A faster path to getting started in China
To employ people to run your business, traditionally, you require a company to be operational in the country, and to meet HR, tax and other compliance regulations. However, setting up a company in China generally requires months to complete. During that period, the intended company is not operational and the venture may require tens of thousands of dollars in running costs and investment capital before the investing company understands the business, financial, consumer, or local culture landscape in the foreign market.
Such a fixed market entry strategy might result in the following mistakes:
- Choosing the wrong pricing model;
- Launching the wrong initial service line or product;
- Setting up in the wrong location, pursuing a misguided business model; or
- Selecting the wrong business partners or suppliers to work with.
It is easy to make avoidable mistakes in the absence of on-the-ground information and practical experience in the market. Yet reversing strategies when investments have been made is more costly, time-consuming, and can even adversely affect the business’s reputation.
Given these considerations, an increasing number of firms today may find it better to first test out or target a smaller or shorter-term presence in China.
A lesser-known model for businesses to hedge against the risks of market entry is available across several Asian markets.
Understanding Global Staffing Solutions (GSS)
Global Staffing Solutions (GSS) comprise a range of services designed to help businesses manage their international workforce efficiently while ensuring compliance with local labor laws. These services empower companies to hire, manage, and compensate employees across various countries, alleviating the administrative burdens that come with cross-border operations. The core components of GSS services include:
Employer of Record (EOR)
An Employer of Record (EOR) is a service provider that acts as the formal, legal employer for a company’s employees in a foreign market. While the legal model of EOR may vary across countries—being classified as an employment agency, consultancy, or payroller, depending on jurisdiction, the core function remains the same. The EOR ensures that employees are legally employed, providing compliant, long-term employment protections that are at least equivalent to those offered by local employers.
The EOR assumes full responsibility for employment-related matters, including payroll, tax compliance, benefits administration, and adherence to local labor laws. This structure allows businesses to hire employees in foreign markets without needing to set up a local entity, significantly reducing the complexities and costs associated with international expansion. By managing all legal and compliance responsibilities, the EOR frees businesses from the burden of navigating local employment laws, enabling rapid market entry while ensuring full legal compliance.
Professional Employer Organization (PEO)
A Professional Employer Organization (PEO) enters into a co-employment relationship with the client company, where both parties share responsibilities. The PEO manages administrative HR functions, including payroll processing, benefits administration, and compliance with local labor laws, while the client company retains control over the operational and day-to-day management of employees.
The PEO model is particularly valuable for businesses requiring long-term HR support across multiple regions or countries. It is especially useful in markets where labor laws, tax regulations, and social security requirements vary significantly between regions. The PEO ensures compliance with these complex, region-specific rules, helping businesses navigate the challenges of managing a distributed workforce across diverse jurisdictions.
- Global mobility services help businesses facilitate the movement of employees across borders for assignments, transfers, or expatriate positions. These services include managing immigration processes, visa applications, relocation logistics, and cultural training, ensuring a smooth transition for employees and their families as they relocate for work.
- International recruitment services assist businesses in sourcing talent from international markets. This includes leveraging local job boards, recruitment agencies, and social media platforms, as well as managing interviews, background checks, and reference verifications to ensure the hiring of qualified candidates.
- Some businesses engage independent contractors or freelancers for specific projects in foreign countries. GSS services help businesses manage these global contractors by ensuring compliance with local labor laws, handling payments, and overseeing contractual matters.
Advantages of adopting a Global Staffing Solutions strategy
Foreign companies can benefit significantly from Global Staffing Solutions (GSS) by hiring top global talent to work in international markets while remaining fully compliant with local laws—without the need to set up and operate an overseas legal entity. GSS provides businesses with comprehensive, end-to-end solutions that cover recruitment, employment, daily HR and payroll management, and talent relocation, including visa, tax, and immigration services. This enables companies to navigate new markets with flexibility, minimize operational complexities, and ensure full legal compliance. The key advantages of adopting this strategy include:
Global talent acquisition
One of the primary benefits of GSS is the ability to recruit top talent from a global pool, rather than being confined to the local job market.
International Recruitment enables companies to access a broad range of candidates with specialized skills that might not be available in the local market, making it especially valuable when local talent is scarce or when highly specialized expertise is required.
By leveraging EOR services, businesses can hire talent quickly and compliantly, even before establishing a local entity. This approach allows companies to onboard employees and start operations quickly in foreign markets. The EOR handles all compliance-related aspects, ensuring the business can focus on testing the market and refining its strategy before fully committing to a local presence.
Employing staff at local labor costs
GSS provides businesses with the opportunity to hire employees at local wages, which is particularly beneficial for operations in emerging markets where labor costs are typically lower than in the company’s home country. This cost-effective model allows companies to employ skilled local talent without the financial burden of offering the same compensation and benefits as they would to directly hire employees in their home country.
By leveraging EOR or PEO services, companies can tailor compensation packages to local standards, avoiding the high costs of incentive structures and benefits typically associated with home-country employment. This approach allows businesses to effectively manage their labor costs while maintaining flexibility as they test new markets.
Comprehensive HR, payroll, and compliance management
GSS simplifies the management of employees by providing a comprehensive solution for daily HR and payroll management. Through PEO or EOR services, businesses can outsource key administrative functions such as payroll processing, benefits administration, social insurance contributions, and tax compliance. This eliminates the need for foreign businesses to manage these complex tasks in-house, reducing both the time and resources required to maintain compliance with local labor laws.
In addition, GSS provides crucial legal support in labor contract management. GSS providers assist in drafting employment contracts that are fully compliant with local labor laws, protecting both the business and the employee. This support ensures that businesses navigate complex employment regulations, reduce legal risks, and maintain properly structured employment relationships in line with local standards.
By combining outsourced HR management with legal support, GSS not only simplifies operational tasks but also mitigates the risk of legal disputes, ensuring smooth and legally compliant operations in foreign markets.
Talent relocation support: visa, tax, and immigration
When businesses need to relocate employees for international assignments or expatriate positions, GSS offers full relocation support, including visa and work permit management, tax filings, and immigration services. Global Mobility provides businesses with the ability to manage the entire relocation process seamlessly, ensuring that all legal and compliance matters—such as work permits, residence visas, and tax obligations—are handled correctly.
This comprehensive relocation service helps businesses move employees quickly and compliantly across borders, ensuring smooth transitions for employees and minimizing the administrative burden for the business. GSS takes care of the legalities, enabling businesses to focus on their core operations without being hindered by the complexities of international employee relocation.
Legal compliance and control over employment relationships
Hiring employees through informal means—such as paying them directly into personal accounts—can expose businesses to significant legal and tax risks. GSS provides a legal framework that ensures employees are compliant with all local regulations, including tax filings, social security contributions, and work permits.
By working with an EOR, businesses ensure that all employees are legally employed, reducing the risk of legal challenges and offering greater control over the employment relationship. With GSS, businesses can avoid informal arrangements, ensuring that employees are fully compliant with local laws and regulations. This minimizes potential legal and financial risks.
Flexibility in entering and exiting new markets
A key benefit of GSS is its flexibility, particularly when entering new markets. GSS allows companies to hire employees and start operations in a foreign market without the need for a local entity. If a market or project does not meet expectations, businesses can exit quickly with minimal cost and risk. Conversely, if the market proves successful, businesses can scale up their workforce quickly, without the delays and costs associated with establishing a formal legal entity.
This flexibility allows businesses to test market conditions, refine their approach, and enter or exit markets with ease, significantly reducing the financial and operational risks typically associated with international expansion.
Comparing EOR and PEO
While both EOR and PEO services provide essential solutions for businesses managing international teams, they differ in several key areas:
|
Aspect |
PEO (Professional Employer Organization) |
EOR (Employer of Record) |
|
Legal Employment Responsibility |
Co-employment model: legal responsibilities are shared between the client company and the PEO. The client manages day-to-day operations. |
Sole legal employer: EOR assumes all legal responsibilities for employment, including payroll, tax, benefits, and compliance. |
|
Scope of Services |
Broad HR support including employee relations, development, payroll, and benefits. Best for long-term, multi-region workforce management. |
Focuses on compliance and payroll. Ideal for short-term, flexible, or project-based international hiring without entity setup. |
|
Regional Employment Management |
Effective in regions with complex labor laws and regulatory systems. PEO helps companies remain compliant across multiple jurisdictions. |
Simplifies hiring in new markets without a physical presence. Ensures compliance while minimizing administrative burden for global expansion. |
|
Best Suited For |
Businesses with long-term, ongoing staffing needs and internal HR infrastructure. |
Companies needing quick, flexible hiring solutions in foreign markets without setting up a local entity. |
How to choose an EOR provider
Selecting the right EOR provider is crucial for ensuring a smooth and compliant international expansion. When evaluating an EOR provider, consider the following factors:
- Look for an EOR provider with proven experience in the target countries. The provider should be knowledgeable about local labor laws, tax regulations, and business practices, with a solid track record of managing international teams.
- Ensure the EOR offers comprehensive services that cover the entire employee lifecycle, from payroll and tax compliance to benefits and employee termination processes.
- A reliable EOR should have a robust technology platform for managing payroll, reporting, and data storage. Ensure that the platform provides secure access for both the client company and its employees.
- Choose an EOR provider that offers exceptional customer service, with dedicated teams available to address any issues or queries promptly.
- Research the provider’s reputation through online reviews, client testimonials, and case studies. Request references from other clients and inquire about their experiences.
- Evaluate the pricing structure of different EOR providers, considering setup fees, monthly service fees, and any additional charges for services in specific regions or countries.
Case study: Overseas training company enters China
Challenge: Expansion in China with limited knowledge of the market
Entering an unfamiliar market, client A was hesitant to go through the official incorporation process without first testing the market out for itself. Motivated by the size of the education industry and its high growth potential within China, Company A – a renowned training company itself— wished to enter the market quickly.
Solution: Choosing Shenzhen as a point of entry, followed by GSS for market entry assistance
Leveraging Shenzhen’s flexible policies and its position as a frontier city in China’s reform and opening up, Client A chooses Shenzhen as its point of entry after an initial assessment of the market. Shenzhen has a large number of well-known Chinese enterprises, and many company headquarters have chosen to set up there. Client A chooses Global Staffing Solution (GSS) for their pilot entry as a recommendation by a local professional service advisor to further determine market suitability and formulate an appropriate entry strategy.
Impact: First company set-up in eight months
Client A set up its first company in Shenzhen in eight months after determining market suitability. GSS helped Company A establish a formal presence by providing an effective market entry strategy and gaining first-hand knowledge of the local business environment and culture. Company A was able to work out of a local firm, meet Chinese clients and partners, and gradually expand its market influence in China.
