Latin American governments collected $2.3 billion in misclassification penalties from foreign companies in 2024 alone, according to regional tax authority data. Your PayPal payments aren’t invisible, and “contractor” agreements don’t mean what you think they do south of the border.
US companies hiring in Mexico, Colombia, and Costa Rica face a reality check: these countries don’t care what your contract says. They care about how you actually treat workers. Set someone’s schedule? Provide their laptop? Include them in team meetings? Congratulations, you just created an employee relationship, and local authorities have sophisticated systems to find out.
In the next eight minutes, you’ll learn exactly when contractor status works, what triggers employee classification in each country, and how to calculate the real cost difference between doing it right and getting caught.
How LATAM Tax Authorities Track Foreign Employers
Small US businesses often assume their cross-border payments fly under the radar. That assumption costs companies an average of $127,000 per violation when authorities catch up.
The Digital Paper Trail
Modern banking systems create automatic flags for tax authorities. Regular payments over $500 from foreign sources trigger automatic reviews in Mexico, Colombia, and Costa Rica. Your worker’s bank reports these transactions, and government AI systems cross-reference them against social security contributions and tax filings.
Mexico’s SIDIL predictive system now analyzes 43,000 employer audits annually using pattern recognition algorithms. If someone receives consistent monthly payments from your company but reports contractor income with no corresponding employer contributions, red flags appear in the system within 90 days.
Colombia’s UGPP takes a more direct approach. They monitor freelancer platforms, job boards, and even LinkedIn profiles to identify working relationships. One technology company in Bogotá got hit with $890,000 in back payments after UGPP found job postings that described employee duties but offered contractor pay.
Numbers You Should Know:
- Bank transaction monitoring: Payments over $500/month trigger automatic government review in all three countries
- Average detection time: 4-6 months from first payment to initial inquiry
- Worker complaint rate: 23% of misclassification cases start with employee reports
- Cross-border data sharing: Mexico and Colombia now share employer data with IRS under tax treaties
Why Governments Care This Much
The math is simple. When you classify an employee as a contractor, governments lose 20-35% of potential revenue from employer social security contributions. A contractor making $3,000 monthly pays around $450 in self-employment taxes. That same person as an employee triggers $900-$1,050 in combined employer-employee contributions.
Multiply that across thousands of remote workers, and you understand why LATAM countries built entire enforcement divisions. Mexico alone estimates $8.4 billion in annual revenue losses from worker misclassification.
What Employment Status Really Means for Costs
The contractor-versus-employee decision isn’t just about legal compliance. It’s about understanding total compensation costs and what workers actually receive.
The Real Price of Proper Employment
When you hire someone as a full employee in Latin America, your costs extend far beyond their base salary. Here’s what you’re actually paying for:
Mandatory employer contributions range from 25-40% of base salary across Mexico, Colombia, and Costa Rica. A $3,000 monthly employee costs you $3,750-$4,200 in total compensation once you add health insurance premiums, pension contributions, unemployment insurance, and work injury coverage.
Aguinaldo (13th-month salary) appears in December as a mandatory year-end bonus equal to one full month of pay. Your $3,000 monthly employee receives an extra $3,000 in December, pushing annual costs up 8.3%.
Paid time off starts at 15 days in most LATAM countries and increases with tenure. After five years, many employees earn 20-30 days annually. You’re paying full salary while they’re not working.
Severance obligations create long-term liabilities. Fire someone in Mexico after three years? You owe approximately three months of salary plus 20 days per year worked. That termination costs you roughly $13,000 for a $3,000/month employee.
The Contractor Alternative
Contractors receive none of these benefits. They invoice you for services, pay their own taxes, and handle their own insurance. Your $3,000 monthly payment to a contractor costs you exactly $3,000.
But there’s a catch: if the working relationship looks like employment, you’ll pay those benefits retroactively when authorities discover the arrangement, plus penalties and interest.
Mexico’s Subordination Test: What Actually Triggers Employee Status
Mexico uses the strictest worker classification rules in Latin America. Their courts follow a legal principle called “subordination” that overrides whatever your contract says.
The Three-Factor Analysis
Mexican labor law examines three elements when determining employment status:
Personal service means the worker does the job themselves and can’t delegate to someone else. If your graphic designer can’t send their cousin to do the work instead, that’s one strike toward employee status.
Subordination is the killer factor. This means you control how, when, or where they work. Mexican courts consistently rule that any meaningful control over work methods or timing creates subordination.
Regular payment means they receive consistent compensation instead of project-based fees. Monthly or bi-weekly payments signal employment more than one-time project invoices.
Control That Creates Employee Status
Mexican authorities look for specific control indicators that prove subordination exists:
You set their schedule or require availability during specific hours. Telling someone they need to be online 9-to-5 creates employee status, even if they work from home.
You provide work equipment or require them to use company systems exclusively. Give them a laptop, email address, and Slack account? That’s employee treatment.
You include them in company activities like regular meetings, training sessions, or team events. Inviting contractors to your weekly all-hands meeting tells Mexican courts they’re really employees.
You pay them regular salaries instead of invoicing for completed deliverables. A fixed monthly payment looks like employment compensation, not contractor fees.
You require exclusivity or prevent them from working for other companies. Contractors should have multiple clients.
Quick Trivia: Mexico’s Federal Labor Law hasn’t been substantially updated since 1970, but court interpretations have expanded “subordination” to cover remote work arrangements that didn’t exist when the law was written. Judges now apply 1970s factory-floor principles to 2025 Zoom meetings.
What Happens When You Get It Wrong
Administrative fines for misclassification violations can reach $315,000 USD for systematic violations, though smaller companies typically face $15,000-$50,000 in penalties for first offenses.
The real cost comes from retroactive benefit payments. You’ll owe all the social security contributions, aguinaldo payments, vacation pay, and other benefits they should have received as employees. For a three-year relationship with a $3,000 monthly worker, that’s approximately $35,000-$45,000 in back payments before interest and penalties.
Documentation Mexican Authorities Expect
Legitimate contractor relationships require proper business infrastructure. Your Mexican contractors need:
Business registration (Registro Federal de Contribuyentes) showing they operate as independent service providers.
Electronic invoicing (CFDI) for every payment they receive from you. Mexico’s tax system requires digital invoices for all business transactions.
Multiple clients providing income. If 80% or more of their income comes from your company, Mexican courts presume employment regardless of your contract.
Clear deliverable-based agreements that specify results, not hours or methods. “Complete website redesign by March 15” works. “Work 40 hours per week doing design tasks” doesn’t.
Colombia’s Reality-Over-Paperwork Approach
Colombia follows a legal doctrine called “primacy of reality” that makes your carefully drafted contractor agreement nearly worthless if the actual relationship looks like employment.
The Three Elements Colombian Courts Examine
Personal activity means the work can’t be delegated. If your Colombian developer must do the coding themselves, that’s element one.
Continued subordination means you direct their work methods, timing, or output. Weekly check-ins where you review their progress and provide specific instructions? That’s subordination.
Remuneration means they receive regular compensation. Bi-weekly or monthly payments signal employment more than quarterly project invoices.
The “Core Business Activity” Trap
Here’s where Colombia gets tricky for US companies: even legitimate contractor relationships can create liability if the work relates to your normal business operations.
You’re a software company hiring a Colombian developer? Colombian labor law presumes that relationship is employment because software development is your core business. The law assumes you’re trying to avoid employment obligations by misclassifying someone doing work your employees normally do.
This “core business activity” rule caught one US SaaS company by surprise. They hired five Colombian developers as contractors, thinking their clear deliverable-based contracts provided protection. Colombian authorities ruled all five were employees because the developers were building the company’s actual product, not providing auxiliary services.
Recent Law Changes Expand Liability
Colombia’s 2025 labor reforms expanded what counts as subordination and increased maximum penalties to $1.5 million USD. The new laws specifically target remote work arrangements where foreign companies exercise control over Colombian workers.
Numbers You Should Know:
- Social security contribution rate: 32.5% of employee income (split between employer and employee)
- Minimum contractor invoice requirement: Monthly invoices using Colombia’s electronic system
- Economic dependence threshold: 80%+ income from one client triggers employee presumption
- Average UGPP investigation length: 8-14 months from initial inquiry to final determination
Red Flags Colombian Authorities Watch For
Economic dependence is the biggest warning sign. If someone relies on your company for most of their income, Colombian law presumes employment. One client providing 80% or more of annual income creates a rebuttable presumption of employment status.
Standard business hours matter. Contractors should set their own schedules. Requiring someone to work 9-5 Colombian time signals employment.
Company email and branding indicate integration into your business. Listing contractors on your website team page or giving them company email addresses tells authorities they’re employees.
Policy compliance means following your internal procedures. When contractors must use your project management tools, follow your code review process, and attend mandatory meetings, they look like employees.
Documentation Requirements for Colombian Contractors
Legitimate independent contractors in Colombia need:
RUT registration (tax ID) proving they operate as independent businesses.
Electronic invoicing for all services using Colombia’s validated invoice system.
Multiple client base demonstrating genuine independence. Your contractor should have invoices showing other clients.
Result-based contracts that specify deliverables, not hours or supervision requirements.
Costa Rica’s Worker-Friendly Legal Presumptions
Costa Rica takes the most pro-worker approach of the three countries. Their law creates a legal presumption that anyone providing services is an employee unless you can prove otherwise.
The Employment Presumption Burden
Costa Rica’s Labor Code presumes employment relationships exist between any service provider and recipient. This puts the burden of proof on you to demonstrate someone is legitimately a contractor.
If a dispute reaches court, you must prove the contractor classification is legitimate. The worker doesn’t have to prove they’re an employee; the law assumes they are unless you show clear evidence of genuine independence.
Indicators Costa Rican Courts Examine
Exclusivity of services means working only for your company. Contractors with just one client raise immediate red flags.
Fixed work locations or schedules indicate employment. Requiring someone to work specific hours or from particular locations signals employee status.
Periodic payment structures like weekly or monthly compensation suggest employment more than project completion fees.
Assignment acceptance obligation means they can’t refuse tasks. Contractors should be able to decline projects without consequences.
Company-provided tools indicate employment. Supplying equipment, software licenses, or office resources suggests employee treatment.
Policy compliance requirements mean following your internal procedures. When contractors must adhere to your employee handbook, they’re probably employees.
Costa Rica’s Remote Work Law Complications
Costa Rica’s 2025 Remote Work Law explicitly authorizes telework from abroad” → } while maintaining all labor protections for remote employees. This creates additional compliance obligations for US companies with Costa Rican remote workers.
The law requires:
Employer consent for international remote work arrangements, creating written documentation of the arrangement.
Extraterritorial insurance coverage protecting workers even when they’re working from abroad.
Digital disconnection rights guaranteeing workers can ignore communications outside agreed hours.
Work equipment reimbursement for internet, electricity, and home office setup costs.
Documentation Costa Rica Demands
Employment contracts must include comprehensive job details and be filed with MTSS (Ministry of Labor) within 15 days of hire.
Independent contractor agreements must clearly establish autonomy, specify deliverable-based payment instead of time-based compensation, document the contractor’s independence in work methods, establish completion-based payment structures, and include contractor business registration information.
Social security enrollment is required for contractors making over approximately $600 monthly. Even independent contractors must register with Costa Rica’s social security system (CCSS) and pay contributions.
Penalties for Getting It Wrong
Costa Rica’s enforcement combines administrative fines with retroactive benefit obligations. Violations trigger 5% fines on unreported income plus retroactive social security billing extending back four years.
For a $3,000 monthly misclassified worker discovered after three years, you’re facing:
- Three years of unpaid social security contributions: approximately $34,000
- Three years of unpaid aguinaldo bonuses: $9,000
- Unpaid vacation pay: $3,600
- Administrative fines: $12,000-$25,000
- Interest on late payments: $6,000-$8,000
Total liability: $64,000-$80,000 for one worker.
US Tax Implications: What American Companies Owe
Worker classification creates dramatically different US tax obligations beyond LATAM compliance issues.
Employee Tax Requirements
True employment relationships require you to:
Withhold federal income tax from every paycheck based on their W-4 elections.
Pay Social Security and Medicare taxes totaling 7.65% of wages (and withhold matching 7.65% from employee).
Pay FUTA unemployment tax of 6% on the first $7,000 in annual wages (reduced to 0.6% with state credits).
File annual W-2 forms reporting total compensation, withholdings, and taxes paid.
Contractor Tax Requirements
Foreign contractors working entirely outside the US for your company generally require no US tax withholding or 1099 reporting. However, you should have them complete:
Form W-8BEN (individuals) or W-8BEN-E (entities) documenting their foreign status. These forms remain valid for three years and prevent 30% backup withholding on payments.
Tax Treaty Considerations
Tax treaties dramatically affect withholding requirements for certain payment types.
Mexico’s 1993 tax treaty provides significant relief. Personal services income is exempt from US withholding if the person is present less than 183 days annually and paid by non-US residents. Dividend withholding drops from 30% to 10%.
Colombia has limited treaty provisions with standard 30% withholding on US-source income, though some services qualify for 10% rates if locally untaxed.
Costa Rica has NO comprehensive tax treaty with the United States. This results in full 30% withholding on all US-source income with no relief available.
Recent IRS Developments
The IRS increased Form 1099-NEC reporting threshold from $600 to $2,000 effective January 2026, reducing reporting burdens for companies making smaller contractor payments.
Enhanced Foreign Earned Income Exclusion scrutiny means the IRS is examining digital nomad tax situations more carefully.
New Form 9123 requires digital nomad visa status reporting for certain foreign workers.
Transfer Pricing Trap for Related Entities
If you’re paying a related-entity contractor (like a foreign subsidiary providing services), IRS Section 482 requires arm’s length pricing documentation. Penalties for transfer pricing violations can reach 40% of unpaid taxes when documentation is inadequate.
Red Flags That Trigger Reclassification Audits
Certain patterns immediately attract government attention across all three LATAM countries.
Universal Warning Signs
Control and subordination factors include setting specific work hours, directing work methods, requiring specific work locations, and implementing disciplinary measures.
Financial integration indicators include regular salary payments versus project-based invoicing, equipment provision by the company, expense reimbursement policies, and employee-type benefits like health insurance or paid time off.
Relationship permanence factors include indefinite arrangements without end dates, exclusive service requirements, integration into company hierarchy, and corporate email usage.
Mexico-Specific Triggers
Working over 48 hours weekly automatically requires employee status under Mexican law.
Christmas bonus payments (aguinaldo) to contractors signal you’re treating them as employees.
IMSS social security contributions for supposed contractors prove employment relationships.
Regular company facility usage indicates employee integration.
Colombia-Specific Triggers
Economic dependence on a single company creates presumption of employment.
Missing contractor business registration means they can’t legitimately operate as independent businesses.
Lack of electronic invoice systems suggests informal employment arrangements.
Exclusive employer relationships without other clients prove dependence.
Costa Rica-Specific Triggers
Working standard business hours (6 AM to 6 PM) indicates employee status.
Receiving company benefits or vacation pay proves employee treatment.
Following internal policies like employee handbooks suggests integration.
Lacking invoice-based payment systems indicates informal employment.
Recent Audit Trends Show Sophisticated Enforcement
Mexico plans 43,000 federal labor inspections in 2024-2025, a 34% increase, using AI-powered SIDIL predictive systems focusing on telework compliance and psychosocial workplace risks.
Colombia’s UGPP investigations increasingly target foreign companies, with Law 2381 implementing new Social Security audit requirements in July 2025.
Costa Rica’s MTSS continues increasing workplace audits while courts consistently favor workers in “Reality of Contract” disputes.
When Employer of Record Services Make Financial Sense
The EOR-versus-direct-hiring decision comes down to risk tolerance, scale, and complexity management.
Clear EOR Use Cases
Use an EOR service when you:
Need full-time hours from workers (30+ hours weekly consistently).
Require specific availability during your business hours for meetings and collaboration.
Have core business work that isn’t just temporary project-based assignments.
Want to provide benefits like health insurance, paid vacation, or retirement contributions.
Plan multiple hires in the same country, making compliance infrastructure worthwhile.
Lack in-house compliance expertise for navigating local labor laws.
When Direct Contractor Hiring Works
Legitimate contractor relationships work when you have:
Genuine project-based work with clear deliverables and defined end dates.
Schedule flexibility allowing contractors to set their own work hours and methods.
Multiple client base where they work for several companies, not just yours.
No specific hour requirements and asynchronous collaboration.
Clear temporary relationships tied to specific projects with obvious endpoints.
The Real Cost Analysis
EOR services typically cost $300-600 monthly per employee depending on the country and benefit package. This covers all compliance, benefits administration, payroll processing, and legal liability.
Direct employee hiring seems cheaper upfront at approximately $50-$150 monthly for payroll processing, but requires you to navigate local labor laws, set up compliant systems, handle benefits administration, and assume all legal liability.
Break-Even Points by Country
Mexico: EOR services make sense until you reach approximately 15-25 employees annually. Beyond that threshold, establishing your own legal entity costs around $20,000 but saves $30,000+ yearly versus EOR fees exceeding $50,000 for 25 workers.
Colombia: Break-even occurs at 20-30 employees given higher entity setup costs and more complex compliance requirements.
Costa Rica: Smaller market size and simpler regulations create break-even at 12-20 employees.
Strategic Advantages Beyond Cost
Risk transfer means EOR providers assume 100% compliance liability, protecting you from classification penalties.
Speed to market enables hiring in two weeks versus 3-6 months for entity setup.
Scalability lets you grow teams without infrastructure investment.
Easy exit allows market departure without entity dissolution costs and complications.
Many companies continue using EOR services even above break-even points because flexibility and risk mitigation outweigh cost optimization.
Did You Know? The global EOR market grew 186% between 2020 and 2024, with Latin America representing the fastest-growing region. Companies increasingly view EOR fees as insurance premiums rather than service costs, paying for compliance protection instead of just payroll processing.
Bootstrapping your growth? Scale smarter with elite LATAM professionals at 70% lower salary cost. No compromise on quality, compliance, or speed. Book a free 15-minute strategy call.
Strategic Compliance: Your Implementation Roadmap
Smart compliance starts before you make your first hire. Here’s how to build protection into your LATAM hiring process from day one.
Phase 1: Pre-Hiring Risk Assessment
Document your intended relationship by writing down whether you need an employee or contractor before you start recruiting. This documentation protects you if classification questions arise later.
Review local labor requirements for your target country. Mexico, Colombia, and Costa Rica have different thresholds and requirements that affect classification decisions.
Assess control and integration factors by honestly evaluating how much direction you’ll provide over work methods, schedules, and location.
Evaluate exclusivity and dependency by determining if this person will work only for you or maintain other clients.
Phase 2: Compliance Threshold Evaluation
Determine permanent establishment triggers by calculating if your activities in the country create tax presence requiring local entity registration.
Assess core business function involvement to understand if the work relates to your primary business operations or auxiliary support services.
Project employee counts for the next 12-24 months to evaluate EOR versus direct hiring economics.
Review industry-specific regulations that might apply to your business type in each LATAM country.
Phase 3: Operational Risk Mapping
Map work relationship control factors including who sets schedules, provides direction, and evaluates performance.
Document equipment and resource provision to understand if you’re supplying tools that indicate employee status.
Assess schedule and method control requirements based on your operational needs.
Evaluate disciplinary authority needs for managing performance and behavior.
Phase 4: Financial Structure Analysis
Calculate total employment costs including base salary, mandatory benefits, social security contributions, and compliance overhead.
Compare EOR versus direct hiring expenses across 12-month and 36-month timeframes.
Assess currency and payment requirements including foreign exchange risk and transfer costs.
Evaluate tax withholding obligations for both US and local tax requirements.
Ongoing Compliance Monitoring
Maintain proper employment agreements that accurately reflect working relationships and comply with local requirements.
Document contractor independence evidence including multiple client relationships, invoice-based payments, and method independence.
Track working hours and control to prevent drift toward employee-type relationships with contractors.
Conduct quarterly internal reviews examining whether actual practices match documented relationships.
Audit Preparedness Protocol
Monitor regulatory changes in your target LATAM countries through local legal counsel or EOR provider updates.
Maintain local legal counsel relationships for quick consultation when questions arise.
Prepare audit response procedures including documentation gathering, authority communication, and remedy implementation.
Critical Mistakes Leading to Severe Penalties
Understanding common classification failures helps you avoid expensive mistakes other companies have made.
Contractor Misclassification
The mistake: Treating workers like employees while calling them contractors to avoid benefit costs.
The consequences: Fines reaching hundreds of thousands to millions of dollars, depending on violation severity and duration.
Real example: One US marketing agency faced $430,000 in penalties after Colombian authorities discovered five “contractors” who worked 40-hour weeks, attended daily standup meetings, used company email, and couldn’t work for other clients.
Inadequate Documentation
The mistake: Operating on handshake agreements or vague contracts without proper legal documentation.
The consequences: Courts default to employee status when documentation is inadequate, triggering full retroactive benefit obligations.
Real example: A software company lost a Mexican labor court case despite arguing their developer was a contractor because they couldn’t produce contracts specifying deliverables, independence, or payment terms.
Improper Invoice Systems
The mistake: Accepting personal payments or informal invoices that don’t prove legitimate business operations.
The consequences: Lack of proper invoicing proves contractors aren’t operating real businesses, supporting employee reclassification.
Real example: Costa Rican authorities reclassified 12 “contractors” as employees after discovering none had business registrations or issued proper electronic invoices.
Payroll Tax Errors
The mistake: Misapplying tax withholding rates, missing payment deadlines, or calculating contributions incorrectly.
The consequences: Tax penalties, interest charges, and criminal liability for payroll tax evasion in serious cases.
Real example: A logistics company faced $156,000 in back taxes and penalties for three years of incorrect social security calculations in Colombia.
Registration Failures
The mistake: Failing to register with required government systems (REPSE in Mexico, UGPP in Colombia, CCSS in Costa Rica).
The consequences: Operating without proper registration creates presumption of attempting to hide employment relationships.
Real example: Mexican authorities fined a customer service outsourcer $89,000 for operating without REPSE registration despite having proper employee contracts otherwise.
Your Path Forward: Making Classification Decisions That Protect Your Business
Latin American labor laws consistently prioritize worker protection over contractual arrangements. Courts across Mexico, Colombia, and Costa Rica examine actual working relationships rather than accepting contract labels at face value.
Successful compliance requires ensuring your operational practices align perfectly with your intended classification. Comprehensive documentation supporting every classification decision protects you during audits. Experienced local legal counsel helps navigate complex situations before they become problems. Robust monitoring systems track evolving regulations and catch relationship drift before authorities do.
Conservative approaches favoring EOR services during market entry and employee classification when relationships seem ambiguous provide critical protection against costly compliance failures. Given severe financial and criminal penalties for violations, overinvestment in compliance infrastructure costs far less than underinvestment that leads to government enforcement.
The choice between direct hiring and EOR services ultimately depends on your risk tolerance, employee growth projections, operational complexity tolerance, and strategic flexibility requirements. Companies succeeding in LATAM hiring treat compliance as competitive advantage rather than overhead expense.
Frequently Asked Questions
Can I hire someone in Mexico as a contractor if they only work 20 hours per week for me?
Part-time hours help support contractor status but don’t guarantee it. Mexican authorities examine the overall relationship, including how much control you exercise, whether they have other clients, and if they can refuse assignments. Working 20 hours weekly while maintaining three other clients and setting their own schedule supports contractor classification. Working 20 hours weekly as your only client, following your schedule, and attending your team meetings creates employee status regardless of hours.
What happens if a contractor complains to local authorities that they should be an employee?
Government investigations typically take 6-12 months depending on the country. Authorities will request employment contracts, payment records, communications, and work product documentation. They’ll interview both you and the worker about actual working conditions. If they determine misclassification occurred, you’ll owe retroactive benefits, social security contributions, and administrative fines. The worker gains full employment rights including severance protections going forward.
Do I need to withhold US taxes from payments to LATAM contractors?
Foreign contractors working entirely outside the US for your company generally require no US tax withholding. Have them complete Form W-8BEN to document foreign status. However, if they perform services while physically present in the United States, different rules apply. Consult a tax professional for situations involving US-source income or ambiguous location situations.
How long do I have to correct classification mistakes before penalties start?
Most LATAM countries allow voluntary compliance programs where you can reclassify workers and pay back benefits without criminal penalties if you act before formal investigation begins. Once authorities initiate audits, voluntary compliance options disappear. If you realize you’ve misclassified someone, consult local employment counsel immediately about remedy options before government discovery.
Can using an EOR service protect me from all classification liability?
Reputable EOR providers assume full compliance liability as the legal employer of record. However, you must accurately describe the working relationship to the EOR. If you tell them the person is a contractor but then treat them as an employee with schedules, direction, and integration, the EOR may deny coverage for resulting violations. EOR protection requires honest disclosure and following their compliance guidance about managing the relationship.
What This Means for Your LATAM Hiring Strategy
Worker classification in Mexico, Colombia, and Costa Rica isn’t negotiable or flexible. Your contract doesn’t determine status; your actions do. Small US companies can’t hide behind PayPal payments or assume distance creates invisibility.
The good news: legitimate contractor relationships absolutely work when structured properly. The better news: employee relationships through EOR services cost far less than risking misclassification penalties.
Your next hire doesn’t have to be complicated. It just has to be compliant.
Talent Without Borders.
About the Author
The author is Co-Founder and VP of Sales at Viva Global, a leading remote staffing agency and employer of record specializing in connecting US companies with the top 1% of Latin American talent under the motto “Talent Without Borders.” With extensive experience across Fortune 500 companies, top-rated tech firms, and early-stage startups in sales and customer success roles, the author has witnessed firsthand how recruitment processes evolve as companies scale. This diverse background has shaped a unique perspective on talent acquisition that now drives Viva Global’s approach to placing remote employees across various industries, helping businesses overcome hiring challenges and build thriving distributed workforces.
For more actionable strategies and real-world insights on scaling your business, check out my podcast, “Hire Smart, Scale Fast.” Each episode features expert interviews and proven playbooks to help you build and lead a world-class team. Listen now at vivaglobal.us/hire-smart-scale-fast.
