Employer of Record (EOR) – Expansion into LatAm without establishing a local entity

  • Updated
  • 4 mins read
  • Published
Photo: Unsplash

Expanding a global presence is a logical and clever move for any growing business. There are numerous arguments in favor of expanding into Latin America (“LatAm”) as the region offers numerous benefits and opportunities. Notwithstanding the latter, expansion into LatAm also entails certain obstacles, such as the ease of doing business in the region. In the present article I focus on one of the aspects of the latter.

Previously, if foreign companies wished to expand into the LatAm region, they had no other option but to establish an entity in the region and engage a remote team. The latter entailed numerous challenges such as recruitment of the appropriate associates, handling their payrolls, studying the complex regulations of LatAm countries and staying compliant with local laws, to name just a few. In addition, the latter has often proven to be rather impractical, especially when hiring a smaller number of employees. Today, however, there is a new, more practical option for companies expanding to LatAm as far as this matter is concerned. The solution is called the Employer of Record (“EOR”).

Intrigued? Keep reading…

An EOR is an external partner of a company, a third party organization that assumes responsibility for employment needs of the company. Organizations providing this services are also known as Professional Employer Organizations (PEOs)

EOR in LatAm enables companies to establish a presence in the region – have a team of their own, without the complexities and limitations of establishing a local legal entity. EOR usually hires members of the company’s global team on behalf of the company, manages the onboarding, handles the employees’ payroll, benefits, and taxes, and provides HR support, etc., while the company focuses on overseeing the day-to-day operations. Not to be unclear, employees hired by the EOR are in practice working for the company that hired the EOR, however the EOR is their official employer and thus has more liability. 

The EOR benefits organizations of different sizes and sectors. Nonetheless, EOR services are principally relevant to companies that are uncertain whether they will be in the respective market for five or more years, cannot delay their hiring timelines and have the urgency to be operational in a new market promptly, do not have large financial resources for global expansion at their disposal, etc.  

In LatAm there are many organizations offering this services, such as SkuadGlobalization PartnersServiapSafeguard Global, to name just a few. When choosing an EOR service provider, companies should focus on certain aspects, such as experience of the EOR services provider with managing companies in the respective region (ideally companies which fit the niche of the company looking for its EOR service provider), reputation and standing of the EOR service provider, spectrum of rights and benefits the EOR service provider offers to its employees, to name just a few. 

It is really not surprising that there are so many organizations offering the respective services and that so many foreign companies choose to use this services, as the benefits are numerous. Benefits of collaborating with an EOR services provider in the LatAm region include saving time for the company wanting to establish its presence in the LatAm market, guaranteed compliance with the legislation of the respective country and consequent avoidance of fines, penalties, lawsuits due to non-compliance, reducing the usually high costs of establishing an entity in the respective market, to name just a few. 

Expansion and forming a team in LatAm is without doubt an extremely lucrative business effort. The already very good and constantly improving business environment as well as the existence of local talent represent alluring aspects for every company. Nevertheless, expanding into LatAm region can be full of different challenges, such as the one discussed in the present article. The EOR represents an excellent response to the subject challenge for foreign companies that want to explore and take advantage of the vast business opportunities of the LatAm market.  

So there really is no longer any reason to delay expanding into the LatAm region, is it?  

Leave a Reply