What Is Nearshore Outsourcing? Everything You Need to Know

Companies are increasingly seeking ways to cut costs, improve efficiency, and minimize the impact of labor shortages. An approach that continues to grow in popularity in the US is nearshoring—outsourcing business procedures and services to companies in Latin America.

With nearly 10 million jobs unfilled in the US but less than 6 million unemployed workers to potentially fill them, accessing a skilled talent pool outside the US to fill remote roles is key for growth. Nearshoring also offers several advantages over traditional offshore outsourcing to distant countries, including cultural and language similarities, shorter travel times, and little to no time zone differences.

This article explains what nearshore outsourcing is, its benefits and challenges, and how you can implement a successful nearshore hiring strategy.

What Is Nearshore Outsourcing (Nearshoring)?

Nearshoring outsourcing is outsourcing your processes or services to a nearby country or region.

In the case of the US, contracting out work to remote workers in Latin America (LatAm) would be considered nearshoring. For example, you might nearshore your software development to Mexico or Costa Rica rather than to a more distant country like India or China.

For US companies, Mexico, Brazil, and Argentina are popular locations for nearshore outsourcing due to their proximity, abundance of highly skilled talent, and lower labor costs compared to the US. These countries focus on technology and innovation, making them ideal places to find software developers, digital marketing experts, and just about any type of professional you need.

Nearshoring vs. Onshoring vs. Offshoring

Onshoring and offshoring are two other types of outsourcing strategies. Onshoring means hiring workers within the US, while offshoring involves hiring workers from distant countries with time zones that don’t align with US working hours.

Onshore outsourcing doesn’t provide the same cost reduction advantages as offshoring and nearshoring because salary costs are higher in the US.

On the other hand, while offshore outsourcing usually leads to cost efficiencies, it often also leads to communication difficulties due to time zone and cultural differences. Nearshoring is usually the better choice, allowing for time zone compatibility, cultural similarities, and reduced travel costs.

We go into more detail on the differences between nearshoring, onshoring, and offshoring in our article “Nearshoring vs. Offshoring vs. Onshoring: What’s the Difference?”

Nearshoring vs. Outsourcing

Outsourcing is a broader term that involves hiring a third-party provider to handle specific tasks or functions. Nearshoring is a specific type of outsourcing that focuses on cost savings and accessing larger talent pools and specialized expertise by hiring remote workers from a nearby country.

A significant difference between outsourcing and nearshore hiring is that, with nearshoring, remote team members work closely with your in-house team. You will want to make them feel like part of the team by, for example, including them in virtual meetings and chat channels to foster collaboration and integration.

Nearshore Outsourcing Benefits

Nearshoring has a number of advantages, both in its own right and when compared to onshoring and offshoring. In brief, some of the nearshore outsourcing benefits are:

Lower salaries reduce overhead costs

US companies nearshoring to Latin America can save 30–70% compared to hiring domestically. These savings are possible because the cost of living in LatAm is lower. Consequently, salary expectations are also lower.

This is a win-win situation: you save money while your remote workers receive fair compensation. Often LatAm hires will make significantly more than they would in their local area.

And because your LatAm-based workers will earn a good wage (in US dollars, which is often more stable than their local currency), they will be motivated to work hard and keep partnering with you for the long term, helping lower turnover and therefore reducing recurring recruitment costs.

Expanded talent pool

“Finding, developing, and keeping the right talent with the right skills at the right price is more elusive than ever.”

Deloitte Global Outsourcing Survey 2022

Nearshore hiring can also help businesses address talent shortages in their local area or industry by opening up a much wider talent pool to source from. By nearshoring, you can access a wider pool of qualified professionals to help fill these gaps.

Hiring remotely and accessing a larger talent pool is also the easiest way to scale a team at speed. A larger talent pool means you are more likely to find the talent you need quickly and reduce your time to hire. Plus, by hiring remotely, you can grow your team fast without needing the additional office space and associated infrastructure (office equipment, etc. ) you would need to increase an in-house team, which could take ages to source.

Similar time zones enable better communication and collaboration

Your LatAm hires would be within two hours of EST, meaning most of your working day will align. This allows for quicker decision-making and more efficient collaboration, which can result in better project outcomes and increased productivity.

For US companies, working with colleagues in LatAm at mutually convenient times takes no more consideration than working with colleagues on opposite sides of the US—in fact, there will often be less of a time difference.

Great cultural fit and English proficiency

Nearshoring reduces cultural barriers and allows for a more seamless integration of business processes.

When hiring from Latin America, US companies attract the top performers with the highest levels of English proficiency. Many of these top professionals have previously worked for US-headquartered multinational companies and can fit seamlessly into US work settings.

Allows you to hire the top 1%

Nearshoring allows you to hire the most experienced professionals because of the strength of the US dollar.

Although you will pay your LatAm-based workers less than you would comparable US-based workers, you will provide them with superior wages compared to what they could get working for a local company. As mentioned earlier, this is a win-win situation. And it means you can make attractive offers that can allow you to secure highly skilled professionals.

For example, PwC has offices in Argentina and Mexico. So finding highly skilled LatAm finance and accounting candidates that have worked for the Big Four is not unheard of.

Business continuity

Having some of your team in different locations makes it easier to run operations smoothly if unforeseen circumstances affect your main office/headquarters. If a natural disaster strikes, your remote teammates can keep working. It also allows you to have coverage when your US team might be observing a national holiday if that is something you need to consider.

Build high-performing, agile teams

Hiring from LatAm increases your team’s diversity and breadth of experience, which fosters innovation. LatAm workers will bring new ideas and a fresh perspective, making them valuable assets to any company. This is good for business—companies with more diverse workforces are more profitable and have higher employee satisfaction ratings.

In addition, contracting with remote workers on a flexible basis allows you to adapt quickly to market changes. You can more easily scale up and down your workforce when needed, especially when contracting on a per-project basis or through a recruiting firm that can quickly source new talent.

Nearshore Outsourcing Challenges

There are some potential difficulties and challenges when hiring from LatAm, such as:

Compliance

Hiring from a nearby country can present challenges in complying with that country’s laws and regulations.

Every country has its own set of laws, labor codes, and regulations that businesses must comply with. Failure to comply with these can result in legal consequences, including fines, penalties, and legal disputes.

This is why businesses might prefer to work closely with an outsourcing partner with the expertise to ensure compliance with all applicable laws and regulations.

Verifying skill and competency

It may not be easy to verify the credentials and qualifications of remote workers, particularly if they are in a country with different educational and professional qualifications. This can make it challenging to assess their skills and determine if they are suitable for the role you need to fill.

You may need to be a bit flexible when evaluating skills and recognize that some hard skills are interchangeable. For example, while Netsuite and Quickbooks are the most common tools in the US for accounting roles, many LatAm companies use SAP. However, getting up to speed with Netsuite or Quickbooks would be a quick process for skilled candidates. Even if they don’t know the exact tools, Latin Americans are highly adaptable and can learn them quickly.

You will need to develop effective strategies and systems to address these challenges and ensure that remote workers can perform their roles effectively if you are not working with a recruiting firm.

Finding the right candidates

The talent acquisition processes you currently have in place likely won’t be sufficient for hiring from Latin America. You need a well-thought-out screening process, especially if you advertise your position on job boards that may attract hundreds of applicants.

For example, you will need to screen for their English level before jumping on a call. You won’t just be checking whether they have a basic proficiency (which their application will inform you of); you may have to specifically check whether they have ever used English in a professional environment before (which may require familiarity with vocabulary they hadn’t needed before but could pick up quickly).

Resume differences

LatAm resumes may take you a bit more time to review. They are not usually one page like US ones typically are. The tendency is to include as much information as possible, so someone with 20 years of experience might submit 4–5 pages. But this shouldn’t be a disqualifying factor.

Some people include information, such as a photo, address, marital status, and driver’s license number, that would be considered useless in most recruiting situations. Just find the information that is useful to you and disregard the rest.

We don’t feel any of these challenges are sufficient to prevent anyone from taking advantage of the benefits of nearshoring. But if you want to minimize them, finding a nearshoring partner that understands the LatAm talent market ensures the hiring process will be easy to navigate, removing potential sources of stress.

An expert nearshore outsourcing staffing or recruiting firm can help you figure out if nearshoring is right for you and what areas of your business would benefit from nearshore hiring.

Nearshoring Trends

The pandemic has left a lasting impact by demonstrating the viability of remote working for a wider range of positions than previously considered. This practice has now become so widespread that some question why it wasn’t implemented more frequently in the past. Businesses allowing remote work see a 25% lower turnover rate, saving resources on frequent hiring.

And once a company sees the possibilities and benefits that remote working offers, hiring from LatAm, where salaries are lower, becomes an obvious choice—the location of your remote team member is irrelevant if you are communicating over Zoom anyway.

Tie those benefits in with a tight labor market in the US, and there is no doubt that the nearshoring trend will only continue in popularity.

“Latin America has been and will continue to be the leading regional hotspot for nearshoring. With numerous International Organization for Standardization (ISO) certifications and more rigorous intellectual property laws than Asia …”

~The National Interest
‍

With a general trend of moving business from China to LatAm for several reasons—among those, supply chain issues and intellectual property protection—it’s not surprising that this is expected to continue. While that trend is more focused on manufacturing, it will spill over into business process outsourcing as well, firmly entrenching LatAm as a destination of choice for outsourcing.

Another trend is the rise in the popularity (or necessity) of outsourcing roles that are increasingly in demand with the growing digital transformation of companies. In their Global outsourcing survey 2022, Deloitte found that 96% of executives outsourced at least some of their data and analytics capabilities and 81% of their cybersecurity roles. The demand for talent in these areas will only increase, making nearshore hiring the smart choice for securing top talent with the necessary expertise in these areas.

Nearshoring FAQs:

Here are some of the most common questions US companies have when it comes to nearshore hiring:

Is Nearshore Hiring Just for Tech and Software Firms?

It’s true that nearshoring to tech and software firms in LatAm is extremely popular and has become commonplace. For example, according to the World Bank:

“Mexico’s information technology outsourcing industry has been growing at an annual rate of 10 to 15 percent, amounting to roughly US$ 46 billion in exports, and Mexico is now considered the third-largest exporter country worldwide of information technology services.”

Mexico has become well known for its IT and tech sector along with Costa Rica, Argentina, and Brazil. However, nearshoring isn’t just for hiring a team of developers; you can take advantage of the benefits of nearshore outsourcing for many roles.

Any role that can be done remotely can be outsourced to LatAm, but we think positions in the following areas are particularly suitable:

software development and IT
finance and accounting
call center and customer support
marketing
design and product design
sales and business development
human resources
data

LatAm has advanced professionals in all of these fields, and some of the largest US companies have taken advantage of that for a while.

To see examples of specific roles you can outsource, read our article “14 Roles US Companies Can Easily Outsource to Nearshore Locations.”

How Does Nearshoring Help the Economy?

Nearshoring helps the US economy because, with access to cheaper labor and services, companies can increase profits and reinvest this money into the US economy. It promotes more economic activities within the country, creating more jobs, stimulating business growth, and promoting overall economic growth.

If a company can’t find the skilled labor it needs, it can’t grow and contribute to the US economy. For example, with a shortage of accounting graduates in the US, accounting firms, including the Big Four, regularly have to look abroad for professionals or risk positions remaining unfilled. If companies can’t fill positions like these within the US, operations and growth will suffer. Hiring from abroad may also mean a company can employ several more US-based customer-facing workers due to the money saved.

Nearshoring also encourages international cooperation and understanding and helps support professional and educational development for nearby countries. More and better jobs increase the living standards of the LatAm region, potentially reducing migration and creating new markets for US products.

What Are Some Examples of Companies Successfully Nearshoring?

Savvy companies have been successfully nearshoring to LatAm for years. For example, Amazon knows they can find an “abundance” of talent in places like Costa Rica, where they are now one of the largest employers in the country. Whirlpool, Boeing, Honeywell, and Ford all have some production in LatAm.

Here are a few of the companies we know are enjoying the advantages of nearshoring:

Northstar

Northstar is a full-service accounting and CFO firm. They wanted to hire one bookkeeper from LatAm and ended up scaling their entire team.

With top accounting talent in the US in short supply, Northstar realized they were better off looking elsewhere.

Since discovering nearshoring, Northstar has hired 12 candidates across finance, accounting, operations, and admin to scale their remote team quickly without breaking the bank. They’ve also saved over $250k, which is up to 70% per new hire.

Delve

Digital consulting agency Delve was looking for affordable talent to help grow its marketing operations. Initially, they wanted just three new employees. Now, they have ten highly skilled LatAm recruits.

The move has saved them more than half a million dollars in salaries and helped them to scale at speed. While Eastern Europe was their initial choice for outsourcing, nearshoring in LatAm meant they didn’t need to deal with time zone differences and could offset the war in Ukraine’s impact on operations.

CyberFortress

CyberFortress, a cybersecurity and data recovery company, has hired LatAm professionals for 12 positions. They have been able to save around $500k while still making top-quality hires. For example, they filled a director of accounting and financial reporting position with a candidate with a postgraduate degree and 15 years of experience.

How To Hire Nearshore Workers

By far, the easiest way to hire nearshore workers is to use an agency such as Near. Using a company that knows how to navigate finding the best candidates in LatAm and how to contract with them will save you countless hours. Nearshoring recruitment firms can take over as much or as little of the hiring, onboarding, paying, and compliance with local laws as needed.

Here is our recommendation, step by step, for hiring nearshore workers:

1. Define what you need

It’s worth spending some time on this step. We have seen the best results when clients take the time to narrow down what they are looking for in a candidate for the specific role they need to fill. Going in with a clear picture of the role and the skills needed will make the whole process more efficient and reduce the chance of bad hires (and their associated costs).

Knowing exactly what you need also speeds up the screening and interviewing stages, making you more likely to get the most in-demand top professionals.

2. Attract the best candidates

You want your job description to get in front of the best candidates, so you need to know where to post it to get maximum (but targeted) reach. This is where working with a nearshore outsourcing partner will really make your talent acquisition budget go further. A recruiting firm or executive search agency is going to be skilled at optimizing its advertising reach and attracting the best of the best.

If you choose to go it on your own, ensure you post your job on job boards that cater to where your ideal candidates are likely to look, keeping in mind that the more places you have to post your job, the more costs you will inevitably incur.

(Here are our top picks for job boards for hiring LatAm talent.)

3. Screen candidates

After you’ve collected applications for potential candidates, conduct initial screenings to narrow down your list to just those you want to take through to formal interviews.

After an initial paper sift to cut the number of applications down to those that meet your basic requirements, you will want to review the remaining applicants’ resumes in more detail, request references from past employers/clients, and conduct skills assessments.

We detail this process for you in our article “7 Tips to Screen Remote Foreign Workers.”

4. Interview candidates

Your interview process should be as smooth as possible to create a good candidate experience. Remember to be accommodating to the candidates’ schedules. This is a chance to demonstrate your company’s values and that you care about your employees.

Need a sample piece of work or some further info? Make this clear in advance, so candidates have plenty of time to prepare.

5. Make an offer

Once you’ve identified your ideal candidate, it’s time to make an offer. A good job offer should make you stand out from any other competing offers the candidate may be considering, reduce the hiring time, and lead to a better chance of retaining the talent. Make sure to include the financial compensation being offered, any perks and benefits, and clarify the details of the role.

Within this step, if you haven’t made this decision already, you will want to consider how you are going to hire your remote worker, so this is clear in the offer. For example, as:

- an employee employed directly by you

In this case, you will need to consider the implications of hiring someone who is not a US resident. This may only be a good option if you have a legal entity in the country you are hiring from.

- an employee employed by an employer of record (EoR)

If you don’t have a legal entity in the country you hire from, this is an option for employing a foreign worker as a direct employee. The EoR acts as the legal employer for purposes of complying with the employee’s local laws, but you retain your role as employer for all other purposes.

- an independent contractor (freelancer)

This is a more straightforward route and the one we recommend. With this model, the local laws of the remote worker are irrelevant to your purposes. The contract arrangement can look very similar to that of a full-time or part-time worker (even including benefits if you choose), or it can look similar to any freelance work (being paid by the hour or on a project basis).

You will still have to send payments internationally, but that is simple these days—and if you work with a nearshoring firm to recruit your workers, they can handle it for you.

To read more about the difference between employees and contractors, including why you may still want to offer benefits to contractors, read our article “Should Employers Provide Contractor Employee Benefits.”

6. Onboard new hire

Onboarding remote hires is a critical process that can determine the success and retention of new nearshore team members. Onboarding remote hires is important for several reasons:

It helps remote hires feel welcome and valued and reduces the sense of isolation and disconnection that can affect remote workers.
It establishes clear expectations and goals for remote hires and aligns them with your mission, vision, values, culture, and norms.
It provides the necessary tools, resources, and support for remote hires to perform their roles effectively and efficiently.
It fosters strong relationships and collaboration among remote hires and their managers, peers, and other stakeholders across the organization.

We have detailed six best practices for onboarding new hires here.

Which Software Should You Use for Nearshoring?

Software is crucial in making nearshore outsourcing effective: it enables seamless collaboration, coordination, and quality control among distributed teams.

With all the tools and software available today, like project management platforms and video conferencing apps, having teams working remotely doesn’t need to slow down productivity. Whether your new team members are in Georgia or Mexico will make no difference to your collaboration and productivity.

We’ve written a full guide on our suggested top seven tools, with the pros and cons of each. But, in brief, here are some of the options available:

Communication and collaboration

From setting up a virtual interview to allowing your teams to collaborate in real time, using one (or more) of these communication tools is essential for remote working.

Cloud-based storage

Whether for in-house, hybrid, or fully remote teams, cloud storage has become commonplace for storing and sharing work-related documents.

Project management

An easy-to-use project management platform is critical for effective working for many roles. Most of these platforms make agile project management easy, with the ability to view tasks and schedules in multiple forms, such as kanban boards or Gantt charts.

HR and payroll

These platforms help streamline your HR and payroll activities for distributed teams, including making paying international contractors simple.

And while some of these tools come with a financial cost, it’s likely to be negligible compared with the costs of office space, cleaning costs, and the other overheads associated with having in-house staff—besides, in many cases, you would already be using many of these SaaS tools in house.

Final Thoughts

From our experience, as well as our clients’, we have seen that nearshoring is a cost-effective and efficient way for US companies to grow and be competitive. By choosing nearby countries like Mexico, Brazil, and Argentina, businesses can benefit from lower costs and top-tier talent without sacrificing communication, collaboration, and cultural compatibility.

Successfully nearshoring requires having a solid talent acquisition process in place. We have seen that the companies able to take advantage of nearshore outsourcing benefits to their fullest have had strong recruitment processes or have partnered with a nearshore hiring firm to find and hire the best talent.

Partnering with someone like Near streamlines the recruiting process and relieves the burden of screening potentially hundreds of job applications. All you have to do is write your job description, and we will present you with a short list of ideal candidates to interview for free. We can even help you onboard and pay them once you make a hire.

To discuss how we can help you find the best LatAm talent, book a free consultation call today.