Resource · Hiring Structures
Contractor vs. Employee: What US Companies Need to Know About Hiring in Latin America
By Diego Figueroa, Founder of UpHiire · Last updated: November 5, 2026
Two very different legal structures, two very different sets of responsibilities. Here's what each one means for you.
When a US company hires someone in Latin America, there are two main structures: hiring them as an independent contractor, or hiring them as a formal employee (usually through an Employer of Record, or EOR). The difference matters for cost, compliance, and ongoing responsibility — here's how they compare.
Independent contractor model
The person is engaged as a self-employed contractor, not a legal employee of your company. This is typically simpler and faster to set up, with lower overhead — but the US company is generally responsible for ensuring the working relationship doesn't resemble employment under local or US classification rules (e.g. not dictating exact hours, not providing equipment, allowing the contractor to work with other clients). Once you've chosen the contractor route, here's how to pay contractors in Latin America. Put the terms in writing with a clear contractor agreement.
Employer of Record (EOR) model
An EOR is a third-party company that formally employs the worker in their home country on your behalf — handling local payroll, taxes, benefits, and labor law compliance. This shifts more of the legal responsibility to the EOR, but usually comes with a higher ongoing cost, often a percentage-based fee layered on top of the person's salary.
How UpHiire's model works
UpHiire places talent as independent contractors, not through an EOR structure. Our flat placement fee covers sourcing, vetting, and delivering your shortlist — the working relationship and its structure is between you and the professional you hire. If you'd prefer ongoing payment handling (you pay us, we pay your contractor on a recurring basis), we can tailor that separately — but this isn't the same as formal EOR employment, and we're not acting as the legal employer of record.
Learn more about how contractor payments work →
See what to include in a contractor agreement (free template) →
Contractor vs. employee vs. Employer of Record (EOR)
Independent contractor
- Who is the legal employer
- No employer — a business-to-business service agreement
- Setup
- Fast — a contractor agreement and a W-8BEN
- Benefits and mandatory bonuses
- Not required by law; you can offer paid time off by agreement
- Control over schedule and methods
- Limited — agree on results and availability, not how they work
- Main risk
- Misclassification if the relationship works like employment
- Best for
- Defined roles, flexible arrangements, small teams
Employee (your own local entity)
- Who is the legal employer
- Your company, through a local entity you set up
- Setup
- Slow and costly — incorporate and register locally
- Benefits and mandatory bonuses
- Required by local law (social security, year-end bonuses, vacation, severance)
- Control over schedule and methods
- Full
- Main risk
- Running a local company and payroll
- Best for
- Large teams in one country, long term
Employer of Record (EOR)
- Who is the legal employer
- The EOR provider, on your behalf
- Setup
- Fast — the provider already has the local entity
- Benefits and mandatory bonuses
- Required by local law, handled by the provider
- Control over schedule and methods
- Full, within local labor law
- Main risk
- Higher monthly cost
- Best for
- Full-time, long-term roles without a local entity
General information, not legal advice. Classification depends on how the work is actually performed, under the law of the country where the person works.
Frequently asked questions
Does UpHiire act as an Employer of Record (EOR)?
No — UpHiire places talent as independent contractors. We don't formally employ candidates on your behalf the way an EOR does.
Who is responsible for correctly classifying a contractor?
Generally, the hiring company is responsible for ensuring the working relationship is structured appropriately under applicable classification rules. We recommend consulting your own legal or tax advisor for guidance specific to your situation.
Can UpHiire help with ongoing payments to my hire?
Yes — for clients who prefer it, we can manage recurring payments to your contractor directly. This is a payment-handling service, not formal EOR employment.
Is one model always cheaper than the other?
Not necessarily — EOR services typically add an ongoing percentage-based fee, while the contractor model has lower ongoing overhead but places more of the classification responsibility on the hiring company.
Can I hire someone in Latin America as an independent contractor?
Generally yes, as long as the relationship actually works like a contractor relationship: they control how they do the work, agree on deliverables and availability, use their own equipment and can have other clients. Local law looks at how the work happens, not just what the contract says.
What is misclassification, and who carries the risk?
If a contractor works like an employee (fixed hours you set, exclusivity, close supervision), local authorities may treat them as one. That can mean back benefits, severance and penalties, and the risk generally falls on the hiring company.
When should I use an Employer of Record instead?
When the role is full-time, long-term and closely managed, or when you want to offer local benefits without opening a company in that country. The EOR legally employs the person for you and runs local payroll and compliance.
Do contractors in Latin America get benefits?
Independent contractors handle their own taxes and social security and are not legally entitled to employee benefits, such as the mandatory year-end bonus many Latin American countries require for employees. Many companies still offer paid time off by agreement to keep good people.
What tax form do I need from a contractor in Latin America?
Usually a Form W-8BEN for individuals who are not U.S. persons, instead of a W-9. See our guide on how to pay contractors in Latin America.
Can I move a contractor to employee status later?
Yes. The usual path is to move them to an Employer of Record or to your own local entity. Plan the transition with local counsel so start dates and benefits are handled correctly.
This page is general information, not legal or tax advice. Consult a qualified attorney or accountant for guidance specific to your situation.