Four crucial questions for NGOs entering Latin America

NGOs are helping to transform the futures of tens of millions of people across Latin America. From protecting indigenous land rights and responding to natural disasters, to delivering humanitarian aid, supporting peacebuilding efforts, and expanding health programs in underserved rural areas. But achieving meaningful, lasting impact relies on more than funding and effective programs. It requires the right people, deployed strategically and in compliance with complex local labor laws. And this can present significant challenges.

In this article, we discuss some of the key decisions every NGO leader needs to consider when planning their entry and expansion in Latin America.

Four key decisions for NGOs entering Latin America

Across Latin America, local hiring laws vary widely between countries, worker protections are extensive, and contractor classifications are complex, restrictive and strictly enforced. Any mistakes will lead to delayed work permits, problems in contractor audits, visa denials, or entity registration issues. These issues can stall critical NGO initiatives pushing them months behind schedule.

When advising NGOs expanding into Latin America, we start by exploring the four critical questions that will shape a relevant and resilient globalization strategy:

1. What is the most effective and compliant way to engage international talent – contractors or employees?
2. Is establishing a local legal entity necessary – or would a more flexible model be better?
3. Which national and regional employment regulations in Latin America will impact your operations?
4. Will the staffing and operational model support long-term goals in Latin America?

The answers to these questions will not only impact your hiring approach but also how fast your program can launch, the level of risk you accept, your credibility with donors, and ultimately, how effectively you can deliver impact.

Question 1: What is the most effective and compliant way to engage international talent - contractors or employees?

A critical decision NGOs face when expanding into LATAM is how to engage local talent. Should team members be hired as independent contractors or formally employed under local labor laws? The right answer depends on your program’s scale, urgency, duration, structure, and the level of regulatory complexity your organization is equipped to manage.

Option 1: Contractors

For pilot phases, emergency deployments, or short-term advisory work, hiring contractors offers NGOs speed, flexibility and minimal operational overheads. Mainly because there’s no requirement to set up a separate in-country legal entity. But it’s important to consider that governments of many Latin American countries have become increasingly assertive in how they apply contractor classification rules in recent years.

Without a thorough understanding of local labor definitions and tax obligations, NGOs risk exposing themselves (and their contractors) to legal and financial liabilities. In particular, NGOs need to consider:

• Enforcement of contractor classifications: For example, the authorities in Brazil, Colombia, and Argentina frequently audit NGOs and other foreign entities for misclassifying workers. Penalties can be severe.
• Visa limitations: In most countries foreign contractors must hold a valid work permit (sponsored by a local entity) to work locally.
• Lack of protection: Contractors don’t receive severance, health coverage, or legal protections under local labor rules.

Option 2: Direct employees

For longer-term, mission-critical programs or roles involving close collaboration with communities, governments, or donors, contracting staff is often not as effective. As a general rule, hiring staff as employees allows for more operational control and builds legitimacy with stakeholders.

Whether it’s bringing in a program director from your international headquarters or employing a local team, staffing a new operation in Latin America requires diligent planning and in-depth knowledge of local legal and regulatory obligations.

Key employment challenges across LATAM include:

• Legal entity setup: In Mexico, Brazil, and Argentina NGOs must register with tax authorities and labor ministries before they can issue employment contracts. This can take several months.
• Work permits and foreign staff quotas: Although most countries (including Peru, Colombia, and Mexico) allow NGOs to hire foreign staff, they require employer-sponsored visas and enforce strict quotas.
• Mandatory benefits and contributions: Employers must budget for social security contributions, severance pay, paid vacation, and other requirements.
• Country-specific employment terms: In the southernmost countries, such as Argentina, Uruguay, and Chile, employment conditions (from working hours to annual bonuses and termination processes) are heavily shaped by unions and collective bargaining agreements.

Question 2: Is establishing a local legal entity necessary – or would a more flexible model be better?

If your NGO decides to hire employees rather than independent contractors, the next strategic decision is how to employ them – through a local legal entity or via an Employer of Record (EOR). Both approaches are legally feasible in most Latin American countries, but the right approach depends on your timeline, budget, growth plans, and your organization’s capacity to manage ongoing compliance requirements.

Option 1: EOR

Opting for an EOR arrangement enables NGOs to hire local staff without setting up a legal entity. With this structure, the EOR acts as the legal employer on your behalf, handling employment contracts, payroll, tax compliance, social security contributions, and work permits for international hires.

Acting as an EOR, TopSource Worldwide can help NGOs deploy teams in as little as four weeks, offering a fast, low-risk way to compliantly enter a new Latin American market. This makes this model particularly beneficial for:

• Programs requiring less than 10 staff in LATAM.
• Emergency responses and short- to medium-term initiatives that require fast setup.
• Early-stage operations and pilots for new programs.

Option 2: Local entity setup

As programs become more permanent or grow in size and scope, establishing as a local legal entity offers more control and long-term credibility. It also supports permanent staffing, eligibility for government tenders, and encourages deeper connections with local communities and partnerships.

Each country in Latin America offers its own pathway for registration as a non-profit entity. For example, the Asociación Civil in Mexico and Argentina and Fundación or Corporación in Colombia and Chile. These structures offer opportunities to develop deeper local engagement and long-term partnerships, but they also come with significant legal and administrative responsibilities. A few examples include:

• Obtaining registration and approvals with national tax, labor, and civil society agencies. This can take time.
• Ensuring governance structures comply with country-level guidance. For example, in many LATAM countries, board members must include nationals or residents.
• Compliance with employment laws, social contributions, and collective bargaining rules.
• Negotiating work visa sponsorship for foreign workers and staying within the legal thresholds for foreign workers.

Question 3: Which national and regional employment regulations in Latin America will impact your operations?

While the need for NGO support in LATAM is significant, the compliance requirements around staffing can be complex, with employment regulations differing from country to country. When first entering the region or scaling existing programs, a localized staffing strategy will ensure operations are aligned with national labor rules.

Here are some examples of the regulatory requirements to plan for:

• Complying with varying foreign labor quotas and visa regulations. For examples, some countries (like Peru) enforce a hard cap on foreign employees, while others (such as Mexico and Colombia) require evidence that no qualified local talent is available before filling a role with a foreign candidate.
• Budgeting for mandatory contributions to social security, pensions, health insurance, and unemployment funds, as well as bonuses and profit-sharing. For example, a 13th-month salary is required in most LATAM countries, including Mexico, Colombia, and Argentina.
• Adhering to country-specific severance rules. For example, in Brazil, employers must deposit 8% of each employee's monthly salary into the Fundo de Garantia do Tempo de Serviço (FGTS).
• Enforcing the relevant country’s working week rules and ensuring overtime is correctly compensated and documented in line with local regulations.
• Understanding the influence of industry- or sector-level collective agreements over everything from leave entitlements to severance and contractual flexibility.

Question 4: Will the staffing and operational model support long-term goals in Latin America?

When developing your globalization strategy, it’s critical to choose the right staffing model not just for now, but also to support your long-term vision for programs in LATAM.

When your organization first enters with a pilot program or to provide an emergency response, an Employer of Record (EOR) model can help you mobilize quickly, with reduced regulatory and administrative burden and limited overhead costs. However, if your NGO plans to build a more permanent, long-term presence in LATAM, as your presence scales, the EOR model might not offer the level of control, authority and local credibility you need. This might make transitioning to a legal entity necessary.

TopSource Worldwide can help with planning for and executing an evolving globalization journey in LATAM. As a strategic partner for NGOs, we develop staffing strategies that are compliant, resilient, and agile enough to evolve with your mission and long-term vision.

Need help building or scaling your LATAM team compliantly?

At TopSource Worldwide, we support NGOs with EOR services, legal entity setup, global payroll, accounting and HR advisory, so you can focus your efforts and resources on program delivery. Our services span a full range of global staffing solutions, supporting you to:

• Choose the right employment model
• Stay compliant with labor, tax, and immigration laws
• Navigate regulatory changes
• Manage onboarding, payroll, and work permits
• Scale your team confidently

If you would like to explore how TopSource Worldwide can support your expansion into LATAM, our team would be happy to discuss your plans and help you to find the best path forward.