How to Expand Into LATAM Legally and Without Local Entities

How Do You Enter LATAM Without Setting Up Local Entities?

Expanding into Latin America no longer necessarily requires you to register a full legal entity (subsidiary, branch or local corporation) in each country, an approach that is often costly, time-consuming, and legally burdensome. Instead, many companies now use the Employer of Record model or similar global-employment solutions to hire talent in LATAM quickly, compliantly, and with minimal upfront investment.

What an EOR does:

• The EOR formally becomes the legal employer on record for your LATAM hires. That means the EOR assumes responsibilities for employment contracts, statutory benefits, local payroll, tax withholding, social security, and other compliance tasks. Your company remains responsible only for managing day-to-day work and performance, not local legal employment obligations.
• With this model, you can onboard new hires, sometimes within days or a few weeks, rather than spending months establishing an entity. Many EOR providers claim a typical hiring timeline of 1–2 weeks from offer to start date.
• Because there is no entity formation required, you avoid high upfront setup costs (legal fees, local incorporation processes, capital commitments, local accounting/bookkeeping infrastructure, registered office requirements).

When this option makes sense:

• You're entering a new market for the first time and want to test the waters without committing to a full local presence.
• You only need a few hires initially and don’t expect immediate large-scale operations.
• You value speed, flexibility, and risk reduction over full local control.
• You want to scale across multiple LATAM countries quickly without setting up legal entities everywhere.

What are the Biggest Risks When Expanding into LATAM?

While a well-chosen EOR or global-employment solution can greatly simplify expansion, entering LATAM still carries a set of material risks, particularly if compliance, contracts, or local practices are mishandled. Being aware of these risks is key to scaling effectively and safely.

• Regulatory and compliance risk: Each LATAM country enforces its own labor regulations. What works in Mexico may fail in Brazil, Colombia, or Argentina. For instance: mandatory benefits, paid leave, severance rules, 13th-month salary, statutory social security contributions, termination procedures, and more can vary wildly from one jurisdiction to another.
• Misclassification & contractor risk: Many companies start with contractors/freelancers to avoid entity costs. But transforming those engagements into full-time roles, or treating contractors like employees, can trigger misclassification risk. LATAM authorities may deem them employees, exposing the company to back taxes, social security, and fines.
• Payroll, tax & currency risk: Payroll systems must handle local payroll taxation, statutory benefits, social contributions, and local-currency payments — mishandling any of these can lead to underpayment, overpayment, compliance breaches, or tax liability.
• Operational & employer-brand risks: Poor employment practices (wrong contracts, late payments, non-compliant benefits) can damage your employer brand — making hiring and retention harder in a region where top talent is increasingly in demand.
• Strategic risk and over-commitment without local presence: If you decide later to convert from EOR to full local entity, e.g. to generate local revenue, open offices, or recruit at scale, you may face unforeseen costs in incorporation, accounting, legal setup, local compliance, and sometimes restructuring.

5 Compliant Ways to Scale Effectively in Latin America

The hiring landscape in Latin America has evolved rapidly in recent years. Countries like Brazil, Mexico, Colombia, and Costa Rica have become hotspots for global talent, especially in the tech and services sectors. With a growing pool of experienced professionals, strong English proficiency in some markets, and cost efficiencies compared to North America and Europe, the region offers significant promise.

Recently, Playroll hosted a webinar with HSP Group and reesmarxGLOBAL, titled “Lost in LATAM? Common Pitfalls and Fixes.” Experts Louis Demetroulakos, Felix F. Ndeloa, and Ian Jackson shared practical strategies for companies looking to expand into the region. Here are five essential takeaways.

1. Research Local Customs to Offer Competitive Benefits

Hiring in LATAM isn’t just about salary – it’s about offering a full package of employee benefits that reflects local customs and expectations. In Mexico, for example, benefits like the aguinaldo (13th-month salary), meal tickets, transportation allowances, and remote work stipends are often considered standard. “There are a number of benefits that are not legally required, but they are kind of table stakes,” noted Ian Jackson. Without them, companies risk losing top candidates to better-informed competitors.

Beyond benefits, cultural expectations also shape what candidates consider attractive. In Costa Rica, where English proficiency is high and many professionals have already worked with global firms, perks like learning and development budgets and career growth pathways are essential. These workers expect more than just a paycheck – they want future prospects. Research or benchmarking studies, often supported by firms like reesmarxGLOBAL and HSP Group, can help ensure your offer stands out.

2. Understand Regional Differences to Put Together Competitive Packages

A one-size-fits-all approach won’t work across LATAM, or even within a single country. Brazil illustrates this challenge well. Companies must navigate region-specific collective bargaining agreements (CBAs), which can vary by location and industry. These agreements dictate everything from minimum benefits to private healthcare levels. “The various CBAs often vary by industry and region,” said Felix Ndeloa. Not factoring these in can lead to non-compliance and inflated employer costs.

Colombia presents another kind of complexity. Salaries for the same role can vary dramatically based on a candidate’s region, background, and previous exposure to global firms. In major cities like Bogotá or Medellín, costs are higher due to infrastructure, international experience, and demand. But opportunities exist in smaller cities with strong infrastructure, where companies can find quality talent at more affordable rates. Understanding these nuances is key to optimizing hiring strategies.

3. Broaden Your Methods of Sourcing Talent

In a competitive hiring market like Brazil, where 2024 brought record-low unemployment, relying on one job board or sourcing method isn’t enough. “If you're completely relying on a single tool, you're setting yourself up to fail,” said Ian Jackson. Companies that want to attract top-tier talent must diversify sourcing channels using local job boards, networks, and specialist recruiters.

reesmarxGLOBAL, for example, emphasizes multi-channel strategies tailored to regional contexts. In Brazil, tapping into on-the-ground networks has been essential to win over candidates with multiple offers. With demand for skilled professionals growing, especially in tech and finance, broadening recruitment efforts beyond LinkedIn and into local ecosystems can be a game-changer.

4. Test the Market Before Opening Entities

Setting up a legal entity in a new country is a costly and time-consuming commitment. EOR services like Playroll offer a smarter way to test the waters. In Mexico, where labor reforms and compliance requirements are complex, companies often start with a few hires via EOR services to assess fit before committing long-term. “EOR will be a really quick and compliant way to hire that person as a local worker,” noted Demetroulakos.

Colombia presents similar challenges, with high corporate tax rates, rigid labor rules, and slow incorporation timelines. “It can take two to four months to set up an entity,” said Ndeloa. EOR services streamline the process by handling taxes, payroll, and compliance, allowing companies to launch operations quickly while reducing risk. Once you’ve achieved stability and scalability, making the shift to establish a local entity can be a well-informed next step.

5. Work with Trusted Partners Early to Decide on the Right Strategy

Choosing the right market and setup model early on can save significant costs and headaches. In complex markets like Brazil, where every employee falls under a unionized collective bargaining agreement and employer taxes can reach 40%, expert guidance is essential. “All companies that I've come across in Brazil are subject to unions,” shared Ndeloa. Navigating tax, labor law, and regulatory compliance requires local expertise.

Working with partners like reesmarxGLOBAL, HSP Group and Playroll helps global employers align their strategies with local requirements. Whether it's understanding severance liabilities in Costa Rica, tax risks in Colombia, or CBAs in Brazil, early engagement with experienced providers ensures you're making smart, compliant decisions. “Work with a recruitment partner that knows the region,” advised Jackson. That early groundwork can determine whether your expansion sets you up for success or leaves you exposed to risk.

LATAM is a fast-moving, talent-rich market with distinct opportunities and risks in every country.

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LATAM is an exciting, vibrant, fast-moving market. Companies that are looking to expand globally should give it serious thought.

Ian Jackson, Global Account Executive, reesmarxGLOBAL

Tools tp Centralize Payroll, Compliance, and HR for LATAM

Scaling effectively in Latin America requires more than just hiring talent, it demands a unified operational infrastructure that can manage payroll, taxes, statutory benefits, and compliance across multiple countries. Because each LATAM jurisdiction has its own labor code, social security system, and payroll rules, centralizing these functions is essential to reducing risk and ensuring consistency.

Today, companies typically rely on three categories of partners to centralize payroll, compliance, and HR across the region:

1. Employer of Record (EOR) Platforms

Modern EOR platforms allow companies to hire full-time employees in LATAM without opening local entities. Because the EOR becomes the legal employer, it takes on the full scope of in-country compliance obligations, including employment contracts, payroll withholding, benefits, and termination rules.

Why they matter for centralization:

• Provide a single system of record for all LATAM employees
• Consolidate multi-country payroll into one workflow
• Ensure employment contracts meet local statutory requirements
• Administer mandatory benefits (e.g., 13th-month salary, vacation accrual, social security contributions)
• Reduce legal exposure by staying current with changing labor laws

This model is the most scalable option for teams without existing LATAM entities or those wanting to test new markets quickly.

2. Global Payroll Aggregators

Payroll aggregators work by connecting local in-country payroll providers under one global umbrella. While they don’t replace legal entities or employment arrangements, they help multinational companies standardize payroll processing and reporting across different countries.

Best suited for:

• Companies that already have legal entities in some LATAM markets
• Finance teams that need unified reporting and consolidated payroll data
• Organizations with hybrid teams (local entities + EOR)

Aggregators often centralize:

• Pay cycles and disbursement schedules
• Tax withholding and employer contributions
• Payroll cost reporting across markets
• Payslip generation in local formats

However, they typically don’t manage employment contracts or ongoing compliance, that remains the company’s responsibility.

3. Regional Legal & Compliance Partners

Specialized LATAM legal firms and compliance consultancies provide guidance on country-specific regulations, entity setup, immigration, labor law interpretation, and statutory requirements.

These partners are essential when:

• Establishing a local entity (e.g., S.A., S.A.S., Ltda. equivalents)
• Handling restructures, terminations, or sensitive employment cases
• Adjusting employment terms due to local law changes
• Managing regulatory filings or audits

While these firms don’t centralize payroll or HR on their own, they play a crucial role in mitigating legal risk and ensuring everything aligns with updated regulations. Partnering them with an EOR or global payroll system creates a fully compliant LATAM operations stack.

Key Takeaways

The most compliant way to scale is to combine strong local insight with centralized operational infrastructure. Modern EOR platforms handle employment contracts, statutory benefits, tax withholding, and multi-country payroll; global payroll aggregators unify reporting for companies with existing entities; and regional legal partners provide critical guidance on labor codes, CBAs, and regulatory changes. Together, these tools create a secure, consistent, and fully compliant foundation for hiring across multiple LATAM markets. With the right partners and processes, companies can expand confidently, minimize risk, and build long-term success across Latin America.