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I grew up in Chile and although bankruptcy laws are harsh, labor laws are even harsher and unlikely to change given the political power of unions: Employers ar

I grew up in Chile and although bankruptcy laws are harsh, labor laws are even harsher and unlikely to change given the political power of unions: Employers are mandated to give 30 days notice when laying off employees. They also have to pay 1 month per each year of employee service. (employee been there 9 years, you have to pay him monthly salary * 10 to let him go) This law is good for employee stability and help keeps salaries low (employees with several years of service are unlikely to quit and lose the accrued severance). However you cannot show up one morning, close the curtain and tell everybody "sorry, company ran out of money".

andrewcooke 14y ago
in practice, if you employ a local as part of startup chile you will be hiring them as self-employed contractors (it's incredibly easy to be self-employed in chile). and the above does not apply. however, the above shows the kind of clout the richer classes have here. despite this being a question about conservative bureaucracies and super-rich family businesses, the unions somehow get blamed. i can remember my bosses complaining about "worker mobility" in the one chilean company i worked for - it suddenly wasn't an issue the day i resigned. [edit: one thing i think that startup chile companies should use to their advantage is the idea of an "american working culture". the chilean culture is to do very little for very long hours. in contrast, you should be able to sell something more like "we want you to work your fucking ass off, but only for 8 solid hours a day". at least for me, that would be a huge incentive. however i don't know if it works so well for young (just out of uni) chileans, who may not yet have the experience to see what a good deal it really is. chilean working hours are the second longest in the oecd, behind only s korea - http://stats.oecd.org/Index.aspx?DatasetCode=LEVEL# http://stats.oecd.org/Index.aspx?DatasetCode=LEVEL#. edit2: whoa that's changed! they are now in third place. curious. they were second earlier this year - http://www.acooke.org/cute/LongWorkin0.html http://www.acooke.org/cute/LongWorkin0.html exactly who to blame for this is unclear, at least to me. while i am not sympathetic to people who simply blame the unions in a country where the gini coefficient is so high (see above) there is clearly a problem. politics are very polarized - people may not understand that doesn't mean just communists, it also means raving fascists at the other end of the spectrum (if you speak spanish, peruse http://www.google.cl/search?q=chacarillas+1977 http://www.google.cl/search?q=chacarillas+1977 - if you dig around you'll find a list showing how many are now in positions of power). i hate to say it, but what the country really needs is some kind of tony blair who can find a populist middle ground that creates space for dialogue.]
- vpeters25 14y ago
  I worked there as self-employed contractor and unless the law changed, the employer was forced to convert you to full time employee after 6 months. They might have changed that, last I heard there was a huge political fight about part-time employees on franchises such as McDonald's
  - Raliaga 14y ago
    AFAIK that only applies to government organizations, as long as you get paid the same amount each month, and all the time you can easily avoid that by getting paid (Salary-X) one month, and (Salary+X) the following month, X needing to be just two dollars.
gyardley 14y ago
Maybe you can answer this for me, since I've always wondered: what happens if your company runs out of money, and you get into an impossible situation where you can't keep paying your employees, but you also can't afford to pay the severance required by law to lay them off? Does the government throw you in jail? Does it come out of your own pocket? (And what if you personally can't afford it?) Does the company just end up owing everyone a bunch of money it can't pay anyway?
- vpeters25 14y ago
  I don't really know much about the penalties involved in chilean labor laws. I know there is a labor inspection bureau where you can report "bad employers" and have them fined. Fired employees usually report their former employers to it as revenge since the inspectors always find violations. One think I see happen a lot is companies rather stay on business barely surviving than close their doors, because is so expensive to layoff employees. I haven't been back to Chile in 10 years so things might have changed for the better.
- jpablo 14y ago
  I don't know about Chile, but in Mexico with similar laws the company will go to something similar to chapter 11. And this money owned to employees will the considered as part of the company debts (however it'll be the higher priority debt). As a debt it can be negotiated (with unions) or if the company is liquidated it'll be pay (in full or part) out of any money that can be extracted from the company assets.
tonyarkles 14y ago
I find it really interesting that you refer to this as "harsh labour laws". Typically, "harsh labour laws" refers to "no maximums on how many hours/day a person can work, no overtime, etc". I love seeing different perspectives like this!
trevelyan 14y ago
Giving someone a month of notice (or zero notice and a month of severance pay) isn't harsh. As far as the other obligations go, I believe the law also states that you can have a contract which explicitly overrides these severance obligations. The obligation to have Chilean citizens (or permanent residents?) involved in most kinds of incorporated LLCs (I think particularly for single-founder companies) is much more of a big deal, but even it is not really that big a deal if you hire a lawyer and have them do it. It just means it costs more than starting a company in the US.

andrewcooke 14y ago

in practice, if you employ a local as part of startup chile you will be hiring them as self-employed contractors (it's incredibly easy to be self-employed in chile). and the above does not apply. however, the above shows the kind of clout the richer classes have here. despite this being a question about conservative bureaucracies and super-rich family businesses, the unions somehow get blamed. i can remember my bosses complaining about "worker mobility" in the one chilean company i worked for - it suddenly wasn't an issue the day i resigned. [edit: one thing i think that startup chile companies should use to their advantage is the idea of an "american working culture". the chilean culture is to do very little for very long hours. in contrast, you should be able to sell something more like "we want you to work your fucking ass off, but only for 8 solid hours a day". at least for me, that would be a huge incentive. however i don't know if it works so well for young (just out of uni) chileans, who may not yet have the experience to see what a good deal it really is. chilean working hours are the second longest in the oecd, behind only s korea - http://stats.oecd.org/Index.aspx?DatasetCode=LEVEL# http://stats.oecd.org/Index.aspx?DatasetCode=LEVEL#. edit2: whoa that's changed! they are now in third place. curious. they were second earlier this year - http://www.acooke.org/cute/LongWorkin0.html http://www.acooke.org/cute/LongWorkin0.html exactly who to blame for this is unclear, at least to me. while i am not sympathetic to people who simply blame the unions in a country where the gini coefficient is so high (see above) there is clearly a problem. politics are very polarized - people may not understand that doesn't mean just communists, it also means raving fascists at the other end of the spectrum (if you speak spanish, peruse http://www.google.cl/search?q=chacarillas+1977 http://www.google.cl/search?q=chacarillas+1977 - if you dig around you'll find a list showing how many are now in positions of power). i hate to say it, but what the country really needs is some kind of tony blair who can find a populist middle ground that creates space for dialogue.]

vpeters25 14y ago
I worked there as self-employed contractor and unless the law changed, the employer was forced to convert you to full time employee after 6 months. They might have changed that, last I heard there was a huge political fight about part-time employees on franchises such as McDonald's
- Raliaga 14y ago
  AFAIK that only applies to government organizations, as long as you get paid the same amount each month, and all the time you can easily avoid that by getting paid (Salary-X) one month, and (Salary+X) the following month, X needing to be just two dollars.

gyardley 14y ago

Maybe you can answer this for me, since I've always wondered: what happens if your company runs out of money, and you get into an impossible situation where you can't keep paying your employees, but you also can't afford to pay the severance required by law to lay them off? Does the government throw you in jail? Does it come out of your own pocket? (And what if you personally can't afford it?) Does the company just end up owing everyone a bunch of money it can't pay anyway?

vpeters25 14y ago
I don't really know much about the penalties involved in chilean labor laws. I know there is a labor inspection bureau where you can report "bad employers" and have them fined. Fired employees usually report their former employers to it as revenge since the inspectors always find violations. One think I see happen a lot is companies rather stay on business barely surviving than close their doors, because is so expensive to layoff employees. I haven't been back to Chile in 10 years so things might have changed for the better.
jpablo 14y ago
I don't know about Chile, but in Mexico with similar laws the company will go to something similar to chapter 11. And this money owned to employees will the considered as part of the company debts (however it'll be the higher priority debt). As a debt it can be negotiated (with unions) or if the company is liquidated it'll be pay (in full or part) out of any money that can be extracted from the company assets.

tonyarkles 14y ago

I find it really interesting that you refer to this as "harsh labour laws". Typically, "harsh labour laws" refers to "no maximums on how many hours/day a person can work, no overtime, etc". I love seeing different perspectives like this!

trevelyan 14y ago

Giving someone a month of notice (or zero notice and a month of severance pay) isn't harsh. As far as the other obligations go, I believe the law also states that you can have a contract which explicitly overrides these severance obligations. The obligation to have Chilean citizens (or permanent residents?) involved in most kinds of incorporated LLCs (I think particularly for single-founder companies) is much more of a big deal, but even it is not really that big a deal if you hire a lawyer and have them do it. It just means it costs more than starting a company in the US.