- Expanding into new markets opens up opportunities but also exposes companies to risks, including complex regulations, cultural differences, and workforce challenges.
- Do thorough research on local regulations, budget for hidden costs, start small and scale gradually, build local partnerships, and consider global EOR services to simplify hiring and compliance.
- Sysgen RPO enables businesses to expand globally with ease by handling payroll, compliance, HR, and taxes.
According to the World Bank Group, the global economy is slowing down, with growth expected to dip to 2.3% in 2025. This will be the weakest pace since 2008, outside of recessions.
Rising trade barriers and global uncertainty are making it tougher for companies to grow. Even so, many businesses aren’t standing still.
In fact, 47% of American companies, 35% in Spain, 39% in Poland, and 28% in the UK are considering expanding overseas. The big hurdle? Hiring and managing people in new countries without getting stuck in complicated rules and red tape.
That’s where Employer of Record (EOR) services can help you. They simplify international hiring by handling local compliance, payroll, taxes, and human resources (HR) requirements.
This article will explore the risks businesses can face when expanding internationally without a global EOR partner and share practical tips to ensure a smoother and successful global expansion.
Risks of Expanding Internationally (Without the Right Support)
Did you know that over 70% of international businesses cite regulatory compliance as one of their most significant operational challenges? That’s why expanding to new markets without proper support can expose your company to major risks.
Below are key risks you might face when going it alone.
1. Compliance Risks
Labor and tax rules are often different between countries and even within regions. In the United States (U.S.), the Department of Labor has recently raised penalties for federal labor law violations by 2.6% due to inflation adjustments.
Meanwhile, 60% of companies operating in Europe reported struggling with compliance in cross-border hiring. Without expert help, you may find yourself dealing with fines or legal battles due to payroll, benefits, or contract mistakes.
2. Time Delays, High Setup Costs
Registering a new business entity overseas often takes months. These delays slow hiring, put offers at risk, and can stall market entry, especially problematic when talent is scarce and fast competition bids for the same skilled candidates.
Establishing a business in another country can be costly. It’s estimated that establishing a new legal entity abroad can cost between $11,000 and $37,000 USD upfront, with ongoing annual expenses ranging from $15,000 to $59,000 USD.
3. Operational Challenges
When you expand to new markets, the battle doesn’t end in handling and juggling paperwork. You’ll also manage people with different cultures and languages. These challenges can have a direct impact on team performance and collaboration in the long run.
A 2024 CSM survey revealed that 42% of global teams struggle with language barriers, while 33% report issues with cultural misunderstandings. Without the right support, companies may struggle to establish a strong company culture and sustain employee engagement across borders.
4. Talent Retention Issues
Hiring talent is one thing, but keeping them is another. In today’s day and age, employees now expect seamless onboarding, fair contracts, competitive benefits, and long-term stability.
Unsurprisingly, statistics show that companies with strong onboarding processes experience a 60% improvement in new hire retention. Without the right systems in place in a foreign region, your company may face higher turnover rates and lower employee engagement.
5 Tips for Successful Global Workforce Expansion
Expanding internationally doesn’t have to be overwhelming. But the good news is, you don’t have to face them alone.
With the right strategies, your company can overcome these common pitfalls and scale smoothly across geographical borders. Here are five tips to help you ensure success:
Tip 1. Do Your Homework on Local Regulations
What’s legal in one country might not be in another, so research local labor laws, tax rules, and compliance requirements before diving into a new market. A minor error, such as misclassifying a worker, can quickly escalate into a legal battle.
For example, global shoe retailer Nike faced scrutiny in Europe and the risk of fines exceeding $530 million for allegedly misclassifying thousands of temporary office workers as contractors, rather than employees.
Tip 2. Budget for Time and Costs
As we’ve discussed, a legal entity overseas can take months (or even years) to become fully operational, with substantial costs to maintain its operation. These hidden costs can easily push budgets beyond initial estimates.
So, always remember that global expansion is more than signing a lease and posting job ads. If you underestimate costs or timelines, you risk stalled projects, missed hiring opportunities, or frustrated investors.
Tip 3. Start Small and Scale Gradually
Instead of committing to a full-scale operation right away, you can test the waters with a small team or pilot project first. This approach enables you to evaluate the market, understand cultural dynamics, and refine your strategy before making significant investments.
For example, you can begin by hiring just a few local employees or contractors to gauge demand. Once you see that there’s real traction, you can add more staff, invest in a physical office, and scale operations confidently.
Tip 4. Build Local Knowledge and Partnerships
No matter how much research you do from afar, nothing
replaces insights from people on the ground. Building relationships with local recruiters, consultants, or business associations can provide a clearer understanding of the market and help you avoid common missteps.
BYD, a leading automaker from China, expanded rapidly into Southeast Asia by partnering with trusted local companies such as Sime Darby in Malaysia and Ayala Corporation in the Philippines. These partnerships helped them win customer trust and scale faster than if they had gone it alone.
Tip 5. Consider Employer of Record (EOR) Services
One of the most effective ways to simplify global expansion is by partnering with an Employer of Record (EOR). An EOR acts as the legal employer for your international workforce, managing payroll, taxes, benefits, and compliance on your behalf.
This means you can:
- Hire employees quickly without setting up a costly local entity.
- Stay compliant with changing labor laws and tax regulations.
- Provide fair contracts and benefits that keep talent engaged.
- Focus on growth instead of navigating red tape.
How Sysgen RPO Supports Global Workforce Growth
Nearly half of U.S. companies are looking to expand into new markets. Yet compliance risks, setup costs, and operational challenges remain some of the biggest barriers to success.
Whether you’re building small pilot teams or launching a full global workforce, Sysgen RPO ensures a seamless hiring experience for both you and your employees. With our global EOR services, you can hire talent in new markets quickly and confidently—without the expense and delays of setting up a local entity.
Our team handles the tedious and complicated compliance, payroll, and HR requirements so you can focus on what matters most: growing your business.
Are you ready to expand without the risks and roadblocks? Partner with us today to learn how we can assist you in making global growth simpler, faster, and fully compliant.
