EOR in Latin America: Do You Need the Help of Employer of Record?

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In the heartbeat of Latin America’s technological evolution, the software industry stands as a pivotal force, steering the region toward innovation and growth. A testament to its significance, the software industry in Latin America generated a staggering revenue of 18.6 billion USD in 2022. Fueling this robust ecosystem are 645 independent software vendors, each contributing to the dynamic landscape of technology in the region. As we delve into the intricacies of this flourishing industry, we unravel the role of Employers of Record (EOR) in shaping the future of LATAM development teams.

Table of Content

What Does LATAM Tech Landscape Look Like?

Latin America is a region with a thriving startup ecosystem, a large and growing pool of developers, and a high demand for tech talent from global companies. The region offers access to over 626 million potential customers and employees across 7 industries, according to the LatAm Tech Report 2022. The report provides insights into the trends and opportunities for entrepreneurship in the following sectors: fintech, e-commerce, edtech, healthtech, agtech, mobility, and social impact.

One of the key factors that makes Latin America attractive for tech innovation is the availability and quality of its developers. According to LatamList, Latin America is the region with the second-highest growth of developers globally, after Asia. There are currently 26.9 million developers worldwide, and it is estimated that they will increase by around 1 million each year. Latin America has a strong presence of online education platforms, such as Platzi, Udemy, and Coursera, that offer courses and certifications for aspiring and experienced developers. Moreover, the region has several initiatives and communities that support and connect developers, such as Devscola, Hackers and Founders, and Latinas in Tech.

Another factor that reflects the potential of Latin America’s tech landscape is the increasing hiring of tech professionals from the region by global companies. According to a report by Deel, a platform that helps companies hire and pay remote workers, global hiring by tech companies in Latin America grew 286% in the second half of 2021 compared to the first half, a greater jump than in Europe, Middle East and Africa (+250%) or Asia (+227%). The report also states that Latin American professionals appeared as the most requested by companies around the world: the hiring of workers from the region grew 156% between July and December last year, ahead of professionals from Asia (+107%) and Europe, Middle East and Africa (+96%). The report attributes this trend to the high quality, diversity, and affordability of Latin American tech talent, as well as the favorable time zones and cultural compatibility with the US and Europe.

The LATAM Tech Talent Puzzle

In the vast mosaic of Latin America’s tech landscape, questions arise like sparks in the night. What makes LATAM’s tech talent a sought-after gem in the global market? Why do US-based companies increasingly turn their gaze southward when building their dream teams? Let’s embark on a journey to unravel the enigma that is the LATAM Tech Talent Puzzle.

Amidst the technological symphony, US-based companies are finding harmony by recruiting from the Latin American talent pool. What beckons them to this region? The answer lies in the potent combination of numerous factors. Let’s review them in detail:

  • Cost Efficiency: Labor costs in LATAM are often more competitive than in the United States, providing significant cost savings for companies without compromising on talent quality.
  • Access to Skilled Talent: LATAM boasts a pool of highly skilled developers, with many professionals possessing strong educational backgrounds and experience in cutting-edge technologies.
  • Cultural Affinity: LATAM shares cultural similarities with the United States, making it easier for teams to collaborate seamlessly and ensuring a cultural fit that fosters effective communication and collaboration.
  • Language Proficiency: English proficiency is common among LATAM developers, reducing language barriers and enhancing effective communication with US-based teams and stakeholders.
  • High-Quality Education: Many LATAM countries have strong educational systems, producing graduates with solid foundations in computer science and related fields, making them valuable assets to US-based companies.
  • Agile and Adaptive Workforce: LATAM developers are known for their agility and adaptability, crucial traits in the fast-paced and ever-evolving tech industry.
  • Overlap in Business Hours: The overlap in business hours allows for real-time collaboration and quick response times, facilitating smoother project workflows and reducing delays.
  • Innovation and Problem-Solving Skills: LATAM developers often bring a fresh perspective and innovative problem-solving skills to projects, contributing to the overall creativity and success of development initiatives.
  • Reduced Talent Shortages: LATAM helps mitigate talent shortages, especially in niche or highly specialized areas, where demand often outstrips local supply in the United States.
  • Ease of Collaboration: The cultural proximity and similar working styles facilitate smooth collaboration, helping teams work cohesively and efficiently towards common goals.
  • Cost-Effective Time-to-Market: By leveraging LATAM developers, companies can accelerate time-to-market for their products or services, gaining a competitive edge in the rapidly evolving tech landscape.

Yet, as with any quest for treasure, challenges emerge on the path to securing top-tier LATAM talent. The intricacies of navigating diverse regulations, time zones, and cultural nuances can be daunting. Misalignment in expectations, communication gaps, and the need for a nuanced understanding of regional talent landscapes present hurdles that companies must navigate to unlock the full potential of LATAM’s tech talent.

The Employment Laws Specifics of the Popular LATAM Offshoring Destinations

Navigating employment contracts in Latin America is a journey that demands more than just a passing glance. As companies explore the opportunities presented by offshoring to popular destinations in the region, understanding the nuances of employment laws becomes paramount. Because a comprehensive grasp of local employment laws is not just a legal necessity; it’s a strategic imperative for building successful and compliant offshore teams. To give you an impression of local labour laws, we prepared this concise table.

Country

National Minimum Wage

Working Hours

Overtime Pay

Maternity/Paternity Leave

Mexico

207.44 MXN/day

8 hours/day, 48 hours/week

1.5x regular pay

12 weeks/6 weeks

Colombia

1,160,000 COP/month

8 hours/day, 48 hours/week

1.25x regular pay

18 weeks/1 week

Brazil

1,320 BRL/month

8 hours/day, 44 hours/week

1.5x regular pay

120 days/5 days

Costa Rica

603 USD/month

8 hours/day, 48 hours/week

1.5x regular pay

4 months/1 week

Guatemala

90.38 GTQ/day

8 hours/day, 48 hours/week

1.5x regular pay

84 days/2 days

Ecuador

400 USD/month

8 hours/day, 40 hours/week

1.5x regular pay

12 weeks/1 week

Uruguay

21,100 UYU/month

8 hours/day, 44 hours/week

1.25x regular pay

14 weeks/1 week

What Are the Consequences of Violating Employment Laws in LATAM?

Understanding and adhering to employment laws in Latin America (LATAM) is not just a legal obligation, but a strategic imperative for companies looking to establish a seamless and compliant offshore presence. The consequences of breaking employment laws in LATAM are far-reaching and can have serious ramifications for businesses venturing into this vibrant market.

  • Legal Repercussions: Employment law violations in South America can lead to legal actions, fines, and penalties. Authorities in these regions take labor laws seriously, and companies found in breach may face significant financial consequences, impacting their bottom line and reputation.
  • Reputational Damage: Companies that violate employment laws risk tarnishing their reputation not only with local authorities but also within the global business community. Reputational damage can result in diminished trust among clients, partners, and potential employees, impacting long-term business prospects.
  • Operational Disruptions: Legal disputes and investigations can disrupt day-to-day operations, diverting valuable resources and attention away from core business activities. This can lead to delays in projects, loss of productivity, and increased operational costs.
  • Employee Discontent and Turnover: Violating employment laws may create dissatisfaction among employees, leading to increased turnover rates. This not only disrupts team dynamics but also incurs additional costs associated with recruitment, onboarding, and training of new staff.
  • Loss of Market Access: Certain legal violations may result in companies being barred from operating in specific markets or facing restrictions on business activities. This can hinder expansion plans and limit access to lucrative opportunities within LATAM.
  • Contractual and Financial Obligations: Companies found in breach of employment laws may be subject to contractual and financial obligations. This can include compensating affected employees, addressing legal fees, and fulfilling any other financial commitments arising from legal disputes.
  • Difficulty in Attracting Talent: A tarnished reputation due to legal violations can make it challenging for companies to attract top-tier talent. Skilled professionals are more likely to gravitate toward employers with a strong commitment to legal compliance and ethical business practices.
  • Loss of Investor Confidence: For companies seeking external funding or partnerships, employment law violations can erode investor confidence. Investors are increasingly scrutinizing ethical and legal practices, and a track record of compliance is crucial for securing financial support.

EOR as the Catalyst for Change

As the solution to hiring challenges in Latin American countries, EOR assumes the mantle of the official employer, navigating the legal, administrative, and cultural landscapes. By doing so, it becomes the linchpin for companies seeking to harness the region’s tech talent without succumbing to the complexities that may impede success.

What is EOR?

Employers of Records (EORs) are professional employer organizations. It takes on the role of the official employer for a company’s offshored employees, managing the intricacies of international employment. This includes navigating local labor laws, ensuring payroll accuracy, handling benefits administration, and mitigating legal risks associated with offshore hiring.

Main Services of EOR

Legal Compliance

  • Navigating the complex landscape of local labor laws and regulations.
  • Ensuring all employment-related activities adhere to the legal framework of the designated country.

Payroll Management

  • Timely and accurate processing of employee salaries, bonuses, and benefits.
  • Adhering to local tax regulations to ensure compliance and avoid financial penalties.

Benefits Administration

  • Managing employee benefits such as health insurance, retirement plans, and other perks.
  • Ensuring that benefit programs align with local regulations and meet employee expectations.

Tax Compliance

  • Handling all tax obligations and filings on behalf of the employer.
  • Navigating the intricate tax landscape to ensure compliance and prevent legal complications.

HR Administration

  • Overseeing human resources functions, including onboarding and offboarding processes.
  • Managing employee records, performance reviews, and other HR-related tasks.

Risk Mitigation

  • Acting as a protective shield against legal liabilities associated with offshore hiring.
  • Proactively identifying and addressing potential risks to ensure a secure and compliant work environment.

5 TOP Benefits of Cooperation with EOR

  • Streamlined Operations: By handling the intricacies of employment, EOR allows companies to streamline their operations and focus on core business functions.
  • Reduced Legal Risks: EOR assumes legal responsibilities, significantly reducing the risk of non-compliance and legal issues for companies.
  • Cost Efficiency: Outsourcing employment functions to EOR can often be more cost-effective than managing them in-house, leading to operational cost savings.
  • Faster Market Entry: EOR facilitates quicker entry into new markets by efficiently handling the regulatory complexities associated with international employment.
  • Enhanced Flexibility: Companies gain flexibility in scaling their workforce up or down without the burden of navigating complex employment regulations.

As a catalyst for change, EOR not only addresses the challenges of hiring in LATAM but transforms the hiring landscape into an avenue for accelerated growth, reduced risks, and operational excellence.

When Does Your Company Need to Cooperate with EOR?

In the intricate tapestry of LATAM hiring, Employers of Record (EOR) emerges as the guiding force, seamlessly navigating through various scenarios where its expertise becomes paramount. From regulatory intricacies to global expansion strategies, EOR proves to be an essential partner, adeptly addressing the nuanced needs of companies aiming to tap into the vast potential of LATAM talent.

Market Entry and Expansion:

Scenario: A company is eyeing expansion into a LATAM market, seeking to establish a presence without the burden of navigating complex legal and administrative hurdles.

How EOR Helps: EOR accelerates market entry by handling legal compliance, payroll, and other HR functions, allowing the company to establish a foothold swiftly and efficiently.

Project-Based Hiring:

Scenario: A company has a short-term project requiring specialized skills and aims to engage LATAM talent without the long-term commitment of establishing a full-fledged entity.

How EOR Helps: EOR provides the flexibility to hire skilled professionals for specific projects, managing employment logistics for the duration of the project.

Testing New Markets:

Scenario: An organization is considering testing the waters in a new LATAM market before committing to a permanent establishment.

How EOR Helps: EOR offers a low-risk entry strategy by facilitating short-term engagements, enabling companies to gauge market viability without extensive legal obligations.

Navigating Complex Employment Laws:

Scenario: A company is unfamiliar with the intricate employment laws in a specific LATAM country and seeks a partner to ensure compliance.

How EOR Helps: EOR takes on the responsibility of understanding and adhering to local labor regulations, mitigating the risk of legal challenges for the company.

Flexible Workforce Scaling:

Scenario: A company anticipates fluctuating workforce needs in response to project demands and wants the flexibility to scale its team up or down.

How EOR Helps: EOR allows for agile workforce scaling, accommodating changes in staffing needs without the administrative complexities associated with traditional hiring.

Risk Mitigation for Remote Teams:

Scenario: A company is concerned about legal and compliance risks associated with managing remote teams in LATAM.

How EOR Helps: EOR acts as a protective shield, assuming legal responsibilities and reducing the risk of non-compliance for companies managing remote teams.

Handling Payroll and Benefits Administration:

Scenario: A company wants to ensure accurate and timely payroll processing and effective administration of benefits for its LATAM employees.

How EOR Helps: EOR takes on the responsibility of payroll management and benefits administration, ensuring a seamless and compliant compensation process.

In these scenarios, Employers of Record (EOR) emerges as the linchpin, providing tailored solutions to the multifaceted challenges of hiring in LATAM. Whether facilitating market entry, managing short-term projects, or ensuring compliance in unfamiliar legal landscapes, EOR proves to be an invaluable ally in crafting a successful and sustainable offshore hiring strategy.

TurnKey Staffing - Your Reliable EOR in the LATAM Region

Embarking on the LATAM hiring journey? TurnKey Staffing stands as your trusted Employer of Record (EOR), offering a seamless solution to navigate the complexities of hiring in Eastern Europe & Latin America. Let’s explore the benefits that make TurnKey your strategic partner for worry-free offshore talent acquisition.

Here’s What TurnKey Staffing Provides:

Worry-Free Employer of Record Services:

Experience a headache-free hiring process with TurnKey. No more legal intricacies, no liability headaches—just a streamlined approach to finding, hiring, and paying tech talent.

International Legal and Payroll Expertise:

Place an international legal and payroll expert in your pocket. TurnKey’s dedicated legal and HR teams ensure swift, legal, and compliant hiring and payment processes for your offshore talent, shielding you from potential risks.

No Hiring Risks, No Tax Liability:

Legal Exposure Be Gone: TurnKey shields you from employment or tax liabilities, streamlining customer contracts, fundraising, and exits. Mitigate potential risks with vigilant monitoring of legal changes.

Compliance You Can Count On:

Ready to Stop Worrying: Ensure full compliance with local employment laws and tax regulations. Say goodbye to concerns about offshore hiring risks with TurnKey’s robust compliance measures.

IP & NDAs:

The IP Is 100% Yours: Secure your intellectual property. Every member of your TurnKey team signs agreements, based on local laws, assigning all IP rights to you. Background checks ensure the integrity of your team.

Zero Administrative Hassle:

Everything Handled: Receive one monthly invoice for your entire team, covering legal, tax, pension, benefits, compliance, payroll, and accounting. Enjoy flexibility tailored to your needs as you expand into new offshore locations.

With TurnKey Staffing as your EOR in LATAM, your journey into offshore hiring becomes not just seamless but strategically advantageous. The benefits extend beyond administrative ease, providing a foundation for compliant and worry-free growth in the dynamic LATAM tech landscape.

Hire employees from LATAM with our expert support

Summing Up

As CEOs and CTOs contemplate their offshore hiring strategies, the profound implications of employment law violations underscore the need for a trustworthy ally. TurnKey’s unwavering dedication to legal compliance positions it as a strategic partner, not just facilitating talent acquisition but safeguarding companies against the legal pitfalls that could derail their success. In a landscape where every decision shapes the trajectory of offshore ventures, TurnKey stands as the compass, guiding businesses towards a future where compliance isn’t just a legal obligation — it’s a cornerstone of enduring success in the vibrant and promising tech markets of Latin America.

FAQ

Why should my company consider using an Employer of Record (EOR) in LATAM?

Leveraging an EOR in LATAM streamlines the complexities associated with hiring employees, managing payroll, and ensuring legal compliance in unfamiliar territories. EOR services provide a secure and compliant framework, allowing your company to focus on core business activities while accessing top-tier talent seamlessly.

What benefits do EOR services offer in LATAM?

EOR services in LATAM offer a range of benefits, including reduced legal and compliance risks, streamlined payroll processing, and access to a skilled talent pool. Unlike traditional hiring, EORs handle administrative complexities, ensuring that your company remains compliant with local employment laws and regulations without the burden of establishing a legal entity.

How does an EOR help navigate the employment laws across different countries in LATAM?

EORs specialize in navigating the intricate legal landscapes of various LATAM countries. They stay abreast of local employment laws, ensuring your company's compliance. By acting as the employer on record, EORs take on the responsibility of understanding and adhering to country-specific regulations, allowing your company to confidently expand its operations across different regions in LATAM.

December 6, 2023

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