Expanding your business into Latin America (LATAM) and the United States offers tremendous growth opportunities. But a crucial decision in the expansion process is how you hire your team: should you hire employees directly or partner with an Employer of Record (EOR)?
This article breaks down the main differences between EOR and direct hiring to help you choose the best option for your business goals.
What is Direct Hiring?
Direct hiring means establishing a legal entity in the country where you plan to employ staff. As the official employer, your company manages payroll, taxes, benefits, labor laws, and local compliance.
Advantages of Direct Hiring:
Full control over employment contracts and HR processes
Stronger local presence and brand recognition
Flexibility to design customized benefit packages
Challenges of Direct Hiring:
Requires significant time and financial investment to set up a local entity
Complex management of local labor laws, payroll, and taxes
Higher legal and compliance risks if regulations are not properly followed
What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization that legally employs your workers on your behalf in a given country. You retain full operational control, while the EOR handles hiring, payroll, taxes, and legal compliance.
Benefits of Using an EOR:
No need to set up a legal entity
Faster market entry — hire in days, not months
Full compliance with local tax and labor laws
Reduced administrative burden
Flexibility to apply your internal policies, as stipulated in the master services agreement
Key Considerations for LATAM and the US
LATAM:
Labor laws differ greatly between countries (e.g. Brazil, Mexico, Colombia)
Termination processes, severance, and union regulations can be complex
Currency fluctuation and inflation impact compensation structures
United States:
Federal and state laws may conflict; each state has unique rules for payroll, benefits, and taxes
“At-will” employment is common, but misclassification of employees vs. contractors can result in penalties
When to Choose an EOR
Planning to test a new market with minimal risk
Aiming to hire talent quickly without opening a subsidiary
Operating without internal legal or compliance experts in the destination country
When to Choose Direct Hiring
Suitable for long-term investments where building local presence matters
Ideal when your business requires full control over HR polices and team structure
Recommended if your company has a legal and compliance team familiar with local laws
Choosing between an EOR and direct hiring depends on your company’s growth stage, resources, and expansion strategy. For many businesses entering LATAM or the United States, partnering with a trusted EOR like Payroll Worldwide provides speed, simplicity, and peace of mind.
Our team helps companies operate compliantly and efficiently in multiple countries, so you can focus on growing your business without worrying about bureaucracy.
Contact Payroll Worldwide
Ready to expand into LATAM or the United States? Let’s talk about the right hiring strategy for your business.
Learn more on our Services page
Payroll Worldwide — Your Team on the Ground in the USA and LATAM
