As someone who regularly talks with entrepreneurs about scaling their teams, I hear the same question all the time. “Nearshoring sounds amazing, but what’s the best way to actually hire talent from Latin America?”
Nearshoring is exploding in popularity as businesses tap into Latin America’s highly skilled workforce at competitive rates. But after the initial excitement of finding great talent fades, reality sets in. Complex international compliance requirements, confusing cross-border employment regulations, and the risk of contractor misclassification become real obstacles.
Entrepreneurs frequently ask me, “Can’t I just hire directly? Why use an Employer of Record?” These conversations made me realize something important. Knowing the difference between these hiring methods can save you more than just headaches, it can save your business, literally.
Here’s why using an Employer of Record (EOR) when nearshoring isn’t just another option; it’s your competitive edge to safely and effectively scale your business.
Remote Staffing vs. Employer of Record: What’s the Difference?
Let’s clear up a common confusion right away. Though these terms are sometimes used interchangeably, they represent fundamentally different services:
Remote Staffing Agencies: Finding Your Talent
Remote staffing agencies primarily focus on talent acquisition. They help you:
- Source qualified candidates
- Conduct initial screening and interviews
- Negotiate salary offers
- Present candidates for your final selection
Think of them as matchmakers who connect you with potential employees or contractors. Their involvement typically ends once a successful match is made, and they usually charge a recruitment fee or placement percentage.
Employers of Record: Protecting Your Business
An Employer of Record (EOR) plays a completely different role. They:
- Become the legal employer of your team members
- Handle all employment compliance matters
- Manage payroll, benefits, and taxes
- Take on legal liability for employment matters
With an EOR, you maintain complete control over day-to-day work and management, while they handle the legal and administrative complexities.
EOR vs. Direct Hiring: Understanding the Costs and Risks
Before diving deeper into solutions, let’s compare the costs and risks of using an Employer of Record versus direct hiring for your nearshore talent:
| Factor | EOR Approach | Direct Hiring Approach |
|---|---|---|
| Setup Costs | $0 (EOR handles entity setup) | $15,000–$50,000+ (Legal entity registration, local office, HR infrastructure) |
| Compliance Risk | Low (EOR assumes liability for labor laws, taxes, benefits) | High (Employer must navigate complex regulations; penalties for missteps) |
| Time to Hire | 2–4 weeks | 3–6 months (Entity setup delays) |
| Ongoing Management | EOR handles payroll, taxes, benefits | Internal HR team required |
| Exit Flexibility | Easy termination per EOR contract terms | Complex severance laws (e.g., Brazil’s FGTS fund) |
As this comparison shows, the EOR approach offers significant advantages in terms of speed, cost, and risk mitigation. Recent studies show that LATAM EOR users report 40% lower operational costs compared to direct hiring (Ventes Mexico, 2024).
Let’s understand the problem that keeps many entrepreneurs from safely tapping into Latin American talent.
Imagine this scenario: You’ve found an amazing developer in Colombia who charges half what you’d pay in the US. You set up a contractor agreement, make monthly payments, and everything seems perfect… until it’s not.
Six months later, you receive notice of an audit. Local authorities claim your “contractor” should be classified as an employee under Colombian law. Suddenly, you’re facing:
- Significant financial penalties ($1.58 million in the worst cases)
- Back taxes and benefits payments
- Legal proceedings in a foreign country
- Damage to your company’s reputation
This isn’t a far-fetched scenario. Latin American countries have strict employment laws that often differ dramatically from US regulations.
FREE RESOURCE: Download our 2025 Guide to Contractor vs. Employee Classification in LATAM
How Misclassification Happens
Most entrepreneurs don’t deliberately misclassify workers. It happens through common practices that trigger employee status:
- Setting specific working hours
- Providing company equipment
- Paying regular salaries instead of project fees
- Exercising direct control over work methods
- Requiring exclusivity
In Latin America, countries like Brazil, Mexico, Colombia, and Argentina each have their own classification criteria that are often more stringent than US standards. For example, in Argentina, even minor details like giving your contractor a company email address can trigger employee classification.
Cross-Border Employment Laws: Key Differences by Country
| Country | Key Employment Laws | Compliance Considerations |
|---|---|---|
| Brazil | – 13th salary (annual bonus) – Mandatory social security (INSS) contributions – Strict termination rules (FGTS severance fund) | High penalties for misclassification (up to 100% of owed benefits); Complex labor litigation trends |
| Mexico | – Mandatory profit sharing (10% of taxable income) – Social security (IMSS) enrollment – Severance pay for unjust dismissals | Fines for misclassifying contractors (up to $25k per case); Rising unionization in tech hubs |
| Colombia | – Severance pay (1 month/year worked) – Mandatory bonuses (prima, cesantías) – Orange Economy Law tax incentives for tech roles | Strict probation period rules; Recent reforms increasing paid leave entitlements |
| Argentina | – Inflation-adjusted salaries (collective bargaining) – Mandatory social charges (20–23% of salary) – High severance for layoffs | Currency volatility risks; Frequent labor strikes; Complex payroll adjustments for hyperinflation |
The 4 Key Advantages of Using an EOR for Nearshoring
1. Eliminate Compliance and Misclassification Risks
When you work with an EOR for your international compliance management:
- Your team members are legally employed in their home countries
- All local labor laws are automatically followed
- Employment contracts meet country-specific requirements
- Proper tax withholding and reporting is handled for you
Mark, a software startup founder, learned this lesson the hard way: “We hired five contractors in Brazil and Mexico before realizing we were creating significant liability. Switching to an EOR cost a bit more monthly but eliminated a potential $200,000 risk. That’s the best insurance policy I’ve ever purchased.”
According to recent data, companies using EORs report a 95% reduction in compliance-related concerns and virtually eliminate the risk of worker misclassification penalties, which can range from $5,000 to over $1.5 million depending on the country and severity.
2. Save Time and Resources on Administrative Tasks
Running a business requires focus. EORs free you from time-consuming administrative work:
- No need to research constantly changing international regulations
- No payroll processing across multiple countries and currencies
- No benefits administration headaches
- No tax filing in foreign jurisdictions
Sarah, who runs a digital marketing agency, shares: “Before using an EOR, I spent nearly 15 hours each month just managing payments and compliance issues for our Latin American team members. That’s almost two full workdays I now spend on growing my business instead.”
Simplify compliance with an EOR partner: Let Viva Global handle the legal complexities of international hiring while you focus on building your team. Schedule a free 30-minute strategy session →
3. Provide Better Benefits and Security to Your Team
When you properly employ team members through an EOR rather than hiring them as contractors:
- They receive proper health insurance and benefits
- They build retirement savings and social security
- They gain employment stability and protection
- They feel more committed to your company
“Our retention rate increased by 40% after switching to proper employment through an EOR,” reports Daniel, a tech entrepreneur. “Our Latin American team members tell us they appreciate the security and benefits, and it shows in their commitment to our company.”
4. Scale Quickly Without Building Infrastructure
Perhaps the most compelling advantage for growth-minded entrepreneurs is the ability to scale:
- Hire in new countries without establishing legal entities
- Onboard employees in days rather than months
- Test new markets with minimal commitment
- Adjust your team size up or down as needed
Carlos expanded his e-commerce business using an EOR: “We were able to build specialized teams in Colombia, Mexico, and Argentina without navigating three different legal systems or creating foreign subsidiaries. We went from idea to fully operational teams in under three weeks.”
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The Cost Question: Is an EOR Worth It?
Typical EOR Costs
EOR services generally cost between $199-$650 per employee per month, or approximately 10-20% of the employee’s gross salary.
While this might seem significant at first glance, consider what you’re getting:
- Complete compliance and risk mitigation
- Elimination of entity setup costs ($15,000-$50,000 per country)
- No need for in-house international HR expertise
- Time savings for you and your team
The True Cost of Going Without an EOR
The real comparison isn’t between using an EOR and doing nothing. It’s between using an EOR and:
- Establishing legal entities in each country
- Hiring international compliance experts
- Managing multiple payroll systems
- Taking on significant legal risk
A single misclassification claim can cost tens or hundreds of thousands of dollars in penalties, back taxes, and legal fees. In contrast, one study showed that businesses saved an average of 40-60% on overall employment costs when using an EOR compared to establishing their own foreign entities.
FREE CALCULATOR: See how much you could save with Viva Global’s EOR services
Who Benefits Most from EOR Services?
Different types of businesses see unique advantages when using an EOR for nearshore hiring:
By Industry
| Industry | EOR Advantages |
|---|---|
| Tech Startups | Rapid scaling without entity setup; access to LATAM AI/cloud talent |
| Manufacturing | Compliance with unionized labor laws in Mexico/Brazil |
| Fintech | Mitigation of currency volatility risks (especially in Argentina/Colombia) |
By Company Size
| Size | Use Case |
|---|---|
| Startups (5–10 employees) | Avoid legal costs; hire bilingual developers in LATAM within weeks |
| SMBs (50–100 employees) | Manage multi-country teams without local HR departments |
| Enterprises (100+ employees) | Centralize compliance for regional hubs (e.g., Brazil for AI, Colombia for security) |
Making the Right Choice for Your Business
When an EOR Makes Sense:
- You’re hiring team members in countries where you don’t have a legal entity
- You need to move quickly and can’t wait months to establish infrastructure
- You want to focus on your core business rather than international compliance
- You’re concerned about misclassification risks
- You’re testing new markets before making larger commitments
When You Might Consider Alternatives:
- You already have established legal entities in your target countries
- You have in-house expertise in international employment law
- You’re only hiring for very short-term projects (though even here, compliance risks remain)
Getting Started with an EOR: A Simple Process
If you decide an EOR is right for your business, here’s what the process typically looks like:
- Select your EOR partner: Look for experience in your target countries and industry
- Choose your compensation structure: Your EOR will help you develop competitive, compliant packages
- Make a job offer: Once your candidate accepts, the EOR handles the employment contract
- Onboarding: The EOR manages all necessary paperwork and compliance
- Ongoing management: You direct the day-to-day work while the EOR handles administrative tasks
Most entrepreneurs are surprised by how simple the process is. Many business owners hear the words, “international hiring” and immediately expect the process to be complicated. But with an EOR like Viva Global, it’s actually easier than hiring in the US.
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Combining Staffing and EOR Services for Maximum Benefit
Many successful entrepreneurs are discovering the power of combining specialized services. Using remote staffing agencies to find talent and an EOR to employ them gives you the best of both worlds:
- Expert talent acquisition aligned with your specific needs
- Complete compliance and risk management
- Simplified administration across your entire team
- The ability to focus entirely on your business goals
Key EOR Benefits for 2025 and Beyond
The global talent marketplace continues to evolve, and businesses using EORs for nearshoring are seeing significant advantages:
- Speed to Market: Companies using EORs report onboarding international talent 75% faster than those establishing their own entities
- Reduced Legal Exposure: EOR clients face virtually zero compliance violations, compared to a 32% risk rate for companies managing cross-border employment themselves
- Cost Efficiency: LATAM EOR users report 40% lower operational costs compared to direct hiring approaches
- Focus on Core Business: Executives using EORs save an average of 15-20 hours per month previously spent on international HR management
The most successful businesses are using EORs to build global teams while maintaining complete protection from the complex risks of cross-border employment.
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The Viva Global Advantage: Smart Matching System
At Viva Global, we’ve transformed the nearshore hiring process with our proprietary Smart Matching System™. We don’t just connect you with any Latin American talent—we find the perfect match for your specific needs. Our data-backed approach combines human expertise with predictive hiring algorithms to identify pre-vetted, culturally aligned talent ready to contribute from day one.
With access to 10,000+ pre-screened candidates and a streamlined process that delivers top candidates in just 7-10 days, we’ve eliminated the guesswork from remote hiring. The result? Faster placements, stronger teams, and long-term success—all with a simple, transparent fee structure.
Taking the Next Step
The global talent marketplace has changed forever. Geographic boundaries no longer limit who can contribute to your company’s success. Latin America, with its deep talent pool, convenient time zones, and competitive costs, represents an extraordinary opportunity for US entrepreneurs.
By understanding the critical difference between finding talent (staffing) and employing it properly (EOR), you can build your dream team while protecting your business from significant risks.
The entrepreneurs who will thrive in the coming years aren’t just those with the best ideas or most funding. They’re the ones who build the most effective teams while avoiding the compliance pitfalls that derail their less-informed competitors.
As you consider your next hire, ask yourself: Is saving a few hundred dollars per month on proper employment worth risking thousands or even millions in penalties? For most forward-thinking entrepreneurs, the answer is clear.
Ready to explore how an EOR can transform your nearshoring strategy? Book a free consultation call today!
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.
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