Recruitment Guide for the Latin America

Purpose

This guide aims to ensure that the company goes through the correct recruitment process, ensuring that the company will understand all the things to consider when hiring in Latin America. This guide will serve as a how-to guide for the recruitment procedure in Latin America.

Key Takeaways

Latin America is commonly considered to include the entire continent of South America, Mexico, Central America, and the Caribbean islands, whose inhabitants speak a Romance language.

Things to Know before Hiring in the Latin America’s Countries

Employment Contracts and Salarys

Most Latin American staff are paid monthly, not biweekly, and it might be difficult to pay employees retroactively. Furthermore, most countries require employers to pay a 13th-month bonus, with Ecuador, Guatemala, Honduras, and Peru demanding a 14th-month incentive. Each country’s law specifies when the compensation must be paid, and it must be prorated if the employee leaves the company in the middle of the year. In most nations, the bonus is equal to one month’s pay, but in Argentina, it must be similar to the highest monthly wage earned in the previous six months. In Bolivia, the bonus must be twice if the GDP exceeds a particular threshold. Different systems are permitted in some countries as part of collective bargaining agreements. You must be very careful when establishing employment contracts to specify the annual compensation, a monthly wage, and 13th and 14th-month bonus amounts; otherwise, you may find yourself on the hook for extra money.

Vacation Leave

In Latin America, the maximum number of paid holidays allowed by law for employees is 30 days per year. Brazil, Cuba, Panama, Peru, and Nicaragua are the only countries that guarantee this length of annual paid leave. On the other end of the spectrum are the Caribbean nations of Saint Vincent and the Grenadines and Trinidad and Tobago. Their legal systems do not require employees to take a minimum number of paid holidays. Employees in Mexico were only entitled to a minimum of six paid holidays each year.

Considerations for Hiring Employees in Latin America

Except for Brazil, where Portuguese is the primary language, almost all Latin American countries speak Spanish. Furthermore, the bulk of Latin American countries ranks poorly in terms of English competence, according to an EF survey. Since 2017, the average English proficiency of adults has been dropping. Because you will need to hire a local workforce to expand your business, working with HR specialists who can successfully communicate and connect with your employees is vital. An International PEO can help you in this aspect because we prepare job offers in the target language, conduct interviews, and even manage the onboarding process.

1. Workplace Culture

The working culture varies depending on the place and is one of the most significant elements to consider. Employees in several Latin American countries, including Mexico, Colombia, Uruguay, and Costa Rica, are compelled to work a minimum of 48 hours each week. Employees in Chile work 45 hours a week, spread out over six days. To comply with local labor laws and regulations, you must work with a PEO. It is also good to be aware of local preferences regarding employee benefits. The Latin American worker prefers better workplace incentives. As a result, an International PEO can assist you in offering benefits like private medical insurance, life insurance, office leasing, and even visa sponsorship.

2. Cost-effective

One of the most important factors to consider when growing internationally and employing people in new regions is cost-effectiveness. In this scenario, Latin America has one of the lowest labor expenses compared to most European countries and the United States. Given that competent and experienced talent can be found in Latin America, it becomes a cost-effective market for corporate expansion.

3. Language and Culture Barriers

Remember that Spanish is the official language of most Latin American countries (except for Brazil, as they speak Portuguese). As a result, if you are not fluent in the language, it will be challenging to create a proper relationship with your employees, especially given that most Latin American countries have a poor level of English proficiency. Furthermore, you must study and comprehend your destination’s culture, keeping in mind that each LATAM country has unique manners and customs.

4. Local Regulations and Labor Laws

To hire people in Latin America, you must learn about and follow every local rule and labor legislation, including specific holidays, minimum pay and working hours, employee benefits, etc. For example, given that three of the top five countries with the highest working hours are from Latin America (Mexico first, Costa Rica second, and Chile fifth), it is necessary to examine different types of employment perks to retain the best personnel.

How to Hire Employees in Latin America Without Using a Local Company

1. Identify a Local Business Partner

If you’re confused with the jargon and worried about not being able to discover the right personnel for your company, take a step back and think about finding a local business partner first. They will assist you in understanding the culture and differences between your home country and a foreign country. They will also advise where to hunt for talent, how to conduct efficient interviews and other topics. Not only that, but a local company partner will be able to open doors to previously unknown opportunities, whether they work in business development or take a percentage of your earnings. Indeed, without assistance, entering a new market is nearly impossible, as there are so many nuances from country to country that you’d never be able to seek out new areas of growth without working with someone who has actual local knowledge, so don’t be afraid of working with new people and seeing where it takes you, both when recruiting and expanding.

2. Get Help With Recruitment

It’s easy to become overwhelmed and confused about where to begin when hiring overseas workers or to make a mistake and hire someone who isn’t a good fit for your firm. The good news is that there are people who can help, and several global organizations specialize in the recruitment and human resources to help alleviate stress. Of course, these organizations charge for their time and knowledge. Still, investing a little more makes sense when you want to build the most incredible team to take your business to the next level rather than make a terrible decision and suffer for years of poor performance. If you don’t think you’re ready to hire new personnel, you could try using a PEO or Professional Employer Organization. These companies will hire people on your behalf, allowing you to outsource the recruitment process and gain access to talent without incorporating your company into a new country. This method should be used only in the short term, but it is something to consider.

3. Latin America Cities That Offer Better Talents

If you want to expand your business in Latin America and hire top foreign talent, don’t assume that all countries are created equal. Because of culture, greater education levels, and business and growth attitudes, some LATAM locations are better for startups than others.

For example, in Santiago, Chile, foreign investors establish more than one-fifth of all new enterprises, implying that locals are not only multilingual but also accustomed to operating under diverse briefs and organizational structures. Brazil, on the other hand, is home to the Startup Brazil accelerator, which has generated a fabulous pool of entrepreneurial potential in locations like the following:

They are another excellent example since they are not only the wealthiest city in the country but also one of the best places to do business in Latin America, with its technology industry developing three times faster than the global average.

4. Do Not Overlook Human Resources

It is too easy to expand into a new country and focus on your growth and expansion without considering your everyday workers; therefore, investing in a solid human resources department is vital. Don’t wait for employees to depart for another job; instead, make them feel valued from the start and ensure they have the necessary training and support to thrive. After all, happy and engaged employees are far more likely to generate revenue than those who are merely coasting and don’t want to be there. Some companies that grow internationally keep their human resources department in their home country, leading to poor communication and management. Hire an HR specialist in each nation where you intend to operate if possible, and connect your HR and business objectives to ensure everyone is on the same page. You should also evaluate performance, absenteeism, and worker turnover and make necessary changes based on the data. Simply put, if you care about your employees, they will care about you.

5. Local Laws and Regulations

Having extended my business across Latin America, I know that many legal stumbling blocks must be overcome to incorporate your company into new territory – and the same can be said when employing new employees. Whether you hire a lawyer or do it yourself, you must understand local employment rules and regulations before you begin advertising for employees, or you could face serious consequences. In some countries, you may be required to give employees specific national holidays or a minimum amount of annual leave based on their age or length of employment. In contrast, in some LATAM territories, minimum wages and working conditions are increasing, so it’s prudent to follow regulations and offer your employees a generous pay package and comfortable and ethical working conditions, regardless of your industry.

6. Get Help from EOR Organization

An EOR is a company that assists businesses by providing human resource services. As part of a comprehensive EOR service, this often entails recruiting, hiring, terminating, and paying all taxes and benefits to local employees. However, depending on your requirements, a more limited service may be supplied. An EOR will perform time-consuming HR activities for their clients, allowing them to focus on other elements of their enterprises.

Benefits of Hiring in Latin America Through EOR

Other advantages of engaging an EOR, in addition to saving your firm time and workforce, include:

Profitability

Hiring employees through an EOR lowers administrative and recruitment costs and saves you money if you want to hire local employees but do not have substantial activities to warrant company incorporation or branch formation.

Recruiting

A reputable EOR will have a well-established recruitment staff that is well-versed in the local market and can swiftly discover the most suitable and qualified employees for your firm.

Compliance

Because of their experience and knowledge of the local market, EORs will ensure that you fully comply with all of the country’s labor laws and regulations.

Benefits of Not Having a Local Company When Hiring in Latin America

The EOR is responsible for carrying out the legal and regulatory obligations of immigration, employment, and payroll but is not involved in day-to-day labor activities.

In essence, the EOR is the worker’s registered employer but has no supervisory or managerial responsibilities regarding the employee’s position. The original employer maintains the substantive work relationship and makes all decisions regarding remuneration, position tasks, projects, and termination.

The employer of record, in particular, is the legal entity that:

Arranges for the employee's visas and work permits, avoiding delays or refusals
Provides a registered entity for the operation of a local, compliant payroll within the country
Complies with all host country labor regulations, including local contracts and worker protections
Provides the client with information on required notice periods, termination procedures, and severance pay
Is the host country the employee's point of contact with government officials?