Hiring in LATAM: A Guide for Global Employers

Latin America continues to gain international attention from numerous sectors and businesses—and for good reason. The region is diverse and offers a variety of investment opportunities. More than half of U.S.-based organizations will expand their nearshore operations across Latin America by 2026.

The benefits of this expansion are wide-ranging, such as time zone alignment with North America, increased technical capabilities, and significantly lower labor rates than in many other regions. The rate at which companies have hired talent in Latin America rose in 2024. For example, remote hiring in Chile increased by 67%,  55% in Colombia, and 54% in both Mexico and Argentina. However, many companies may find themselves unexpectedly challenged by regulations in each LATAM country. 

For instance, Brazil’s labor code protects employees and makes terminating an employee complex and costly. In Mexico, a profit-sharing requirement demands companies distribute a percentage of taxable profits annually, based on the company's performance. And despite its talent density and favorable remote work policies,  Argentina also faces significant currency volatility and debt crises, making payroll planning extremely difficult.

Latin America is not a plug-and-play region. It’s made up of distinct legal jurisdictions, which makes successful global hiring there contingent upon local knowledge and localized compliance strategies for each market.

Must-know considerations for hiring across LATAM

Labor law reform throughout Latin America is creating a different hiring arena for employers and their obligations to employees. Every LATAM nation has different rules around employee contracts, benefits, termination, etc., that need careful navigation.

Labor laws and key changes for 2026

Employment laws and regulations in Latin America are constantly changing as new worker rights and compliance requirements are established. Many countries have enacted new reforms to support these trends, including increased protections for workers and more vigorous enforcement.

The Consolidation of Labor Laws (CLT) is Brazil's set of labor laws. It's considered one of the most comprehensive sets of employment standards in Latin America. Employers are required to pay into Severance Indemnity Fund accounts and follow strict rules for terminating employees, such as providing advance notice and paying them the appropriate severance pay based on their length of service.

At the beginning of 2026, Mexico's minimum wage rose by 12%, and in some border areas, it grew even more than the national average. Additionally, companies operating in the country must allocate 10% of their taxable profits to employees each year under the mandatory profit-sharing ( PTU ) scheme.

Argentina’s unstable economy continues to affect all aspects of employment law. Strict termination laws exist, and calculating severance pay can be expensive, depending on the employee's longevity and fluctuating currency rates.

In Colombia, the minimum wage was increased by 9.5% in 2025. Specific industries mandate profit sharing, and employment contracts require detailed rules and inclusions for social security contributions to cover health, pension, and workplace injury or illness.

Chile passed labor legislation in 2025 that will reduce the number of hours worked per week for employees and provide additional protections. The country also plans to gradually lower the maximum workweek from 45 hours to 40 hours by 2028.

Costa Rica’s legal environment is stable and well-established, providing many protections for employees. Costa Rican employers are required to provide mandatory Christmas bonuses (aguinaldo) and mandatory severance payments based on length of service.

Payroll and tax requirements

Complex payroll compliance across Latin America creates a wide range of employer contributions to social security, unemployment insurance, and education funding.

In Brazil, employers are required to pay numerous forms of social security ( INSS ), unemployment insurance, education funding, and workers’ compensation insurance. These costs are almost a third of an employee’s base salary. Additionally, employees receive a mandatory 13th-month pay bonus, distributed in two parts throughout the year, as well as vacation time equivalent to a third of their monthly salary.

In Mexico, employers are required to make contributions to social security ( IMSS ), worker housing funds ( INFONAVIT ), and retirement plans (SAR). Employers must keep track of profit-sharing obligations and provide obligatory bonus payments.

In Argentina, employers are subject to high contribution rates for social security, health insurance, and pension funds, which vary by employer size and industry. As such, Argentina’s payroll is further complicated by the need to update salaries monthly to reflect inflation, along with the biannual Aguinaldo payments.

Employers operating in Colombia must contribute to health insurance (8.5% of salary), pension funds ( 12% shared with the employee), and work-related injury insurance. In addition to these contributions, employers must contribute 4% of total payroll to the family compensation fund (Caja de Compensación).

In Chile, employers must pay into unemployment insurance and workplace accident insurance. Private fund managers run the pension plan and withdraw pension contributions from employees' paychecks.

In Peru, employers must contribute to health insurance ( ESSALUD ) at a rate of 9% of salary, as well as additional contributions for pension plans and workers’ compensation. Employers must also pay a bi-annual bonus payment (gratificaciones) twice a year, in July and December, for the amount of a full month's salary.

Mandatory benefits across LATAM

Mandated employee benefits in Latin America are generally higher than those in North America or Europe. The country with the highest statutory entitlements is Brazil, which mandates 30 days of paid annual leave after a worker completes 12 months of employment, as well as an additional vacation bonus equal to one-third of the worker's monthly salary.

Mexico mandates several benefits, including six days of paid annual leave after the first year (which increases with seniority), aguinaldo (equivalent to at least 15 days of pay), prima vacacional (25% of annual vacation entitlement), and profit sharing when available.

In  Argentina, mandatory paid annual leave entitlement varies from 14 to 35 days depending on length of service. The Aguinaldo payment, equivalent to one month's salary, is made in two installments each year.

Employers operating in Chile must provide at least 15 working days of paid annual leave after 1 year of service. Parental leave is extended to 30 weeks, which includes both pre-natal and post-natal periods.

In Colombia, employers are required to provide at least 15 days of paid annual leave, which can increase with length of service. In addition to this benefit, the prima (or yearly bonus), equal to one month of salary, must be provided to employees midway through the year.  Employers must contribute to social security funds to cover health care, pension, and work-related accident risks.

In Costa Rica, employers are obligated to provide paid vacation time equal to one working day for each month worked. Employers must also pay a mandatory Aguinaldo bonus equal to one month's salary in December, and make severance payments (cesantía) to employees with one year of service. The reason for termination doesn’t matter. All employees are due these payments based on length of service.

Cultural expectations

Building a relationship is essential in nearly every culture throughout Latin America. Taking the time to build personal rapport before discussing business can demonstrate respect for your LATAM employees and partners.

Many companies in LATAM still have hierarchical structures in their workplaces. That’s why showing respect for people's seniority and formal title in countries like Mexico, Colombia, and Argentina is crucial.

While expectations may vary across LATAM countries regarding work-life balance, rest assured that family obligations will always be the priority. Most LATAM professionals want stable employment opportunities with long-term relationships—not frequent job changes.

As you know, language plays a huge role when you’re a global employer.  Across LATAM, English-speaking proficiency has increased, particularly in the tech sector. But you can widen your talent pool even further by knowing Spanish or Portuguese. Always use the local language in job descriptions, contracts, and benefits documentation.

Each country has its own national holiday and regional event days that affect mandatory work schedules. Understand what these are in each country to honor them and meet employee expectations.

You’ll also need to figure out communication nuances. In some LATAM markets, indirect communication is the norm rather than direct feedback. What sounds polite and professional in Brazil might come across as vague to your New York office, while what feels efficient from headquarters could land as abrupt or dismissive with your team in Mexico City. Understanding these differences early helps you build trust instead of accidentally creating friction.  

How to hire LATAM talent

There are two main pathways that global companies take to hire people in Latin America. The choice depends on your expansion timeline, budget, and long-term market commitment.

Setting up a local entity

When you set up a legal entity, you can directly control workforce recruitment in each country. You are now the legal employer, which means you have complete control over hiring, payroll, and benefits. This method makes sense if you plan to put a lot of money into a certain market and hire a lot of people.

The challenge is that each LATAM country you wish to hire talent from would need its own legal entity. You can't use your Brazilian subsidiary to hire people in Mexico, and you can't use your Mexican subsidiary to hire people in Brazil.

Setting up an entity includes registering the business, acquiring a tax ID, opening bank accounts, and keeping up with the rules that apply in each jurisdiction. The time frame usually lasts between two and six months, depending on the country. 

Most organizations require guidance from a local lawyer, accountant, and HR expert to understand local rules on hiring. Costs include registration fees, legal expenses, ongoing tax filings, and overhead for running the business. This model works best when you want to build a substantial presence in select regions with greater control over the employment relationship.

Partnering with an Employer of Record (EOR)

When you work with an Employer of Record, they become the legal employer in each country while you manage your team's daily duties. The EOR takes care of hiring contracts, payroll, tax withholding, social security contributions, required benefits, and following local laws. This lets you hire people in several LATAM countries without having to set up your own business entity in each one.

Compared to entity setup, EOR services offer speed and simplicity. You can hire new employees in weeks instead of months, and you can enter new markets without having to invest in infrastructure and local advisors. This model is ideal for businesses that want to test new markets, build teams that work together from different countries, or grow quickly without having to deal with all of the legal matters.

With an EOR provider, you typically pay a service fee depending on the number of employees. But you avoid the steep cost of entity setup, dealing with ongoing administrative work, and the potential fines for non-compliance. The EOR takes responsibility for keeping up with changing labor laws, payroll rules, and mandatory benefit requirements in each area.

Tips to expand your business into Latin America

To successfully grow your LATAM talent force, you need to know more than just local labor laws in those countries. These tips will help you manage the complexity of different regions to set up long-term operations.

• Understand the local business environment before you hire. Every market has its own target demographics, ways of getting products to customers, labor practices, and rules that must be followed. Before expanding globally, do your homework on market conditions, the availability of talent, and the laws that apply to your industry. This will help you avoid costly mistakes.
• Work with an experienced local partner or EOR provider. Latin American markets are diverse and can be challenging to navigate without local expertise. Language barriers and cultural differences alone make local support invaluable, especially when a business is just starting out.
• Be prepared for bureaucracy and administrative delays. Despite the advantages LATAM offers, bureaucratic red tape can cause unexpected costs and time delays. Provisions for documentation requirements, license approvals, and regulatory processing times help companies manage frustrations and maintain realistic timelines.
• Invest time in building relationships with your team.  Latin Americans are more likely to commit to employers they know and trust. Dedicate time to forming genuine connections with employees, not just transactional management relationships.
• Remember that Latin America is not one country. The region is highly diverse in culture, language, regulation, and business practices. A hiring strategy that works in Colombia will not automatically succeed in Brazil or Argentina—treat each market expansion individually.
• Budget for total employment costs beyond base salary.  In LATAM, mandatory benefits, social security contributions, annual bonuses, and severance obligations all add to the total cost of hiring someone. Knowing about these costs ahead of time keeps budgets on track and ensures that compensation packages are fair and competitive.
• Start with pilot hires before scaling rapidly.  Testing operations with one or two hires in a new market helps you learn about how things work there, improve your processes, and make sure there is demand before hiring more people. This method lowers risk while also increasing institutional knowledge.

FAQs about hiring in LATAM

Global employers who want to expand into Latin America should consider the size of the region, legal requirements, and where to start. Here are the answers to the most common questions that employers from around the world ask.

What does LATAM mean in hiring?

LATAM stands for Latin America and typically includes countries from Mexico through Central and South America, plus the Caribbean. When it comes to hiring, it generally focuses on larger markets like Brazil, Mexico, Argentina, Colombia, Chile, Costa Rica, and Peru. Unfortunately, the region doesn’t share legal frameworks. Each country has its own labor laws, payroll systems, and required benefits.

Can I hire in LATAM without a local entity?

Yes. By working with an EOR provider, you can hire people in different LATAM countries without having to set up your own business. The EOR operates as your legal employer while you handle day-to-day work. This saves you significant time and money on setting up an entity and ensures you're following all local employment laws, required benefits, and payroll rules.

Which LATAM countries are most business-friendly for global hiring?

Chile and Costa Rica are known for having stable legal systems and simple rules for hiring. Mexico is recognized for its talented professionals across many sectors and is closest to North America. Colombia has seen considerable growth in remote hiring and has low labor costs. Brazil hosts the largest hiring market, but also has the most demanding labor laws and the highest employer contribution rates.

Make hiring in LATAM possible with Pebl

Pebl enables you to legally employ talent across 185+ countries, including major LATAM markets spanning from Mexico to Argentina. Through our global EOR services , we handle country-specific labor laws, mandatory benefits like aguinaldo and 13th-month salaries, social security contributions, and payroll complexity so you stay compliant without establishing entities in each jurisdiction.

Your teams get a seamless experience from contract to payment, while you focus on building distributed operations across Latin America instead of navigating bureaucracy, currency fluctuations, and administrative burden. Interested in learning more? Reach out to get in touch.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free. 

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