The time difference between India and US Eastern Time exceeds nine hours. When a product team files a critical bug report at 4 PM EST, the India-based engineering team won't see it until the next morning their time. By the time they respond with questions, the US team has left for the day. Each decision cycle loses 12-15 hours.
This compounding delay affects hundreds of tech companies running offshore engineering operations in India. Companies considering an India to Latin America (LatAm) migration face a critical question: Does the operational complexity of transitioning justify the gains in time zone alignment, communication quality, and retention rates?
Latin America offers a different model. LatAm spans multiple time zones, primarily ranging from UTC-3 to UTC-6. Major business hubs in Mexico, Central America, and South America generally operate within 0-3 hours of U.S. Eastern Time. Between 2020 and 2023, the number of LatAm American professionals working remotely for North American companies grew by 70%, with over 2.2 million remote workers from Brazil, Argentina, and Mexico contributing to global companies while staying in their home countries.
This playbook walks through the decision framework, cost analysis, compliance requirements, and execution plan for companies considering or actively planning a migration from India-based teams to LatAm engineering talent.
The challenges of India-based engineering teams
Time zone misalignment costs
India-based engineering teams can lose 12-15 hours per decision cycle due to the nine-plus hour gap between India and US Eastern Time. Critical decisions get postponed because of minimal overlap between Indian and North American business hours. Teams resort to split shifts or night work, leading to fatigue and extended turnaround times.
Instead of waiting overnight for a Slack response, nearshore teams in LatAm engage in direct conversation. QA engineers raise bugs in real time, project managers clarify scope while everyone is online, and developers walk through issues live during overlapping business hours.
High attrition and talent churn
India's engineering education system produces 1.5 million graduates annually, but only 10% secure jobs. The construction and engineering sectors face attrition rates as high as 61%, affecting overall organizational efficiency and creating constant recruitment cycles.
LatAm retention rates surpass Indian competitors due to lower emigration patterns. Latin American developers typically remain in their home countries, providing clients with stable long-term partnerships rather than constant backfill recruiting.
Communication and collaboration gaps
Delayed pull requests and asynchronous code reviews slow iteration cycles when teams operate on opposite schedules. The lack of real-time collaboration makes sprint planning, daily standups, and urgent troubleshooting sessions difficult to coordinate without someone working outside normal hours.
LatAm provides a large pool of senior engineers who are fluent in English and accustomed to working with US tech companies. Cultural alignment and shared business hours enable the kind of spontaneous collaboration that drives product velocity.
LatAm engineering costs and ROI compared to India and the US
Key cost takeaways
- India offers the lowest base salary but the highest velocity loss due to time zone delays and communication friction
- LatAm delivers 40-55% savings vs US with real-time collaboration during overlapping business hours
- Total annual cost for senior engineers is often lower in LatAm once attrition, recruitment cycles, and productivity delays are factored in
Salary benchmarks by country and seniority
Verified compensation data from Howdy.com shows that average software developer salaries in LatAm range from $53,000 to $63,000 USD annually, with Argentina, Uruguay, and Chile representing the higher-cost markets. Equivalent US salary bands span $85,000 for junior roles to $160,000+ for senior positions, translating to 60%+ savings without sacrificing quality or time zone alignment.
The average US software developer earns $132,720, making LatAm salaries roughly 60% lower on average. These figures represent base compensation before benefits, employer burdens, and recruitment costs.
India vs LatAm vs US: Total cost comparison
The table below compares total employment costs across the three primary engineering markets:
| Cost Component | India | LatAm | United States |
| Senior Engineer Base Salary | $40,000 - $50,000 | $53,000 - $63,000 | $125,000 - $185,000 |
| Benefits Package (Annual) | $4,000 - $6,000 | $6,500 | $15,500 |
| Employer Burden Rate | 20-25% | 30-47% | 25-35% |
| Recruitment Fee (% of salary) | 15-20% | 20% | 30% |
| Time Zone Overlap with US EST | 0-2 hours | 0-4 hours | Full overlap |
| Typical Hourly Rate | $25-$45 | $45-$65 | $100+ |
| Total Annual Cost (Senior) | $50,000 - $65,000 | $65,000 - $85,000 | $165,000 - $230,000 |
| Savings vs US | 65-70% | 60-65% | Baseline |
Companies working with nearshore partners like Howdy report that the 60-65% cost savings from LatAm hiring, combined with improved communication and retention, deliver better ROI than the 65-70% savings from India when factoring in velocity loss and turnover costs.
Total cost of employment calculations
Senior US engineers cost over $185,000 annually while equally skilled LatAm professionals average around $57,000-$63,000, allowing companies to save more than 60% on labor expenses. Benefits packages add approximately $6,500 in LatAm compared to $15,500 in the US, and recruitment fees typically run 20% of gross annual salary for senior developers in LatAm versus 30% domestically.
Employer burdens range from 30% to 47% depending on country. When factoring these obligations, companies achieve 60-65% total savings compared to US hires.
Hourly rate comparisons
LatAm developers typically cost $45-$65 per hour, roughly 30-50% below comparable US or Western European talent. Top LatAm engineers with 6-8+ years of experience earn in the $7,500-$10,000 monthly range, representing 30-40% savings rather than the 80-90% discounts associated with lower-quality offshore markets.
Why LatAm over other nearshore alternatives
Eastern Europe comparison
Eastern Europe offers strong technical talent with time zones 6-9 hours ahead of US Eastern Time. While this provides better overlap than India, it still creates challenges for real-time collaboration. Salary ranges in Poland, Romania, and Ukraine typically run $50,000-$80,000 annually, comparable to higher-cost LatAm markets but without the time zone advantage.
Political instability in the region, particularly following the 2022 Ukraine conflict, has introduced operational risk that many US companies prefer to avoid. LatAm provides similar technical quality with greater geopolitical stability and superior time zone alignment.
Southeast Asia comparison
Southeast Asia, particularly the Philippines and Vietnam, offers cost structures similar to India with salaries ranging $30,000-$50,000 annually. However, the time zone challenge persists with 12-15 hour differences from US Eastern Time. English proficiency varies significantly by country, with the Philippines offering stronger language skills than Vietnam or Thailand.
LatAm's cultural alignment with North American business practices, combined with widespread English fluency and zero to minimal time zone offset, makes it the preferred nearshore option for companies prioritizing communication quality and team integration over maximum cost savings.
Employer of Record (EOR) for LatAm engineering teams
Understanding the EOR model
An EOR becomes the legal employer of your workers in a foreign country, handling payroll, taxes, benefits, and compliance while you manage day-to-day work. This model enables companies to hire international talent without establishing foreign entities, maintaining operational control while the EOR manages local employment, onboarding, and IP protection.
Companies working with specialized nearshore partners like Howdy benefit from integrated EOR services that combine legal employment infrastructure with recruiting, retention programming, and performance coaching. This end-to-end approach addresses both compliance requirements and long-term team development.
Why companies migrating from India need an EOR
EORs absorb permanent establishment risk so your company doesn't trigger tax obligations and regulatory exposure in each country where you hire. Secure contractual indemnification covering PE risk and misclassification liability through a written PE indemnity clause in your service level agreement.
Misclassification creates legal claims from workers for unpaid wages, benefits, and other entitlements. Prolonged contractor use without proper classification exposes businesses to fines, tax arrears, and litigation.
Tax and payroll complexities by country
Personal income tax follows a progressive structure across LatAm. Mexico ranges from 1.92% to 35%, while Colombia spans 19% to 41%, requiring both locally registered and foreign tech companies to withhold and remit income taxes on behalf of employees.
Argentina's currency volatility creates budgeting risk with the peso experiencing double-digit monthly swings. EORs manage multi-currency processing and can structure contracts in USD with local conversion at payroll to stabilize cost basis.
EOR pricing models and cost structure
Standard EOR pricing in LatAm
Deel offers flat-rate pricing starting at $599 per employee per month, with variations depending on location and headcount. The fee includes payroll processing, local compliance, benefits administration, and HR support.
EOR costs typically range from $600 to $2,000+ monthly depending on the provider, country, headcount, and service scope. Some providers like Skuad start at $199 per employee, though pricing often reflects the breadth of compliance coverage and support quality.
Evaluating total EOR costs
When calculating EOR expenses, factor in the monthly service fee, any setup or onboarding charges, and whether benefits administration is included or billed separately. Some providers charge percentage-based fees (typically 8-15% of gross salary) rather than flat rates, which can become expensive for senior engineering roles.
The EOR fee represents 5-10% of total employment costs for most LatAm hires. A senior engineer earning $60,000 annually with a $600 monthly EOR fee ($7,200 annually) brings total costs to roughly $67,200 before benefits and employer burdens.
Intellectual property protection when hiring LatAm developers
IP ownership agreements and documentation
Implement robust NDAs outlining ownership rights and confidentiality obligations. Work-for-hire agreements should stipulate that all work product becomes exclusive company property, and developers must formally assign IP rights for anything they generate during the project.
These contractual protections establish clear ownership from day one. Without explicit assignment language, IP ownership can become ambiguous under local laws.
Country-specific IP laws and enforcement
Each Latin American country maintains unique IP laws regarding patents, trademarks, copyrights, and trade secrets. Enforcement can be less rigorous than in North America, making proactive legal measures critical rather than relying on reactive enforcement.
TRIPS agreement and regional registration
Companies must register IP separately in each target country. The registration burden increases with geographic expansion but remains necessary for enforceable protection.
Step-by-step migration plan: India to LatAm transition
Pre-transition planning and risk assessment
Budget for dual service provider expense during the knowledge transfer period. Running parallel teams temporarily costs more but ensures continuity in application support during and after the transition.
Designate an in-house migration leader to manage the process and limit friction. The departing vendor often lacks motivation to ensure a smooth handoff, making internal oversight critical for success.
Knowledge transfer protocols
Schedule knowledge-sharing sessions where offshore team members guide nearshore counterparts through essential tasks and processes. Documentation becomes crucial during this period, capturing institutional knowledge before the offshore team disengages.
Treat knowledge transfer like any other sprint or project to keep teams in rhythm and on task. Define specific objectives, assign individual responsibilities, and track progress against deliverables.
Live workshops, shadowing periods, and centralized knowledge repositories help nearshore team members observe workflows, address technical questions, and access critical documentation in one location.
Phased transition strategy
Downsize offshore teams piece by piece while ramping nearshore simultaneously. This gradual approach maintains continuity but requires skilled coordination to balance dual team management.
Begin with a pilot project assigning a small, focused team to a contained initiative, then expand gradually through phased migration. Some companies opt for whole-department transitions, which accelerate the process but demand more training budget and stronger risk management.
Managing communication expectations
Initial confusion regarding task handovers, reporting styles, and meeting frequency is common during transitions. Set clear communication expectations early, defining response time standards, preferred channels, and escalation paths.
Ensure all stakeholders understand the transition timeline. Product teams, customer support, and executive leadership need visibility into which team handles which responsibilities during the overlap period.
Transitioning contractors to full-time employees via EOR
When to convert contractors
Convert independent contractors to full-time employees within one year to avoid misclassification risks. While not mandatory, this timeframe helps prevent regulatory issues.
Immediate conversion becomes necessary when contractors use office space, company-owned equipment, or follow set schedules. Control over performance triggers full-time employee classification under most labor laws.
EOR-facilitated conversion process
An EOR acts as the legal employer, handling on-the-ground legal and financial complexity in the target country. The EOR becomes the employer of record without requiring you to open a local entity.
The EOR maintains ongoing back-end support for pay, benefits, and compliance while you continue to oversee day-to-day operations. This model converts contractors to employees quickly without the overhead of entity establishment.
Salary conversion calculations
Multiply the contractor's hourly rate by 2,080 hours (standard full-time working hours per year) as a starting point. The final salary will be lower after adjustments for benefits, taxes, and employer burdens that weren't included in the contractor rate.
Equity compensation for remote LatAm workers
Equity as retention tool
Vesting schedules tied to employee tenure incentivize workers to remain with the company and contribute to long-term development. Equity becomes particularly valuable where location-based pay discrepancies result in lower remote compensation.
NSOs or RSUs can be issued as non-employee grants to contractors since these types aren't restricted to employees. This consideration becomes more complex with remote contractors working across multiple jurisdictions.
LatAm equity landscape
While tech companies in the US and LatAm offer stock options at similar rates, US employees are five times more likely to receive RSUs. The preference gap reflects different compensation philosophies and tax treatment across regions.
LatAm employees often prioritize higher monetary pay and don't factor in potential stock upside. Workers might prefer an offer with higher salary or bonus over valuable stock options paired with lower base compensation.
Tax implications by region
Tax rules for stock options differ dramatically between Europe and LatAm. In Europe, stock options typically face taxation as income, capital gains, or both, with some countries providing tax breaks to encourage equity plans. In LatAm, tax frameworks for stock options are often less developed, with rules varying significantly by country.
Tax authorities are scrutinizing equity compensation plans more closely, especially in cross-border scenarios. Companies hiring remote teams in the region must stay current with local tax laws to avoid compliance issues.
Engineering velocity during team transitions
Expected velocity impact
Velocity often dips for 2-3 iterations when team size or composition changes. By the third iteration, teams typically settle into a new baseline velocity.
Adding members to handle new complex work can decrease velocity initially. The onboarding overhead and knowledge transfer requirements temporarily slow output before productivity gains materialize.
Minimizing velocity loss
Define tasks and prioritize before the sprint begins to prevent velocity loss. New tasks and distractions introduced mid-sprint guarantee velocity will suffer.
Technical debt from shortcuts and assumptions weighs teams down. Pressure to deliver features faster results in accumulated debt that eventually slows development.
Help the new development team crystallize quickly and prioritize the product backlog to deliver customer value. Clear priorities and well-defined acceptance criteria accelerate team formation.
Building remote team cohesion and culture across borders
Common distributed team challenges
Isolation, miscommunication, time zone differences, and difficulty building personal relationships represent the most common distributed team challenges. These issues compound when teams span multiple countries and cultures.
Well-structured rituals lead to higher team cohesion, and proper ritual implementation produces better knowledge retention rates. The investment in structured collaboration pays measurable dividends.
Communication protocols and tools
Asynchronous tools like Slack maintain ongoing communication across distances. The key is establishing clear expectations about response times, escalation paths, and which channels to use for different types of communication.
Best practices for cohesion
Develop a clear mission statement through collaborative brainstorming sessions. Define each developer's mission aligned with their long-term plans and determine core objectives that highlight the unique value your engineering team brings to the organization.
Organizations that successfully implement core practices see improvement in team cohesion and code quality metrics. The combination of clear mission, structured rituals, and intentional communication creates strong distributed teams.
Frequently asked questions
What are the main reasons companies transition from India to LatAm engineering teams?
Time zone gaps, delayed feedback, and cultural misalignment slow progress in India-based teams. LatAm offers 1-4 hour time zone overlap, enabling real-time communication during standard business hours. The nine-plus hour difference between India and US Eastern Time creates 12-15 hour delays on critical decisions, while LatAm teams collaborate synchronously during overlapping work hours.
Additionally, India faces engineering attrition rates as high as 61% in some sectors, whereas LatAm retention rates surpass Indian competitors due to lower emigration patterns and developers remaining in their home countries. Development teams can participate in daily standups, sprint planning, and urgent troubleshooting without scheduling conflicts.
How much can companies save by transitioning to LatAm engineers?
US employers save roughly 60-65% on total employment costs when filling high-impact roles with remote LatAm talent. The median US software engineer's salary sits around $132,720, while a comparable mid-senior engineer in Mexico, Brazil, or Colombia averages about $53,000-$63,000, representing approximately 60% savings before benefits and employer burdens.
When factoring in total employment costs including benefits packages ($6,500 in LatAm vs $15,500 in the US), recruitment fees (20% vs 30%), and employer burdens (30-47% in LatAm), companies achieve 60-65% total savings compared to US hires. Senior US engineers cost over $185,000 annually while equally skilled LatAm professionals average around $57,000-$63,000, and the time zone alignment often delivers better ROI than the slightly higher savings from India when accounting for velocity loss and turnover costs.
What is an Employer of Record and why is it important for LatAm hiring?
An EOR acts as the legal employer for international hires, handling payroll, taxes, benefits, and compliance while you manage day-to-day operations. The EOR enables employee conversion without establishing foreign entities, delivering pay, benefits, and ongoing back-end support while absorbing permanent establishment risk so your company doesn't trigger tax obligations and regulatory exposure in each country where you hire.
How long does a team transition typically impact velocity?
Expect lower velocity for about 2-3 sprints with a new development team, with teams typically settling into a new baseline velocity by the third iteration. The onboarding overhead and knowledge transfer requirements temporarily slow output before productivity gains materialize.
The best approach is helping the team crystallize quickly and prioritizing the product backlog to deliver customer value during the adjustment period, with clear priorities and well-defined acceptance criteria accelerating team formation. Companies can minimize velocity loss by defining tasks and prioritizing before the sprint begins, avoiding new tasks and distractions introduced mid-sprint, and addressing technical debt from shortcuts and assumptions that weighs teams down.
What are the key IP protection considerations when hiring in LatAm?
Implement robust NDAs outlining ownership rights, confidential information, and non-disclosure obligations, with work-for-hire agreements making all work product company property and developers formally assigning their rights to any IP they generate during the project. Each Latin American country maintains unique IP laws regarding patents, trademarks, copyrights, and trade secrets, with enforcement less rigorous than in North America, making proactive legal measures critical rather than relying on reactive enforcement.
How do you maintain team cohesion during a migration to LatAm?
Gather your team for collaborative brainstorming sessions to develop a clear mission statement, define each developer's mission aligned with their long-term plans, and determine core objectives that highlight what unique value your engineering team brings to the organization. Well-structured rituals lead to higher team cohesion, and proper ritual implementation produces better knowledge retention rates.
What are permanent establishment risks when hiring in LatAm?
Expanding your workforce internationally can trigger Permanent Establishment (PE) rules, which may subject your business to corporate taxes in the developer's country, with missteps leading to fines, tax arrears, or litigation. EORs absorb permanent establishment risk so your company doesn't trigger tax obligations and regulatory exposure in each country where you hire.
It's critical to secure contractual indemnification covering PE risk and misclassification liability through a written PE indemnity clause in your service level agreement. Prolonged use of contractors without proper classification exposes businesses to permanent establishment risks, and misclassification creates legal claims from workers for unpaid wages, benefits, and other entitlements. Companies should convert independent contractors to full-time employees within one year to avoid misclassification risks, with immediate conversion necessary when contractors use office space, company-owned equipment, or follow set schedules.
Can you offer equity to LatAm remote employees?
You can offer company equity to any international worker, whether employed under a local subsidiary or hired through an EOR, with NSOs or RSUs issued as non-employee grants to contractors since these types aren't restricted to employees. While tech companies in the US and LatAm offer stock options at similar rates, US employees are five times more likely to receive RSUs.
LatAm employees often prioritize higher monetary pay over potential stock upside, preferring offers with higher salary or bonus over valuable stock options paired with lower base compensation. Tax authorities are scrutinizing equity compensation plans more closely in cross-border scenarios, with tax rules for stock options differing dramatically between regions and LatAm tax frameworks for stock options often less developed with rules varying significantly by country. Vesting schedules tied to employee tenure incentivize workers to remain with the company and contribute to long-term development, becoming particularly valuable where location-based pay discrepancies result in lower remote compensation.
Making the transition decision
Evaluate your current India setup against three core metrics: time zone alignment quality, annual attrition rates, and communication friction. If you're losing 12-15 hours on every critical decision cycle, experiencing turnover above 40%, or watching product velocity suffer from asynchronous collaboration, the case for nearshoring strengthens.
Calculate total cost including EOR fees ($600-$2,000 monthly per employee), benefits packages, recruitment expenses, and employer burdens ranging from 30-47% depending on country. The 60-65% total savings compared to US hires must justify the transition effort and temporary velocity impact.
Plan for a 2-3 sprint velocity dip during team formation. Invest in structured knowledge transfer protocols, clear communication expectations, and team cohesion rituals to minimize disruption and accelerate the path to full productivity.
Ready to migrate from India to a nearshore LatAm engineering team without losing momentum? Book a demo with Howdy to build a hiring plan, confirm compliance requirements, and estimate total costs by country.