With Mexico emerging as a prime location for talented tech professionals, many companies are eager to tap into this growing talent pool. But building a remote tech team comes with strategic decisions that can shape the growth and efficiency of your operations. One of the most important decisions involves whether or not to open a legal entity in Mexico.
In this guide, we’ll explore the various strategies for building a remote tech team in Mexico, their pros and cons, and help you determine the best approach for your business.
Three Main Strategies for Building a Remote Tech Team in Mexico
When it comes to setting up a remote tech team in Mexico, there are three primary approaches companies typically consider:
• Employer of Record (EOR)
• Setting up a Legal Entity
• Hiring Contractors
Each approach offers different levels of control, cost, and compliance, and the decision depends on your company’s objectives and growth trajectory.
1. Employer of Record (EOR): Simplifying Compliance
An Employer of Record is an organization that legally employs people on your company’s behalf. The EOR manages payroll, taxes, compliance, and other HR functions, while the employees work directly for your company.
Pros:
• Compliance & Risk Management: The EOR ensures compliance with local labor laws, reducing risk.
• Speed & Efficiency: You can start hiring almost immediately without setting up a legal entity.
• Cost-Effective: Typically, it’s more affordable compared to establishing a legal entity.
Cons:
• Less Control: You may have limited control over HR and operational decisions.
• Reliance on a Third Party: Your reliance on the EOR for legal and payroll compliance creates dependency.
Best for: Companies needing quick setup and limited operations in Mexico, looking for minimal risk and complexity.
2. Setting Up a Legal Entity: Full Control, Long-Term Strategy
Setting up a legal entity in Mexico, such as a subsidiary, provides full control over operations. You operate as a legal company under Mexico’s laws, directly hiring and managing employees.
Pros:
•Full Control: Complete oversight of your team, policies, and business operations.
•Market Presence: Shows a commitment to the local market and builds brand presence.
•Long-Term Growth: Best suited for companies planning substantial expansion in Mexico.
Cons:
•Time & Cost Intensive: Establishing a legal entity can be expensive and time-consuming.
•Complex Compliance: You must navigate local tax and labor laws, which require ongoing expertise.
Best for: Companies with long-term plans for expansion in Mexico, who need full control over their operations.
3. Contracting: Flexibility Without Commitment
Hiring independent contractors allows you to employ individuals on a project basis without legal employment ties. Contractors are responsible for their own taxes, compliance, and benefits.
Pros:
•Flexibility: Ideal for short-term projects or scaling up quickly without full-time commitment.
•Lower Initial Costs: Avoids costs associated with setting up a legal entity or using an EOR.
Cons:
•Compliance Risks: Misclassifying contractors can result in hefty fines or legal action.
•Less Commitment: Contractors might not show the same level of commitment as full-time employees.
Best for: Companies with short-term projects or those wanting to test the waters before committing to a larger operation.
Why Setting Up a Legal Entity for Payroll Alone Isn’t Ideal
For many companies, setting up a legal entity purely for payroll purposes can feel like overkill. The process can be expensive and time-consuming, especially when better options like EORs exist. A legal entity is often unnecessary unless you have plans to expand your physical presence or conduct extensive business operations in Mexico.
When Should You Consider Setting Up a Legal Entity?
Setting up a legal entity makes sense when your company’s long-term goals include substantial operations in Mexico, such as:
• Expanding a product line or developing local services.
• Hiring a significant number of full-time employees.
• Establishing a physical office to increase brand presence.
In these cases, a legal entity allows you to:
• Directly manage your employees and company culture.
• Gain deeper market insights and credibility.
• Build relationships with local suppliers and partners.
Recommendations for Tech Companies
For most tech companies looking to hire remote developers in Mexico, using a local legal entity or an EOR like CodersLink offers the best balance of compliance, cost, and flexibility. These options allow you to:
• Hire high-quality developers without the overhead of establishing an entity.
• Stay compliant with Mexican labor laws while reducing administrative burden.
• Scale your team quickly and adjust as needed based on project demands.
What Is the Best Option for Your Company?
Ultimately, the decision to open a legal entity in Mexico should align with your long-term business strategy. While a legal entity offers control and growth potential, it’s not necessary for simply building a remote tech team.
For most companies, EOR or contracting provides immediate benefits without the complexity of managing a legal entity. These recruitment strategies are ideal for scaling efficiently and focusing on your core business operations.
Conclusion: Scale Smart with the Right Talent Strategy
Whether you’re hiring your first remote developer or scaling a team of 50, finding the right talent strategy is key to achieving growth in Mexico. Establishing a legal entity is a long-term commitment, but for many companies, an EOR or contracting solution offers the agility and compliance necessary to scale without the burdens of full legal operations.
