Use case
Expand into LatAm
A US SaaS company just closed two enterprise contracts in São Paulo and one in Bogotá. The Head of People is asking: subsidiary, contractors, or EOR?
A Brazilian Ltda costs USD 12,000–25,000 to incorporate, takes 90–150 days, and runs at least USD 30,000/year in ongoing compliance overhead. Misclassifying a Brazilian salesperson as a contractor invites a labour court reclassification claim where back-pay, FGTS arrears, 13th salary recovery, and moral damages routinely exceed BRL 200,000 per worker.
Hire through an EOR and you are operational in two to three weeks at USD 599–899/month per employee. LATAM expansion is a country-by-country compliance exercise, not a single buying decision.
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What LATAM expansion actually requires of you as an employer
Statutory obligations attach the moment a worker performs subordinated labour for you, whether or not you have a written contract or a local entity.
Brazilian labour courts use primazia da realidade (primacy of reality) and ignore paperwork to look at how the relationship actually operates. Mexican labour authorities apply a similar test; Colombian tribunals routinely reclassify foreign-employed contractors as direct employees of the principal.
Before you hire, answer four questions: Where does this person live and pay tax? Will they have authority to bind your company contractually, creating permanent establishment risk?
Do you have an existing relationship that could backdate liability? And are you willing to incorporate a local entity, accept the EOR fee, or accept the contractor reclassification risk?
Where EOR simplifies LATAM expansion vs where it cannot protect you
An EOR carries the employment contract, runs payroll, files statutory contributions, manages benefits, and handles termination. Setting up entities across three or four LATAM countries costs USD 60,000–120,000 in formation fees and takes six to nine months. What an EOR does not do is remove your operational compliance obligations.
If you ask a Brazilian employee to work unpaid overtime, the EOR cannot stop the labour court from holding the economic employer jointly liable. If you terminate a Mexican employee without documented just cause, the constitutional indemnification (three months plus 20 days per year of service) lands on you.
What the statutory employment obligations are by LATAM country
| Country | Employer load (approx) | Key components | EOR fee range |
|---|---|---|---|
| Brazil | ~70 to 80% on top of gross | INSS (~20%), FGTS 8%, 13th salary, vacation +1/3, system S contributions | $599-$899/mo |
| Mexico | ~30 to 35% on top of gross | IMSS, INFONAVIT, SAR, state payroll tax (2-3%), PTU profit-sharing | $499-$799/mo |
| Colombia | ~50 to 55% on top of gross | Health, pension, ARL, parafiscales (SENA, ICBF, CCF), prima, cesantías | $499-$799/mo |
| Argentina | ~27 to 30% on top of gross | Social security, ART, union dues, SAC (13th salary), inflation indexing | $599-$899/mo |
| Chile | ~5 to 7% on top of gross | Workplace insurance, unemployment fund, mutual; pension/health worker-paid | $499-$699/mo |
Brazil: CLT, FGTS, 13th salary, and the highest employer load in the region
Brazilian employment runs under the CLT. Employer load: ~70–80% on top of gross. INSS: ~20%.
FGTS: 8% of gross paid monthly into a worker-controlled account. 13th salary: a thirteenth month of pay split in November and December. Vacation pay carries a constitutional one-third bonus.
Termination without just cause triggers a 40% FGTS fine on the accumulated balance. A worker earning BRL 10,000/month costs the employer roughly BRL 17,500–18,000 fully loaded. Pejotização (treating salaried roles as contractor through a PJ company) is an active Ministério Público do Trabalho enforcement target.
Mexico: IMSS, profit-sharing, and PTU
PTU (Participación de los Trabajadores en las Utilidades) requires distributing 10% of taxable profits to employees each year, capped at three months of salary or the average PTU of the prior three years. IMSS covers health, disability, retirement, and workers’ compensation. INFONAVIT housing fund: 5%.
SAR retirement: 2%. State payroll tax: 2–3%. Termination without just cause: three months of salary plus 20 days per year of service plus seniority premium.
Colombia: mandatory benefits, parafiscal contributions, and compliance
Health: 8.5% employer. Pension: 12% employer. ARL workplace risk: 0.522–6.96%.
Parafiscales: SENA 2%, ICBF 3%, CCF 4%. Cesantías accrue at one month of salary per year, paid into a fund. Prima de servicios: one month of salary paid half in June and half in December.
Total employer load: ~50–55% on top of gross. Misclassification under Article 23 of the Substantive Labour Code (personal service + subordination + remuneration) is unforgiving; foreign tech companies hiring Colombian engineers as contractors have lost reclassification cases in the seven figures.
Argentina: hyper-inflation indexing and payroll complexity
Base employer contribution: ~27–30% (social security, ART, union dues). SAC (Argentine 13th salary) paid in June and December. Argentine inflation has run at 100–200% annually; salaries are negotiated quarterly under collective bargaining agreements with mandatory mid-year readjustments.
Many EOR providers offer partial USD-denominated salary to stabilise real wages. Termination indemnification: one month of salary per year of service per Article 245 of the Ley de Contrato de Trabajo.
What your EOR handles on LATAM expansion, and what remains your responsibility
The EOR fully handles: statutory contract drafting, work permit sponsorship, payroll calculation and remittance, statutory contribution filing (INSS, IMSS, PILA, AFIP, Dirección del Trabajo), withholding tax and year-end reporting, benefit enrolment in mandatory schemes, termination process execution, and audit defence.
You retain: what the employee does day-to-day, performance management documentation, compensation decisions, equity grants, IP assignments (the EOR’s standard contract may need supplementing), and any misclassification risk from how you actually manage contractors. Workplace policies, LGPD (Brazil) and equivalent data protection compliance, and anti-harassment training sit in a grey zone; good EORs provide standard policy packs, weaker ones leave you to figure it out.
What the LATAM expansion process looks like step by step
Pre-hire compliance steps
Before extending an offer: confirm the hiring country and candidate tax residency; run the EOR’s compliance questionnaire to flag PE risk, IP exposure, and any restricted activities (financial services, insurance, telecoms); agree on gross salary, benefits, and non-statutory perks (meal vouchers in Brazil, food coupons in Mexico, prepagada health in Colombia); review the EOR’s contract template for IP assignment and non-compete clauses (Brazilian and Mexican non-competes are largely unenforceable without paid consideration); calculate the fully-loaded budget and get sign-off before the offer goes out.
Payroll setup and benefit enrolment
The EOR drafts the employment contract in local language, signs it with the employee, and registers the worker with the relevant authority (eSocial in Brazil, IMSS in Mexico, PILA in Colombia, AFIP in Argentina, Dirección del Trabajo in Chile).
In Colombia, the employee chooses their EPS health provider and AFP pension fund; the employer cannot select these. Allow four to six weeks from decision to first paycheck for a typical LATAM hire; longer if visa sponsorship is required.
Ongoing compliance obligations
Submit monthly payroll variables (variable comp, expenses, time off) by the EOR cut-off (typically the 18th–20th of each month).
In inflationary economies like Argentina, annual compensation reviews may be legally required to maintain real wage parity. Documentation of performance management decisions must live in your HRIS, not the EOR’s; the labour court will ask for it if you terminate.
What LATAM expansion mistakes cost companies most
Misclassifying LATAM contractors as employees
A 24-month tenure at BRL 15,000/month, reclassified in Brazil, generates roughly BRL 360,000 in back-pay (FGTS, 13th salary, vacation, INSS shortfall, plus the 40% FGTS fine).
Add moral damages and attorneys’ fees: BRL 500,000–700,000 per worker. Mexican reclassification adds aguinaldo back-pay, PTU arrears, IMSS surcharges, and constitutional indemnification.
Colombian reclassification triggers cesantías, prima, and parafiscales arrears. The fix: if the role smells like an employee, hire them as one through an EOR.
Underestimating Brazil’s employer cost
The common US benchmark of gross plus 25–30% misses Brazil entirely (correct: 75–80%), Colombia (50–55%), Mexico (30–35% before PTU), and Argentina (27–30% plus inflation indexing).
The CFO conversation nobody enjoys is the one where budget for ten LATAM hires only covers seven once loading is correct. EOR providers will give you a fully-loaded quote for each country if you ask; many do not volunteer it because the headline platform fee is the easier sell.
How to build a repeatable LATAM expansion hiring process
Five components: (1) a country fact sheet per market with employer load percentages, mandatory benefits, customary benefits, termination rules, and EOR restrictions (updated quarterly as rates change); (2) a standardised offer template by country with fully-loaded cost calculated automatically; (3) a single EOR provider where possible (multi-EOR setups across LATAM double operational overhead); (4) an internal compliance owner who runs quarterly compliance reviews, signs off on terminations, and maintains the country fact sheet; (5) a termination playbook by country before the first termination arrives.
Which EOR providers handle LATAM expansion well
Deel runs owned entities across the LATAM-5 with localised onboarding in Portuguese and Spanish and integrated compliance for eSocial, CFDI, and PILA. Handles Argentine inflation indexing and Brazilian sindicato negotiations more cleanly than most. See our Deel review.
Remote runs owned entities across the LATAM-5 with strong Colombian and Mexican coverage; Brazil presence has expanded materially since 2024. Competitive pricing, fewer integrations than Deel but cleaner data export. See our Remote review.
Pebl (formerly Velocity Global) is strongest in Brazil and Mexico, skews enterprise with higher pricing and less self-serve, but handles complex roles (executives, regulated activities) better than platform-first competitors.
Globalization Partners (G-P) covers all LATAM-5 with owned entities; most expensive option, strongest on regulatory depth, audit defence, and ambiguous classification cases.
For mid-market companies (5–25 LATAM employees): Deel or Remote. For enterprise (25+): G-P, Pebl, or Deel depending on regulatory profile. Evaluate at least two providers head-to-head on a real Brazil role before signing.
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Frequently asked questions about LATAM expansion
How long does LATAM expansion through an EOR actually take?
Expect 2–4 weeks for Mexico, Colombia, or Chile, and 3–5 weeks for Brazil and Argentina. Visa-sponsored hires add 4–12 weeks depending on country and category.
Can I pay LATAM employees in USD instead of local currency?
Mostly no. Brazil, Colombia, and Mexico require local-currency salaries.
Argentina allows partial USD payment under specific structures. Chilean payroll is local currency only.
What is the minimum LATAM hiring volume that justifies an entity over an EOR?
Break-even sits at 15–30 employees per country. Brazil’s high entity overhead pushes it toward 25–35; Chile’s lower overhead can make entity formation worthwhile at 10–15. Below those thresholds, an EOR is almost always cheaper and lower-risk.
How does Brazil’s 13th salary work and who pays it?
Paid by the employer in two instalments: half by 30 November, the remainder by 20 December. Through an EOR, the cost is billed monthly as an accrual within the loaded employer cost.
Does using a LATAM EOR create a permanent establishment risk?
Generally no, if structured correctly. PE risk arises if the LATAM-resident employee has authority to conclude contracts on behalf of your company (dependent agent PE). Sales roles with contract-signing authority are the classic trigger; customer success and engineering roles typically do not create PE.
What happens if I want to terminate a LATAM employee through an EOR?
The EOR calculates and processes the settlement; the cost lands on you. Brazil: FGTS balance plus 40% fine, prorated 13th salary, prorated vacation plus one-third, and notice period. Mexico: three months plus 20 days per year of service without justified cause.
Colombia: cesantías, prima, and Article 64 CST indemnification. Plan for 1–3 months of equivalent salary as termination cost across LATAM markets.
How does PTU profit-sharing in Mexico actually affect my budget?
PTU equals 10% of the employer entity’s taxable profits. Through an EOR, you are typically insulated because the EOR’s profitability calculation drives the distribution, not yours. Confirm this with the specific EOR before signing.
Methodology and disclosure
This guide draws on statutory employer contribution schedules from the labour and social security ministries of Brazil, Mexico, Colombia, Argentina, and Chile.
EOR coverage and pricing assessments are based on review interviews, public pricing pages, and quote-tool outputs collected between January and April 2026 from Deel, Remote, Pebl, and Globalization Partners. CTA links to providers may include affiliate referrals; affiliate revenue does not influence which providers we cover or how we assess them.