For this achievement you need to hire a group of 'Dancers' (Inverted commas definitely necessary) and use them to distract guards holding pirates at gunpoint. There are a few spots where these hostages can be found around a few of the major cites, Just head towards any 'pirate recruit' signs on the map. Be careful not to get spotted heading towards the guards, as you need to be quite close to trigger the 'distract' option. Use the cover of the dancer group if necessary.
It's been confirmed by BigBoomKC that having a full roster of pirates will stop the hostages from spawning. If they're not showing at the location in the video below try raiding a few ships to kill off a few men.
I've added a quick video. Mainly to test the Xbox ONE DVR, but also to show a good location to get this in the south-east of Kingston.