If you’re hiring in Latin America, understanding how Employer of Record (EOR) contracts actually work is critical. While EORs simplify global hiring, every country in the region has its own labor code, benefits structure, and rules for contract termination.
US startups and mid-sized tech companies often assume EOR agreements are “one size fits all.” In reality, a compliant EOR contract in Mexico looks very different from one in Brazil or Argentina — and getting it wrong can mean unexpected costs or regulatory risks.
This guide explains how EOR contracts are structured in Latin America, what they include, and why choosing a compliant partner like Howdy.com helps companies hire quickly and legally.
What an EOR contract actually covers
An Employer of Record acts as the legal employer on your behalf. That means it signs the employment contract with the worker, manages payroll and taxes, and ensures compliance with local employment laws.
Each EOR contract typically includes:
- Employment classification: Whether the worker is a full-time employee under local labor law.
- Compensation and benefits: Salary, bonuses, 13th-month pay, health insurance, and vacation entitlements.
- Termination clauses: Notice periods, severance calculations, and legal protections under each country’s code.
- Data protection and IP clauses: To safeguard confidential company information and product ownership.
You manage the work — the EOR manages the employment.
Country-specific examples
Brazil
EOR contracts must comply with Consolidação das Leis do Trabalho (CLT), Brazil’s national labor code. That means written contracts in Portuguese, payroll in BRL, and mandatory benefits such as FGTS (severance fund), INSS (social security), and paid vacation.
Mexico
In Mexico, all employment agreements must follow the Ley Federal del Trabajo (LFT) and define contract duration (indefinite, fixed-term, or project-based). The EOR handles IMSS (social security) and INFONAVIT (housing fund) contributions, ensuring employees are registered correctly.
Argentina
EOR contracts must align with the Ley de Contrato de Trabajo (LCT), which mandates written contracts, notice periods, and profit-sharing where applicable. Argentina’s strong labor protections make compliant EOR structures essential for startups hiring there.
Contract flexibility and term types
EOR contracts in Latin America typically fall into three categories:
- Indefinite-term contracts — The default in most countries. They include full benefits, vacation, and severance rights.
- Fixed-term contracts — Used for specific projects or timelines, allowed under strict conditions.
- Probationary contracts — Short-term agreements (30–90 days) to evaluate performance before conversion to full employment.
Using fixed-term or project-based contracts without proper documentation can result in fines or reclassification. That’s why EORs like Howdy ensure all agreements are drafted by local counsel, reviewed in both English and Spanish or Portuguese, and include transparent employer cost summaries.
Termination and compliance protections
Each country’s labor law outlines how employment must end — and what employees are owed.
A compliant EOR handles:
- Notice periods and termination documentation.
- Final pay and severance under local formulas (e.g., one month’s pay per year in Argentina).
- Benefit reconciliation for unused vacation or bonuses.
- Official filings to deregister employees with government agencies.
Without an EOR, US companies often face delays or penalties for missed filings. With Howdy, all offboarding is handled by in-country specialists under a unified compliance framework.
How Howdy.com simplifies EOR contracting
Most EOR providers act as intermediaries between clients and multiple local entities. Howdy’s model is different — it operates through direct local Employer of Record partnerships and on-the-ground teams across Mexico, Brazil, Colombia, and Argentina.
That means every EOR contract signed through Howdy is:
- Fully CLT- or LFT-compliant
- Issued in both English and local language
- Digitally managed with transparent cost reporting
- Supported by local HR and finance specialists
Frequently asked questions
How long does it take to set up an EOR contract in Latin America? Typically 1–2 weeks, depending on the country and documentation speed.
Can a US company terminate a contract directly? No. The EOR (Howdy) must execute the termination under local labor law to remain compliant.
Do employees under an EOR get full local benefits? Yes. All Howdy employees receive the same benefits required by law, plus private health coverage and additional perks through Howdy’s network.
Are EOR contracts recognized as legal employment agreements? Yes. They are fully enforceable under each country’s labor code and recognized by local authorities.
Conclusion
Employer of Record contracts make it possible to hire top Latin American talent without setting up a local entity — but only when structured correctly. By combining transparent contract terms, in-country legal compliance, and localized payroll systems, Howdy.com gives US companies a secure, flexible, and fully compliant way to scale engineering, design, and product teams.
Ready to simplify your next hire in Latin America? Book a demo.