Latin America (LATAM) is attracting increasing attention from global employers seeking skilled talent, competitive costs, and time zone alignment with North America.
Many companies are drawn to the region’s skilled workforce, competitive costs, and growing tech ecosystem. However, expanding into LATAM isn’t without challenges. Each country has its own complex labor laws, tax requirements, and compliance risks that companies must navigate to operate effectively.
Before you begin tapping into this skilled talent pool to build your remote team, it’s essential first to understand the compliance requirements within the region.
Key takeaways:
- Latin America is home to a highly skilled and educated talent pool experienced in collaborating with U.S. and European teams.
- Navigating country-specific compliance, labor laws, and currency regulations requires planning or support from an Employer of Record.
- Misclassifying contractors can result in severe financial penalties and legal exposure, particularly in Mexico and Brazil.
Why LATAM Is an Attractive Hiring Market
Skilled Talent Pool
Latin American countries are home to a wealth of talent, particularly in engineering, tech, finance, and customer support. Many of these workers already have experience working with U.S. or European companies.
In fact, large companies like Microsoft, Amazon, and IBM have long employed teams across LATAM, creating a seasoned workforce familiar with U.S. and European business norms.
Latin America’s investments in STEM have also made the region a hub for tech talent. In fact, Mexico graduates a higher percentage of STEM students than the U.S. (26% vs. 20%), and Brazil isn’t far behind, at 17%. Meanwhile, English proficiency among young professionals is rising, particularly in Argentina, Colombia, and Mexico.
Cost Efficiency
One advantage of hiring in LATAM is cost, since salaries are typically much lower than in the U.S. or Europe — sometimes 30-70% lower. According to the State of LatAm Hiring Report, U.S. companies often save more than $30,000 per hire when recruiting remote LATAM talent.
These savings don’t just help the bottom line, though — companies can also reinvest those savings in research and development, marketing, benefits, or scaling their teams.
Time Zone and Collaboration Advantages
For North American businesses, LATAM’s proximity allows for real-time collaboration. Most U.S. and Canadian companies hiring in the region have an overlap of over six hours in their workday, so employees generally don’t have to adjust their schedules to match their employer’s time zone. If they do, it’s minimal.
This is significant because even a one-hour time zone difference significantly reduces real-time communication by 11%. Plus, teams that keep similar hours tend to have smoother workflows, fewer late-night meetings, and spend less time working outside of traditional business hours.
Growing Ecosystems & Innovation Hubs
In addition to the individual talent available in LATAM, cities such as Mexico City, Guadalajara, São Paulo, Rio de Janeiro, Buenos Aires, Bogotá, Santiago, and Medellín are emerging hubs for innovation and global collaboration.
These growing ecosystems are important because the density of talent and professional networks drives continuous learning. Local tech meetups, accelerators, and an expanding venture capital scene keep professionals up to date on the latest tools and trends. With all this local demand for talent, LATAM workers are motivated to keep their skills sharp, making them highly attractive to international employers.
While the larger cities tend to dominate the spotlight, smaller Latin American hubs are also gaining attention. For example, Montevideo, Uruguay, and Córdoba, Argentina, have established reputations for specialized roles, such as bilingual project managers and data analysts.
Compliance and Hiring Complexities Across LATAM
Before you begin hiring in LATAM, it’s essential to gain an understanding of how to do so in a compliant manner. Overlooking local labor, tax, or data laws can lead to steep fines, legal issues, and reputational harm.
Brazil
Compliance can be especially complex in this country, where extensive labor regulations and strong worker protections create multiple layers of bureaucracy.
The Consolidation of Labor Laws, combined with significant union influence, shapes collective bargaining agreements and requires employers to carefully navigate strict termination rules, mandatory benefits, and other employment obligations.
One key requirement is the severance fund, known as the Fundo de Garantia do Tempo de Serviço (FGTS). Employers must contribute a percentage of each employee’s salary to this fund. Brazil doesn’t allow at-will dismissal, so if an employee is terminated without cause, the employer is required to pay an additional 40% of the total deposits as a penalty.
Other key compliance factors for employers to be mindful of include:
- Increased data protection and employee privacy laws, especially as remote work increases
- Ensuring proper worker classification, as contractor misclassification is a common source of litigation in the country
Argentina
In Argentina, compliance challenges often revolve around inflation and currency volatility, which can pose significant challenges for international employers. Argentina’s national minimum wage — which increased to ARS 322,000 as of August 1, 2025 — is frequently revised, so much so in fact that in 2023, the minimum wage increased almost monthly to keep up with inflation.
There are also additional employment expenses to consider. For example, companies hiring in the country are required to pay 25% to 30% of employees’ base salaries to cover the costs of mandatory benefits.
Additionally, employers must be prepared for significant termination costs if they terminate an employee without just cause. In Argentina, severance is calculated based on an employee’s highest monthly salary for each year of service. Employers are responsible for paying a month’s salary per year for termination without cause.
Mexico
Mexico presents compliance challenges for employers seeking to hire local freelancers due to its strict laws regarding contractor misclassification and outsourcing. In 2021, the Mexican legislature passed a reform that banned the outsourcing or subcontracting of core business functions. Any positions deemed essential to a business’s day-to-day operations must be classified as employees.
Contractors must register with the Ministry of Labor’s Registro de Prestadoras de Servicios Especializados u Obras Especializadas registry and maintain strict compliance, including reporting social security and tax obligations. Failure to do so can result in the company employing the contractor being held liable for unpaid taxes and social contributions. Violations could even result in criminal consequences.
Mexican law also requires most companies to distribute 10% of annual taxable profits to employees. There is a cap in place of a maximum of three months’ salary or the average amount received in the past few years — whichever is more favorable to the employee.
Colombia and Chile
In Colombia, pension and social security contributions can total approximately 30% of an employee’s salary, and employers are required to provide several statutory benefits, including a 13th-month payment known as prima de servicios.
Chile also maintains strict regulations for contractors. Chilean contractors must issue electronic invoices (boletas de honorarios electrónicas) to the Chilean Internal Revenue Service. Companies are required to report all payments made to these workers and clearly state in contracts that contractors retain full autonomy.
In both countries, collective bargaining agreements can be utilized to add or modify employer obligations, particularly in relation to benefits.
Paying Salaries in USD vs. Local Currency
When determining whether to pay remote employees in Latin America in U.S. dollars or their local currency, companies must consider what’s most attractive to talent, as well as what’s legally compliant.
Workers in many LATAM countries prefer to be paid in their local currency. However, in areas where inflation and currency instability are common, such as Argentina and Colombia, workers may choose to be paid in U.S. dollars.
In countries where it’s legal to pay workers in foreign currency, some companies opt to use a hybrid payment model, with part of the salary paid in local currency and the rest in U.S. dollars. This approach enables employees to cover local expenses while preserving a portion of their income from devaluation.
However, paying employees in U.S. dollars can also introduce risk. In Argentina, for example, companies can pay workers no more than 20% of their monthly wages in foreign currency. Noncompliance may result in sanctions.
Employers that pay in U.S. dollars can face other challenges as well. Salaries paid in foreign currency are still subject to local tax and social security obligations, which must be calculated and reported in local currency. Employers may also run into exchange control regulations that limit or complicate the remittance of foreign currencies.
Because every LATAM country has its own rules regarding payments, many companies choose to work with local legal experts or an Employer of Record (EOR) familiar with the local laws.
Contractors vs. EOR in LATAM
There are two primary options for companies that want to employ remote workers in LATAM: hire a contractor or partner with an EOR.
Work With Contractors
One of the biggest advantages of hiring independent contractors is cost-effectiveness. Since contractors aren’t considered full-time employees, businesses typically aren’t responsible for benefits, severance pay, or many of the statutory employer contributions that come with permanent staff. This can make contractors an attractive option for project-based work or specialized roles.
However, hiring contractors also comes with important risks. Misclassification is a significant concern, and the rules differ from country to country. If a contractor is later deemed to be an employee, companies may be liable not only for the difference in salary but also for retroactive statutory benefits and potential financial penalties. Careful planning, clear contracts, and compliance with local labor laws are essential to minimize these risks while still leveraging the flexibility that contractors offer.
Partner With an EOR
An EOR enables companies to employ workers in countries where they do not have a local entity. The EOR handles everything from employment contracts and onboarding to administering payroll and remitting taxes to the proper authorities.
Working with an EOR is advantageous because the EOR assumes full compliance responsibility, enabling companies to hire employees in other countries without incurring the associated legal risks.
While hiring employees via an EOR typically costs more than engaging contractors, there are affordable EOR options on the market, such as RemoFirst, which offers services starting at just USD 199 per employee per month.
Choosing the Right Model
There are many factors to consider when deciding between hiring contractors or working with an EOR. However, a good rule of thumb is that contractors are often best suited for short-term or project-based work, where flexibility and speed are essential.
On the other hand, if you’re hiring for roles that are strategic, long-term, or essential to your organization, hiring employees via an EOR is likely the better choice, and it also helps alleviate the potential for worker misclassification.
Additional Considerations for Global Employers
Before expanding hiring into the LATAM region, employers should keep a few additional factors in mind.
One key consideration is the cost of benefits. Many countries require employers to provide health insurance and contribute to pension plans, but expectations often extend beyond these basics.
Competitive benefit packages that include supplemental perks, such as private healthcare, wellness programs, and transportation or meal allowances, can play a significant role in attracting and retaining top talent, especially in high-demand industries.
Cultural alignment should also be factored into hiring decisions, as workplace norms, communication styles, and expectations about work-life balance can vary significantly across Latin America.
Recognizing local holidays, offering culturally relevant leave, or aligning management styles to local expectations can be important factors in maintaining employee engagement and retention.
Businesses must also consider cross-border payments, as errors can lead to employee dissatisfaction and potential penalties. Companies need to ensure that global payroll across multiple countries and currencies is processed accurately, on time, and in full compliance with local banking and tax regulations.
Finally, regulatory changes in Latin America can occur frequently and impact labor and tax laws (such as minimum wage increases). Unless you’re hiring through an EOR, your business will be responsible for staying up to date on any legal changes.
Confidently Hire in LATAM With RemoFirst
Hiring in LATAM opens the door to skilled talent, cost savings, and access to some of the world’s fastest-growing markets. However, it also means navigating different employment laws, tax requirements, and compliance risks across each country.
Partnering with an EOR like RemoFirst allows you to hire and manage employees in 185+ countries, including the LATAM region. We assume responsibility for compliance and undertake all formal employment tasks, including onboarding, payroll, taxes, and more.
Companies can also hire and pay contractors in over 150 countries via our platform for only $25 per person per month. We ensure that all contacts are compliant with local employment law, mitigating the risk of misclassification.
Schedule a demo to see how RemoFirst can simplify global hiring in Latin America and beyond.
