Free tool
A due-diligence scorecard with 27 weighted questions across employment, fees, vetting, security, and exit. Each one carries the answer a supplier gives when they have solved it, the answer that means nothing, and why it matters. Mark how your supplier actually responded and the tool separates the gaps that can wait from the ones that should stop a signature.
Including the questions we would rather you asked us.
Vendor scorecard
The engagement model comes first because it changes which questions are blocking and removes the ones that do not apply. Open any question to see what a strong answer sounds like.
Score the supplier
Pick the engagement model first, because it changes which questions are blocking and removes the ones that do not apply. Then mark each question by how the supplier actually responded, not by how you expect them to.
Managed staffing (the supplier engages the worker). You pay one monthly fee, the supplier holds the relationship with the worker, and the worker sits in your team day to day. The commercial contract is with the supplier, not the person.
The risk this model carries: You are relying on a chain you cannot see. If the supplier engages the worker as a contractor in a country whose courts read subordination out of the facts, the reclassification exposure lands somewhere, and the contract decides where. Ask to see the chain, not a summary of it.
27 questions apply, 12 of them blocking. 27 still unanswered.
Result
Not ready to sign. The core of the engagement is undefined. That does not necessarily mean a bad supplier, but it does mean you would be signing on trust for questions that have documented answers at suppliers who have solved them.
Blocking gaps (12)
A blocking question left unanswered outranks the number above. Suppliers score well on averages by answering the easy questions thoroughly, which is why these are listed separately.
Employment and classification (0%)
Who legally holds the relationship with the person doing the work, and can the supplier prove it. This is where the largest unbudgeted liabilities live.
Money, fees, and pay integrity (0%)
What you pay, what the worker receives, and what happens between the two. Suppliers that will not answer this are usually protecting a margin, not a process.
Talent, vetting, and delivery (0%)
Whether the supplier is running a real assessment process or forwarding resumes, and what happens when a placement does not work out.
Security, data, and IP (0%)
Your customer data and your source code are about to be handled from another jurisdiction. The chain of agreements has to reach the individual, not stop at the supplier.
Continuity and exit (0%)
The questions nobody asks during a good quarter. Notice, termination cost, and whether you can keep the person if you leave the supplier.
Evidence and verification (0%)
Every answer above is a claim until something outside the sales conversation confirms it.
A planning instrument, not legal advice. LavaStaff is not a law firm, a tax adviser, or an employer of record. Use the output to structure the conversation and the contract, and confirm anything jurisdiction-specific with qualified local guidance.
Why it matters
A supplier conversation is organised around talent quality and price, because those are the two things a buyer arrives asking about. The liabilities are somewhere else entirely, in classification, in the entity, and in what the contract does when the engagement ends.
Courts across the region apply the primacy of reality, so the facts of the working relationship override what the paperwork calls it. A contract that names someone a contractor is evidence, not a defence, and reclassification is retroactive.
Notice periods, severance accrual, conversion fees, and equipment recovery are the terms nobody negotiates during a good quarter. They are also the terms that decide what leaving a supplier costs, which is why they are on the scorecard.
Almost every nearshore staffing evaluation runs the same way. A founder or a head of operations decides the team needs capacity that the local market prices out of reach, three or four suppliers get on calls, and the comparison collapses into two axes within a week: how good is the talent, and what does it cost. Both are reasonable questions. Neither is where the money is.
The expensive surprises in this market are structural, and they surface long after the decision. A worker engaged as a contractor in a country whose courts read subordination out of the facts. A supplier funding payroll from your incoming wire, so a delayed invoice on your side becomes a missed rent payment on theirs. A rate that quietly excluded the statutory 13th month until the twelfth invoice arrived. A master agreement whose liability cap is one month of fees, which prices the indemnity that was so reassuring on the call at approximately nothing. An intellectual property assignment that stops at the supplier and never reaches the person who wrote the code, discovered during diligence on your Series A.
None of these are exotic. All of them are visible in advance, to a buyer who asks. The reason they usually are not asked is that they do not fit the shape of a sales conversation: they are unglamorous, they sound distrustful, and they require the buyer to know that the question exists. That is the gap this scorecard is built to close. It is a list of the questions, weighted by what they cost when the answer is wrong, with the answer a supplier gives when they have solved it sitting next to the answer that merely sounds like one.
The three that decide the rest
One. Name the legal entity that holds the relationship with the worker, its country of registration, and its registration number. This is the question the rest of the scorecard depends on, and it is the one most often answered with a reassurance instead of a fact. Statutory contributions, termination cost, data controller status, and the party you would sue all attach to a specific registered company. When a supplier says they have entities across the region, ask which one this hire sits in, whether it is owned or a partner’s, and for the number. A supplier that has built this properly hands it over in the same email. A supplier that has not will change the subject to talent quality, which is a complete answer to a different question.
Two. Is the worker an employee or a contractor in their country, and why is that defensible on the facts? The answer to avoid is that everyone in the region works as a contractor. It is broadly true as a description of practice and worth nothing as a legal position, because labour courts across Latin America apply the primacy of reality: what the relationship is outranks what the paperwork calls it. In Colombia, the contrato realidad doctrine draws on Article 53 of the Constitution and reclassifies wherever personal service, continued subordination, and remuneration are present, without regard to the label the parties chose. Reclassification is retroactive, and it pulls in back-dated cesantias, prima de servicios, vacation, and social security contributions for the entire period. Brazil and Mexico apply comparable subordination analyses. A full-time person working your hours, in your systems, under your direction, reporting to your manager, is not a contractor in most of these jurisdictions no matter what they signed.
Three. If our payment to you is late by a week, does the worker still get paid on time? This is the fastest diagnostic in the entire evaluation and it takes eight seconds. A supplier with working capital says yes immediately, because they have already had this happen and already decided. A pass-through hesitates, or says they would work something out. That hesitation tells you that your late invoice becomes your team member’s problem, and that person will learn who caused it. It is also the least confrontational way to ask about a balance sheet, which is otherwise an awkward conversation with a private company.
The four shapes
Nearshore hiring is sold under a lot of names that describe roughly four structures. The structure determines where the employment relationship sits, which in turn determines which of these questions are yours to answer and which are the supplier’s. The scorecard reweights accordingly: REPSE registration is blocking for a Mexican managed engagement and irrelevant for a direct placement, and the US tax documentation question runs the other way.
| Engagement model | Where the relationship sits | Questions that apply | Blocking |
|---|---|---|---|
| Managed staffing (the supplier engages the worker) | You pay one monthly fee, the supplier holds the relationship with the worker, and the worker sits in your team day to day. The commercial contract is with the supplier, not the person. | 27 | 12 |
| EOR-backed (a named entity employs the worker) | The worker is a formal employee of an in-country entity, either the supplier's own or a partner's, and that entity runs payroll, withholding, benefits, and statutory contributions. | 27 | 7 |
| Direct placement (you employ or contract the person) | The supplier sources and vets, you sign directly with the person or their entity, and the fee is one-time or milestone-based. After the placement you own every obligation. | 21 | 6 |
| Marketplace or freelance platform | You match with an individual through a platform that handles payment escrow and takes a percentage, with little or no vetting of the working relationship itself. | 25 | 4 |
The distinction that gets blurred most often is between a managed staffing supplier and an employer of record, partly because several suppliers sell both without saying which one you are buying. An employer of record puts the worker on the payroll of a named in-country entity and runs withholding, benefits, and statutory contributions through it. A managed staffing supplier engages the worker, usually carries the sourcing and replacement risk, and delivers the person into your team. Both are legitimate. The question that matters for either is whether the entity is theirs or resold, because a resold entity puts an extra hop between you and the company that would actually carry a termination bill, and you will only discover the hop exists on the day you need it not to.
Marketplaces deserve one specific warning, because their economics are so appealing for a first hire. Platform terms almost always disclaim the employment relationship in full, which means the classification exposure, the intellectual property assignment, and the data protection obligation all remain yours. The escrow solves the payment problem and nothing else, and it is worth being clear-eyed that solving the payment problem was never the hard part.
Mexico
Most of this scorecard depends on a supplier telling you the truth. Mexico is the exception, because the government publishes the answer.
Mexico’s 2021 outsourcing reform banned the subcontracting of personnel for a client’s core business activity and created a narrow lane for specialised services, which requires the provider to register with the Secretaria del Trabajo y Prevision Social in the Registro de Prestadoras de Servicios Especializados u Obras Especializadas, universally shortened to REPSE. Registration requires the provider to demonstrate that it is current on its tax, IMSS, and INFONAVIT obligations, and it has to be renewed every three years, in the three-month window before it expires. The STPS platform includes a public registry, so you can confirm a provider’s status without asking the provider.
The reason to bother is that this is not only the supplier’s exposure. Labour and social security inspections examine whether the client contracted with a valid registrant, and the deductibility of the invoices for the client depends on the provider being properly registered. In other words, a US company paying an unregistered provider for Mexican personnel has a tax problem of its own, not merely a counterparty with one. Ask for the registration number and the expiry date, then check it against the registry yourself. A screenshot from two years ago proves nothing about a three-year registration.
The US side
Ask a supplier what US tax documents the engagement generates and the common answer is that you will not need any. The outcome is usually correct and the conclusion is wrong, in a way that only matters when someone asks to see the file.
Compensation for services performed entirely outside the United States by a non-US person is foreign-source income. It generally carries no US withholding obligation and no Form 1099-NEC, which is the favourable result everyone expects. What makes that treatment defensible is documentation of the payee’s foreign status, which is Form W-8BEN for an individual and Form W-8BEN-E for an entity, collected before payment rather than reconstructed afterwards. Without it, the default position for a withholding agent is 30 percent, and the fact that the services happened to be performed abroad is an argument you are making after the fact rather than a file you are producing.
The classification question has a US dimension too, separate from the local one. The Department of Labor proposed a new independent contractor rule in February 2026 to rescind and replace the 2024 rule it had already stopped applying in investigations, moving back toward a framework that gives greater weight to control over the work and to the worker’s opportunity for profit and loss. For a US company engaging someone who lives and works in Bogota, the operative law is Colombian, so the practical significance of the federal rulemaking is limited. It is worth knowing about for one reason: a supplier who cites shifting US guidance as the reason your Latin American classification is fine has answered a question you did not ask with law that does not apply.
The US tax forms tool walks the specific combination for your engagement, and the employer cost calculator models what the statutory side actually costs by country.
Red flags
Offered in place of naming the entity that employs the worker. It is usually sincere, and it is still the answer that hides the most. Everything downstream, from statutory contributions to who you sue, attaches to a specific registered company.
A description of market practice presented as a legal position. Market practice has no standing in a labour court that applies the primacy of reality, and the cost of being wrong is back-dated to the first day of the relationship.
Given in place of an indemnity clause. Reclassification claims and final-pay disputes arrive after an engagement ends, so a clean history mostly measures how recently the supplier started, not how well it is structured.
There is a report with an auditor, a period, and an exceptions section, or there is not. The phrase itself is the finding, because it shows you how the supplier will characterise every other control you cannot see.
A figure with no denominator. A supplier running a real assessment funnel knows how many applicants it saw and how many advanced, because it has to staff the process. Ask for the number and the rubric for one role.
Usually true, and usually said about the conversion fee. Ask before signing, when you have leverage, rather than in the month you want to hire the person directly, when you have none.
None of these mean a supplier is dishonest. Most are given sincerely by people who have never been asked the question and are reaching for the most reassuring true thing they can say. That is exactly why they are useful signals: they mark the boundary of what the supplier has actually built, and the boundary is what you are trying to find. The correct response to any of them is not to walk away. It is to ask the follow-up, and then to write whatever comes back into the contract.
References
Reference calls in this market are close to worthless as normally conducted, because the supplier picks the references and picks them well. Two changes make the exercise worth an hour.
First, insist on shape matching. A reference has to be a company of roughly your size, in your country, hiring the same role you are hiring. A 400-person company praising a supplier for staffing a 12-person support team tells you nothing about whether that supplier can find you one senior engineer, and the supplier knows this, which is why the reference list often skews large.
Second, ask for a client that stopped. Every supplier has them and most will offer one if you ask directly, because refusing is worse than the call. What you are listening for is not whether the ending was amicable. It is how the supplier describes it: whether they name a cause, whether they take any of it, and whether the story matches what the former client says. That single call is the closest you will get to watching a supplier handle a problem before you are the problem. If they will not produce one, that is a data point that costs you nothing to collect.
The third question to put to every reference is the one about money reaching the worker. Ask whether they know what their team member is paid, and whether raises they approved showed up. References answer that honestly far more often than they answer questions about quality honestly, because it does not require them to criticise anyone.
How it scores
27
Questions in the full scorecard, reweighted per engagement model
3 / 2 / 1
Weights: blocking, important, useful, applied to a two-point answer scale
Any
A single unanswered blocking question outranks the percentage
Each question carries a weight of three, two, or one for the engagement model you selected, and a weight of zero removes it from that model’s scorecard entirely. Each answer is worth two points for a real answer, one for a partial answer, and zero for a bad answer or one you have not asked yet. The percentage is the weighted total over the weighted maximum for the questions that apply.
The percentage on its own would be misleading, which is why it is not the headline output. An average is precisely what a supplier optimises by answering the easy questions thoroughly, and the easy questions are the ones about talent and process, which suppliers enjoy discussing. So every question weighted as blocking that is answered badly or left unasked is pulled out into a separate list that sits above the score. A supplier at 88 percent with two blocking gaps is in worse shape than one at 74 percent with none, and the tool is built to make that visible rather than to average it away.
The weights are judgement, and they are set by what the answer costs when it is wrong rather than by how often the question comes up. Classification, the named entity, payroll continuity, the intellectual property chain, the replacement clause, and whether anyone has read the master agreement are blocking on most models, because each one can produce a bill or a loss that exceeds a year of fees. Attrition data and account-manager continuity are useful and not blocking, because getting them wrong costs you a difficult quarter rather than a liability. Disagree with a weight where your situation differs: a company handling regulated health or financial data should treat the data processing question as blocking on every model, and the scorecard is not going to know that about you.
One deliberate omission. There is no question here about how long the supplier has been in business, and no credit for size. Both correlate with process maturity and both are easy to substitute for the actual questions, which is the failure mode this instrument exists to prevent. A four-year-old supplier that names its entity, funds payroll from its own balance sheet, and hands you the assignment chain is a better counterparty than a large one that answers all three with reassurance.
Turn it into a contract
The scorecard is a conversation instrument, and conversations do not survive personnel changes on either side. Every answer that moved you toward signing should end up in one of three places: a clause in the master agreement, a document you hold, or a schedule attached to the contract.
The clauses worth insisting on are the classification indemnity with a named party and a cap you have actually read, the intellectual property assignment chain reaching the individual, the confidentiality flow-down to the individual, the replacement terms with their trigger conditions, the conversion fee or the period after which conversion is free, and the notice period with a clear statement of what statutory termination cost passes through to you. The documents worth holding are the entity registration, the REPSE certificate where Mexico is involved, the W-8BEN or W-8BEN-E, and the security report if one exists.
Then read the two clauses that can quietly undo all of it. A liability cap set at one month of fees prices every indemnity in the agreement at roughly nothing, and a governing law and venue that makes enforcement impractical does the same thing by a different route. Both are normal in supplier paper, both are negotiable, and neither is visible unless someone on your side opens the document. That is the last question on the scorecard for a reason: everything above it is worth exactly as much as the contract that carries it.
Questions
Start with the three that determine everything else. First, name the legal entity that holds the relationship with the worker, in which country, with its registration number. Second, is the worker an employee or a contractor there, and why is that classification defensible on the facts rather than on the contract label. Third, if our payment to you is late by a week, does the worker still get paid on time. Those three separate a staffing business from a pass-through faster than any capability deck, and a supplier who has solved them answers all three without needing to check. The scorecard on this page carries 27 questions in total, weighted so that the ones with money behind them count more than the ones that are merely useful.
Check REPSE, and check it yourself. Mexico's 2021 outsourcing reform requires providers of specialised services that deploy their own workers at a client's site to register with the Secretaria del Trabajo y Prevision Social, and the STPS runs a public registry where you can confirm whether a given provider holds a current registration. Registrations last three years and must be renewed in the three-month window before expiry, so a screenshot from two years ago proves nothing. This matters to you and not only to the supplier: inspectors verify whether the client contracted with a valid registrant, and the deductibility of the invoices depends on it.
They answer different questions, and the honest comparison is about where the employment relationship sits rather than which label is superior. An employer of record puts the worker on the payroll of a named in-country entity, which is the cleanest structure when you want a formal employee and no entity of your own. A managed staffing supplier engages the worker and delivers the person to your team, which usually moves faster and carries the sourcing and replacement risk with it. The distinction that actually matters is whether the entity is owned or resold, because a resold entity means your escalation path has an extra hop in it and the party carrying a termination bill may not be the party you signed with. Ask which one you are buying, and get the entity named either way.
The market runs from a full replacement search inside 30 to 90 days, through a partial fee credit, to nothing at all, and the words used to describe all three are almost identical. What separates them is the clause. Ask three things: what triggers it, what you receive, and who decides whether the failure qualifies. The last one is where most disputes live, because a supplier that reserves the judgement to itself has written a guarantee that is discretionary by construction. Also ask what happens if you do not want a replacement, since a credit against future placements is worth nothing to a company that has decided to stop.
Whoever the contract says, backed by whoever can actually pay. Latin American labour courts apply the primacy of reality, which means the facts of the relationship override the label on the paperwork. Colombia's contrato realidad doctrine reclassifies where personal service, subordination, and remuneration are present, and reclassification pulls in back-dated benefits and social security for the full period of the relationship. So the question is not whether your contract calls the person a contractor. It is whether your supplier has an indemnity clause naming a party, a scope, and a cap, and whether that party has a balance sheet. An indemnity from an entity with no assets is a sentence, not a protection.
Generally no, and the reason is worth understanding rather than taking on faith. Compensation for services performed entirely outside the United States by a non-US person is foreign-source income, so it usually carries neither US withholding nor a 1099-NEC. What you do need is documentation of that foreign status, which is Form W-8BEN for an individual and Form W-8BEN-E for an entity, collected before payment and kept on file. A supplier who tells you there is no paperwork has the outcome right and the file wrong, and the file is the part an auditor asks for.
Enough that you can tell a raise from a rate increase. You are not entitled to a supplier's margin and asking for it usually goes nowhere, but you are entitled to know the split between what the worker receives, what statutory employment costs, and what the supplier keeps, or at minimum a stated fixed markup. Without that split you cannot benchmark against a local salary band, and you cannot confirm that a raise you approved reached the person you approved it for. Opacity here is also the mechanism behind this market's most common complaint, which is a buyer discovering that the person doing the work receives a fraction of what the buyer believed.
Mostly it tells you how they describe things. There is an audited report with a named auditor, a defined period, a scope, and an exceptions section, or there is not. A supplier who says they are SOC 2 compliant without producing the report has used a phrase that does not correspond to any status, and that is more informative than the control itself. For a small supplier, no is a reasonable answer: ask instead what controls they run, whose device the work happens on, and who revokes access on the day someone leaves. Those three tell you more about real security posture than an attestation a 12-person company was never going to hold.
No, and the tool is built so that it cannot. The percentage is an average, and averages are exactly what a supplier optimises by answering the easy questions thoroughly. That is why questions weighted as blocking are pulled out and listed separately: an unanswered blocking question outranks a high score, and a supplier at 88 percent with two blocking gaps is in worse shape than one at 74 percent with none. Use the number to compare suppliers against each other and the gap list to decide what has to be in the contract before you sign.
Ready To Move
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