What Chinese Companies Should Know Before Expanding to Europe

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

👉 Schedule a consultation

📋 Download the EU hiring compliance checklist for Chinese businesses (English & 中文)