What Chinese Companies Should Know Before Expanding to Europe
PUBLISHED ON 18 April 2025 | VIBHU AGARWAL
Europe offers tremendous opportunities for growth, but many Chinese companies face avoidable challenges—often due to unfamiliar labor laws, cultural differences, or operational missteps.
At Jackson & Frank, we’ve helped dozens of Chinese businesses enter the European market successfully. Based on hands-on experience, here are five common mistakes—and how to avoid them with smart, compliant strategies.
Mistake 1: Registering a legal entity too early
The problem
Many companies assume setting up a local legal entity is the first required step—or see it as a sign of credibility. In reality, it often leads to:
- Time delays: Entity setup can take 3–6 months, slowing down market entry
- Hidden costs: Tax filings, social security registration, and legal overheads add up
- Exit risk: If the market doesn't perform as expected, winding down is costly and complex
The solution: Use an EOR (Employer of Record)
- Legally hire talent in 2–4 weeks, without opening a local company
- Let the EOR handle payroll, tax, and social contributions
- Easily scale up or down based on business needs
- Only register an entity after you've validated the market
Mistake 2: Misjudging legal differences across European countries
Key insight
Europe is not a single labor market. Each country operates under its own employment laws. For example:
- Germany: Up to 6 months probation, 4-week minimum termination notice
- France: Severance may be required after probation
- Belgium/Italy: Employer social contributions can exceed 30% of gross salary
Risk alert
Using a generic contract template across all European countries can lead to:
- Labor disputes and legal action
- Fines for unpaid social benefits
- Collective employee claims
Smart strategy
Work with an EOR provider that drafts country-specific compliant contracts.
Compare hiring costs across countries to make informed decisions (e.g. Germany vs. Netherlands).
Mistake 3: Underestimating payroll complexity
Real pitfall
A renewable energy company missed Italy’s TFR severance reserve, increasing the per-employee annual cost by 18%.
Pro advice
Use a centralized payroll platform designed for European compliance that can:
- Auto-calculate net/gross salaries based on location
- Track required benefits and employer contributions
- Notify you of local reporting and payment deadlines
Mistake 4: Misusing contractor models
Risk indicators in Europe
- Requiring contractors to work fixed hours or on-site
- Using exclusivity clauses
- Giving contractors access to company systems or email
High-risk behaviors
These actions can result in reclassification of contractors as employees, leading to penalties and back pay obligations.
Compliant setup
Use an AOR (Agent of Record) for genuine contractor relationships.
For core team members, consider compliant direct employment via EOR.
Mistake 5: Ignoring workplace culture differences
Localization tips
- Nordics: Flatten hierarchies, emphasize consensus-based decisions
- Southern Europe: Offer statutory and voluntary perks like lunch or travel vouchers
- DACH (Germany, Austria, Switzerland): Respect work-life boundaries; overtime is rare unless critical
How Jackson & Frank supports Chinese companies
We offer end-to-end solutions for Chinese companies entering and scaling across Europe:
- No-entity hiring: Compliantly build your team in 14 days or less
- Country-specific compliance audits: Prevent over 95% of avoidable risks
- Cross-cultural team onboarding: Practical guidance on managing European teams
? Download the EU hiring compliance checklist for Chinese businesses (English & 中文)
Jackson & Frank: Your global recruitment partner
At Jackson & Frank, we simplify and ensure compliance in global hiring—no need to establish local entities.
Our HR Outsourcing solutions blend innovative software with expert human support to ensure your global workforce is managed seamlessly and effectively.
Why choose us?
- Global hiring: Recruit top talent without the need for local offices.
- Compliance management: Navigate local regulations with ease.
- Payroll & benefits handling: Manage payroll, taxes, and benefits on time.
- Local expertise: Benefit from our extensive understanding of employment laws.
- Flexible solutions: Scale globally with custom strategies.
- In-house service: Employ talent in 15+ countries through our own offices—no hidden costs.
- No training needed: We handle it all—no platform learning or employee training required.
With over 10 years of experience, 300+ companies, and 1,000+ employees across 15+ countries, we’re here to help you grow globally.
Ready to expand?
Book a 30-minute call to see how we can optimize your global operations.
