Going Global: 5 Reasons not to establish a subsidiary in a foreign market

4 min readJul 7, 2021

The global EOR is seeing tremendous growth, adoption, and enormous investment in the last several years. It is enabling HR agility for growing businesses. Hiring foreigners abroad has never faced more opportunities than it does today. While having access to the global market is the one amazing chance for many companies to grow their operations, access to talent markets may still stay limited due to a lack of expertise and physical presence in the target country

In this article, we’re going to go around the five reasons to avoid the steep expense of establishing a foreign subsidiary.

As you know, a successful business is an expanding business. At some point in its existence, a steadily developing company faces the need to open a representative office or branch in another country, because interaction with foreign counterparties is usually carried out through foreign trade outsourcing agencies until reliable partner channels are established.

But this is not the only way of getting things done in foreign markets without your own subsidiary on site.

If an enterprise has been working with a certain country for a long period of time, it makes sense to abandon remote cooperation in order to rationalize the budget, eliminate various intermediate procedures and optimize the business process.

When a company enters foreign markets, it is necessary to choose the right model of operation.. In this case, you will have alternatives: create a branch of your company in another country, create a full-fledged company on-site, or leverage modern networking procedures to cut the cost and the timeframes. This is when the employer of record service comes into play.

The opening of branches is an important stage in the development of the company, confirming the success on the market, and the guarantee of new victories. To prevent the new division from being a source of additional expense or additional problems, a company may decide to outsource new foreign market HR processes into the hands of reliable experts with a strong network in the target country.

Business development specialists know very well that in the contemporary business environment it often does not make sense to create another liability on top of those that already exist. Starting an ultimately new company far away from the HQ can open a myriad of challenges to the parent company.

5 Reasons to Skip a Foreign Subsidiary

To help you understand why modern employer of record services are not just a whim, but rather a business necessity, let us dwell on the problems a company may encounter on foreign grounds. Since we own the expertise, it is clear for us, but let us just show you the problems you will inevitably face trying to open a branch company abroad:

  1. Upfront cost and Potential (hidden) expenses

Company setup costs may vary from country to country. It also contains multiple factors, like company registration fee, license fee, office rent, authorized capital, and so on.

  1. Organizational/Termination costs

Foreign branches cost a fortune to maintain and they cost even more to terminate (in most cases).

  1. Continuously changing compliance rules

Employment legislation is probably the most frequently altering one since the COVID-19 bomb dropped. Following the local legislation is in your best interest, since the penalties for breaking the law will be painful.

  1. Local Requirements

Legal personalities are often required to sign some of the papers in person. Imagine going back and forth with the delays that require sending paperwork overseas and back every time. Or you think your founder or CEO has all the leisure to take all those flights?

  1. Loss of candidates

The very goal of starting operations abroad is to start them ASAP. Whether you already have prospects in the pipeline or have only started looking, you better get ready, since the moment you can actually hire them is as far as your first day of established operations.

Acvian team understands it is a lot to take in at once, especially if you are a small or a medium-sized business that has just chosen the expansion path as the way to go and grow.

But! It’s not as scary as it seems. You can skip all the underlying costs of step-by-step subsidiary establishment and go right ahead with a faster, more flexible solution: global employer of record.

Acvian will hire your prospects fast and take care of every and any compliance and regulatory issues for you. Your job stays the same: communicate and manage your employees. We take care of the rest.

Contact our team today and learn what it will take to hire your latest prospect soon. With our reach in 118 countries and a strong network system, we can make your global expansion happen much sooner and at a lower overall cost.