Global Staffing Solutions & the US Dollar: What can US companies learn from the LATAM nearshoring model?

There is a global shortage of technology talent, especially engineers and product people. The USA is the world’s leader in technology development so as a result of the global supply shortage wage inflation is hurting most businesses’ capability to attract and keep the engineering and product people they need.

The challenge for US businesses who need to hire these people is trying to access incremental supplies of labor in a cost effective way that doesn’t impact productivity or cause additional administrative costs that offset the benefits associated with a global staffing solution.

In this blog we will take a look at the nearshoring business model in LATAM, how it leverages the power of the US dollar, and how any US company could do exactly the same thing, realizing significant benefits from a recruitment perspective.

GLOBAL STAFFING SOLUTIONS BECOMING MORE POPULAR

Despite the high profile tech layoffs recently wage inflation for in-demand skill sets is still making recruiting engineers and product related positions very challenging for US companies.

As a result many businesses who invest large amounts in technical resources and who have struggled to attract the talent they need because of said wage inflation and tough competition are looking at “global staffing solutions” as a way to get access to incremental labor at a lower cost.

Many US companies utilize workers in India and Eastern Europe. Whilst they offer great value one of the major issues is the time difference, which can hamper productivity.

In LATAM many US companies work with nearshoring companies to access remote tech talent living south of the US border. Unlike in Eastern Europe or India the time zones are exactly aligned with the US making real time collaboration much easier.

At the same time US companies can find significant cost savings for remote LATAM based tech workers versus US based employees doing the same role. In our recently launched Quarterly LATAM Tech Talent Salary Report we found the 40% to 50% salary savings for:

Product Manager 5 years +
Product Manager 3 years +
Backend Engineer
Senior Dev Ops Engineer 3 years +
Product Designer 5 years +
Manager, Engineering
Senior Dev Ops Engineer 5 years +
Senior Backend Engineer
Lead, Software Engineering
Product Designer 3 years +

And 30% savings for LATAM based:

Software Development Engineer C++
Front End Engineer 3 years +
Lead Full Stack Software Engineer – Ruby/JavaScript
Front End Engineer 5 years +
Python Software Engineer – Machine Learning

THE NEARSHORING SECRETS THAT US COMPANIES OVERLOOK

There are three ways in which nearshoring companies enable incremental labor to the US.

They use the power of the US dollar – USD bank accounts are very easy to get for people outside of the USA for those that want them. They can get them from the likes of Wise or Payoneer, or local LATAM banks allow their customers to have USD accounts. This makes paying LATAM talent easy.
They are set up as US companies – the US government allows foreigners to own and set up US companies, which makes doing business with US companies very, very easy and there is no need to set up new company entities in each country they want to hire.
They use independent contractor service agreements – This avoids the regulation that affects businesses who set up workers as full time employees, meaning hiring and payroll is very simple.

US companies that use nearshoring businesses love them because they help them scale their workforce cost effectively with minimal administration costs.

They are able to avoid the issues associated with directly employing workers in new states or countries because the nearshoring businesses take care of payroll and the contracts with the talent, whilst the client pays the nearshoring business as a US supplier.

US supplier I hear you say? Yes, a US supplier.

But why?

Under the US law it is totally legal for a foreigner to set up and own a US company. All the nearshoring businesses we know are set up (usually as US LLCs) in the USA so that the nearshoring company can have a US to US business relationship with its clients.

The US government uses rules like this to support the US dollar’s dominance globally. The more people with US businesses, the greater the use of the US dollar, and the greater power the US government has over global commerce etc.

At the same time in Latin America it is very easy for normal everyday people to get a US dollar denominated bank account via the likes of Wise, Payoneer or even local banks. Therefore when it comes to paying the talent the nearshoring company can do so from their US commercial bank account into an engineers USD bank account, despite the fact that the engineer could be based in Argentina, Chile, Colombia, Uruguay, Costa Rica, Panama, Paraguay etc.

ANY US COMPANY CAN DO EXACTLY THE SAME AND REAP THE BENEFITS TOO

When you examine the technicalities of how the money flow works it’s possible to see that if a client really wanted, they don’t need a nearshoring business.

How would it work?

Being a US business, you have the same ability to work with talent in the same way as a nearshoring company does. So if your company wants to benefit from incremental labor supply at reduced cost then you need to think like a nearshoring business.

Usually nearshoring companies take care of the payroll and contracts on behalf of a client. The contracts however are not full time employee contracts, they are service agreements for independent contractors. As a result they are not bound by the same obligations as an employee, and thus are protected from the additional administration costs involved with full time employees.

As a client searching for tech talent today you can do the same as we have written above, and increase your company’s access to LATAM technology talent.

The only limitation you have is that you can only work with individuals that have a US bank account, however, this is exactly the same for any third party nearshoring business too. Plus, most engineers and product people already have USD denominated bank accounts because the USD is the currency that everybody wants versus the local currencies of Latin America.

When we explain this process to US businesses, it can take a while before they fully understand. Many of them are in the mindset where they are thinking about setting up offices in new countries because they think they need to have full time employees, but that is not necessary.

LOCAL SUPPORT IS KEY TO EXECUTING

If a client was to set up like this then they would still need local expertise to recruit the local talent.

To recruit efficiently in LATAM you need people on the ground with established networks and reputation. A client needs insights about salaries, which markets will be most appropriate and what is the most effective recruitment process to attract the best candidates are all important inputs.

This is where we can help.

Our “Freelance direct” service offers a pure recruitment service, where the client takes care of the contract and payroll, and we look after the recruitment.

If the above sounds interesting for you and your business please contact hello@solivargasrecruiting.com.

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