredit of the system and, on the other hand, a monetary drain such that we are not sure what impact it will have in the medium and long term. For all that, we are sure that this subject will be in the campaign proposals for the drafting of the new Constitution, and the Social Security System is expected to play an important role that we should evaluate and discuss from now.

Finally, it should be pointed out that these are only some of the overall repercussions of the pandemic, but this has affected each industry and each company in a unique way according to their own circumstances. That is why our job as legal advisors is to offer alternatives and support decision-making. We have to remain more active than ever and we indeed are concerned that our clients can best cope with the pandemic, knowing their odds, risks and, above all, know that we are here for them to overcome the challenges outlined above.

by Don Pedro Matamala.