EOR vs. Traditional Hiring in LATAM: A Strategic Guide for Growing Businesses
Expanding your business across Latin America can open doors to exciting markets and top-tier talent. But one question always arises: should you partner with an Employer of Record (EOR) or hire through a local legal entity? This decision impacts cost, speed, risk, and operational control.
Below, we compare both hiring models in detail, offering guidance tailored to companies scaling across LATAM.
What Is Traditional Hiring?
Traditional hiring means setting up a local legal entity to directly employ your team. This includes:
Registering your company with local tax and labor authorities
Managing payroll, taxes, and benefits internally or via a local firm
Drafting legally compliant employment contracts
Administering social security and employee benefits
In countries like Brazil or Mexico, this setup is complex. For example, in Brazil, it can take 30 to 60 days to open a legal entity, and over US$15,000 in setup and legal costs. Ongoing administrative and legal maintenance add thousands per year.
While this model gives full control, it demands deep knowledge of local labor laws, and exposes companies to compliance risks.
What Is an Employer of Record (EOR)?
An EOR is a third-party company that hires employees on your behalf in full compliance with local labor laws. You manage day-to-day work; the EOR manages contracts, payroll, and compliance.
With EOR services in LATAM, you can:
Hire in as little as 3–5 days
Skip entity formation entirely
Avoid tax registration, local banking, and benefit administration
Receive a monthly invoice covering all employer costs
For example, a growing U.S. company can onboard a developer in Colombia through Europortage’s EOR services without ever opening a Colombian entity.
Cost Comparison: EOR vs. Traditional Hiring
| Category | Traditional Hiring | EOR Hiring via Europortage |
|---|---|---|
| Entity Setup | US$10,000–$20,000+ one-time | None |
| Setup Time | 30–90 days | 3–7 days |
| Local Payroll Provider | US$300–500/month | Included in EOR fee |
| HR & Legal Staff | Internal or outsourced | Included |
| Statutory Benefits Admin | In-house or outsourced | Managed by EOR |
| Monthly Cost per Employee | Varies + unpredictable overhead | Fixed fee (avg. US$600–$900/month) |
| Compliance Responsibility | On the company | On the EOR |
Benefits of EOR for Small Businesses in LATAM
Speed: Skip long entity setup and start operating in a new country within a week.
Simplicity: One invoice. One partner. All compliance handled.
Cost Control: Fixed monthly fee—no legal surprises.
Risk Reduction: No fines for misclassification or labor non-compliance.
Scalability: Test markets or run pilots without locking into permanent infrastructure.
Local Expertise: EORs understand labor laws in Brazil, Mexico, Colombia, Chile, and beyond.
A recent survey by Globalization Partners shows 65% of growing companies now prefer EORs when entering new markets due to cost and speed advantages.
Streamline Your Expansion with EOR Services in LATAM
Expand across Latin America effortlessly with our Employer of Record (EOR) services. We handle compliance, payroll, and employee management, ensuring smooth operations while you focus on growing your business.
When Traditional Hiring Makes More Sense
In some cases, building your own entity is a smarter move:
Long-term physical presence (e.g., factories, branches)
Hiring more than 20 employees in one country
Regulated industries that require direct employment (e.g., finance, healthcare)
Desire for full control over HR, legal, and cultural integration
But keep in mind—setting up a subsidiary is time-consuming, costly, and risky if you’re not fully committed to that market yet.
Risks to Consider
Before making a decision, it’s important to understand the risks associated with each approach. Let’s break them down:
Traditional Hiring Risks
- High Setup and Ongoing Costs: Setting up a local entity in Latin America can be expensive. For example, forming a company in Brazil may cost between USD 10,000 and USD 25,000 when you account for legal fees, licenses, translations, notary costs, and registrations. On top of that, you’ll face monthly accounting, tax filing, and payroll obligations, which can add USD 1,000+ per month.
- Bureaucratic Delays: In countries like Brazil and Argentina, registering a company can take 3 to 6 months. Processes involve federal, state, and municipal registrations. Any mistakes or missing documents may lead to further delays. Meanwhile, you can’t legally hire or operate.
- Compliance Risks and Penalties: Labor laws across LATAM are complex and vary by country. For instance, failing to pay the 13th salary in Brazil or vacation bonuses in Mexico can result in heavy fines, labor claims, or backdated payments. Non-compliance with tax or social security rules can also lead to criminal liability in some countries.
- Slow Market Entry: Hiring through a newly formed entity can delay your expansion. You’ll need to wait for tax IDs, bank accounts, and government approvals before onboarding even one employee. This lag can make you lose business opportunities in competitive markets.
EOR Risks
Higher Long-Term Costs for Large Teams: EORs typically charge a monthly fee per employee, which can be cost-effective for small and mid-sized teams. However, for large teams (20+ employees), the cumulative monthly fees may exceed the one-time costs of entity setup over 2–3 years. For example, paying USD 650/month per employee equals USD 15,600/year for just two employees.
Limitations in Some Countries: Not all LATAM countries support long-term EOR engagement. In Argentina, for example, EOR arrangements may be limited to 12 months, after which you’re expected to convert the worker to your own entity. Some regulators also scrutinize permanent EOR use for tax or labor avoidance.
Reduced Control Over HR Processes: With EOR, the legal employer is the provider. This means you might have limited control over certain HR aspects like contract format, benefit design, or termination process. Also, cultural onboarding and internal HR systems may not fully align with EOR-managed employees unless you proactively coordinate.
Incompatibility with Regulated Industries: Sectors such as finance, healthcare, and energy may have restrictions on outsourcing employment. In some cases, only local entities are permitted to hold necessary licenses or sponsor professionals. EORs may not be viable in these scenarios without additional legal workarounds.
Case Study: Expanding to Brazil and Mexico
Let’s say you want to hire 3 developers in Brazil and 2 sales reps in Mexico.
Traditional route:
You’ll need to open entities in both countries, spend at least US$25,000 in legal and setup fees, and wait 3 months to go live.
EOR route with Europortage:
You hire within 5 days, pay a single monthly invoice per employee (starting at ~US$800), and stay 100% compliant with no legal burden.
Choose the Right Hiring Strategy for Your Global Growth
Expanding into Latin America is a smart move—but only if you choose the right hiring strategy. Both traditional hiring and EOR services offer value, but they serve different goals.
If your business is planning long-term operations in a specific country and you want full control, traditional hiring may be the way to go. However, be ready for higher costs, more bureaucracy, and longer timelines.
On the other hand, Employer of Record (EOR) services offer a faster, more flexible, and low-risk entry into new markets. You can hire talent in just days, stay compliant with local laws, and avoid the burden of entity setup. For most small to mid-sized businesses, this model saves time and money while reducing legal exposure.
At Europortage, we help companies hire quickly and compliantly across Latin America. Whether you’re exploring Brazil, Mexico, Argentina, or Chile, our EOR solution is designed to make your expansion easy, legal, and cost-effective.
Let us handle compliance—so you can focus on growth.
