By: Josh Garcia
WHAT’S BEST FOR YOUR ORGANIZATION?
Prospective clients from around the world contact us with the intention of recruiting talent in Latin America. Many don’t understand the difference between outsourcing and hiring directly for their organization. This blog is designed to share the differences and help you decide what’s best for your business.
WHAT’S OUTSOURCING?
There are different interpretations of the concept, but generally speaking, outsourcing is contracting another organization or person to perform an activity or duty outside your company. Now, under this concept, you can hire an organization, freelancer, or individual to perform this activity under a wide variety of contractual models.
- Hiring an Organization – an outsourcing organization has staff in place to perform these activities. It could be sales, data entry, software development, or any plethora of roles. This organization handles payroll, manages personnel, and measures the daily performance of these positions. There’s very little interaction with the business outsourcing the roles and there’s not a lot of direct management involved.
The advantage of this model is that you’ve covered compliance issues in the respective country but you typically don’t control daily performance and outsourcing to another organization can be costly. You’re paying for staff to perform a job, government-mandated benefits, and the markups this organization will charge to manage this staff and cover all costs.
- Hiring a Freelancer or Individual – your business may want to outsource a position without the markups included with an outsourcing agency. In this case, you’ll want to find a qualified contractor who fits your needs but doesn’t require all the benefits required in some Latin American countries. (Side Note: You can still offer benefits indirectly without paying them directly. More on that later.)
The advantages of hiring a contractor/freelancer are you will have direct access to them and you can monitor their performance firsthand. The disadvantage of this arrangement is they could leave the position at any time without notice and you have very little recourse in the situation.
WHAT’S A DIRECT HIRE?
The bulk of the potential clients who contact us has already tried on their own to hire and have been unsuccessful, require someone on the ground who can recruit more than 1 staff member, or require a specialized search for candidates in Latin America. Whatever the situation, these companies are looking to hire directly. Their intentions for the new hire are for them to become part of their team. They want to manage them directly and monitor their performance as an employee or contractor. Under this structure, you can have the following two models to look at.
- Employee – this requires you to have a legal entity in the country you’re hiring in. This could be through PEO or going through the process of establishing your company in the respective country you want to hire in. PEOs provide you the benefit of leasing an employee but they’re under your direct control.
The benefit here is that you have complete control because they are your employee and you can manage them as you wish. The downside is some Latin American countries heavily favor employee rights and it may be hard to fire them without a big payout.
- Contractor – The contractor model allows you to have direct access but you don’t have the control you would have as an employee. The contractor is its own boss at the end of the day. They can have other jobs as they wish or not show up to work.
The pro here is you don’t have to offer benefits, bonuses, or incentives to perform or pay additional expenses that come with maintaining employees. The detrimental side of it is that contractors may not feel as loyal to your organization, can leave without notice, or show up late without any explanation required. For organizations who don’t have a legal entity in the desired country they are recruiting in, we recommend paying a competitive salary to offset the legal benefits needed, providing a healthcare reimbursement program or another incentive, and offering performance bonuses and year-end Christmas bonuses required by law in many Latin American countries.
At the start of this blog, we set out to clear up some of the confusion regarding outsourcing and direct hiring. We hope we simplified the concepts and broke down some of the most common options. As an organization, you’ll have to decide the right structure for you.
If you do have additional questions, we welcome a call to our offices to learn more and encourage you to book a free 30-minute call with our team of account managers here.
This blog was written by the staff at Ventes Mexico LLC Ventes Mexico is a top-rated outsource recruitment firm located in Puerto Vallarta, Mexico. Founded by an American, with 16 years of living in Mexico, Ventes Mexico operates in the USA and Mexico. The company specialized in remote staffing and headhunting. Each of its employees is 100% bilingual (English/Spanish).
