This rise of remote work and a globalized workforce is reshaping how small and mid-size businesses (SMBs) approach hiring and operational strategies.
The embrace of working remotely provides SMBs access to a larger talent pool than ever before, leading SMBs to increasingly look beyond their borders to hire the best talent.
In fact, 75% of SMBs plan to increase their number of international employees in the next one to three years, and the remote work market is projected to reach USD 58.5 billion by 2027.
Historically, it’s been major corporations engaging in international hiring; however, the normalization of remote work has helped eliminate geographical barriers and opened up a literal world of possibilities for SMBs when it comes to hiring talent — no matter where they live.
Let’s take a closer look at why SMBs should hire internationally and the best ways to do so.
Key takeaways:
- SMBs are increasingly tapping into global talent pools to stay competitive, innovative, and cost-effective.
- Compliance with local labor laws is a top challenge for SMBs hiring abroad, and getting it wrong can be costly.
- Establishing a local entity can be expensive and time-consuming, making it less ideal for early-stage global hiring.
Why SMBs Should Hire Global Talent
Today, small and mid-size businesses aren’t only hiring locally — they’re also tapping into international talent pools, hiring both contractors and full-time employees.
Here’s why expanding your hiring horizons beyond borders makes sense and can help you stay competitive and innovative.
Access to a Global Talent Pool
Hiring internationally opens the door to a massive global talent pool, allowing SMBs to employ highly skilled professionals who may not be readily available in their local markets.
This is especially crucial in industries experiencing local talent shortages or requiring niche expertise, such as tech.
Across 21 European countries, 75% of employers report difficulty finding candidates with the right skills, a challenge mirrored in the U.S., where 58% of businesses cite a lack of available talent as a key reason for hiring internationally.
By casting a wider net, SMBs can overcome these constraints and focus on finding the best-fit candidates, regardless of where they live.
Cost Efficiency
Building a global team allows SMBs to tap into regions with lower labor costs and favorable exchange rates, helping their bottom line. Instead of competing for limited — and often expensive — local talent, companies can hire skilled professionals in countries where compensation expectations align more with their company’s budget.
When asked why they hire internationally, 86% of SMBs say they do so primarily to manage costs.
Supporting an offshore team is often significantly more cost-effective than maintaining a domestic one, especially when factoring in expenses like benefits, office space, and payroll taxes.
Plus, the savings can be reinvested in other areas, such as product development, expanding marketing efforts, or entering new markets. For many SMBs, this smarter allocation of resources allows them to compete with larger companies.
Greater Innovation
Innovation is a key driver of growth for SMBs, and one of the most effective ways to fuel that innovation is through building globally diverse teams.
When SMBs hire internationally, they don’t just gain access to talent — they also bring in a mix of cultural perspectives, experiences, and problem-solving approaches. This diversity leads to more creative brainstorming, broader market understanding, and more inventive solutions.
The Boston Consulting Group reports that businesses with diverse management teams see 19% higher innovation-related revenues.
Expanded Market Understanding, Business Operations, and Reach
Building and growing an international team is also a strategic way to gain a deeper understanding of new markets and scale operations efficiently.
By bringing on team members from different parts of the world, SMBs gain access to firsthand knowledge of local cultures, consumer behavior, regulatory landscapes, and market dynamics.
So, it’s no surprise that 51% of SMBs say they hire international employees specifically to help them serve new markets.
Local employees offer valuable context that helps businesses tailor their products, marketing strategies, and customer support to the unique needs of each market.
This localized approach makes businesses more relevant and competitive, allowing them to connect with customers more authentically and effectively.
Plus, with staff spread across time zones, SMBs can operate around the clock, ensuring productivity, faster response times, and better customer engagement no matter where their customers are located.
Challenges for SMBs Hiring Global Talent
Clearly, there are many benefits for SMBs hiring internationally, but there are also significant challenges. To hire global talent successfully and avoid costly missteps, SMBs must navigate these cultural, legal, and logistical hurdles.
Legal and Administrative Compliance
Failure to comply with local tax and labor laws in the country where you have an employee can result in financial penalties, legal repercussions, or even being barred from operating in certain jurisdictions.
A whopping 71% of SMBs report struggling to understand and comply with international employment and tax laws. We’ll explore this more in the next section.
Cultural Fit
Startups and SMBs often pride themselves on their unique company culture, but maintaining a consistent culture while expanding globally is a balancing act.
Hiring international talent not aligned with the company’s mission or way of working can dilute that culture over time.
Training and Onboarding Challenges
Global hires may require region-specific onboarding, training, and role customization, which can create inconsistencies in employee experience.
Time Zones and Communication Barriers
Coordinating work across multiple time zones can slow collaboration and create communication silos. Plus, asynchronous workflows often require additional training and infrastructure.
Language, Communication Styles, and Expectations
Even when candidates speak the same language, communication styles differ significantly across cultures. For example, in some cultures, direct feedback is appreciated, but it can be considered rude in others. Small businesses may lack the HR capacity to manage these nuances effectively.
Local Market Compensation Expectations
Creating competitive and fair compensation packages without knowledge of local standards can lead to either underpaying, which can hurt your employer brand, or overpaying, which can hurt your bottom line.
Lack of Local Infrastructure
Hiring in countries where the company has no physical presence typically requires setting up a local entity yourself or partnering with an Employer of Record (EOR).
Legal Considerations for SMBs
As we touched on above, navigating international employment law is one of the most complex challenges SMBs face when building and growing global teams.
Hiring talent in another country introduces a host of legal requirements that vary widely across jurisdictions, and SMBs must ensure compliance to avoid hefty penalties.
One of the first hurdles is understanding and complying with local employment laws, which can include visa requirements, work permits, and more. Failing to meet these requirements can lead to denied work authorization, fines, or the inability to hire workers in that country.
Tax obligations are another critical area for SMBs to consider, especially since international employment can create tax liabilities in both the employer’s home country and the employee’s country.
Companies may be required to withhold income tax, pay Social Security contributions, or comply with local payroll regulations. Mistakes can result in fines or back taxes and, in some cases, double taxation for the business or the employee.
Employment contracts must also be tailored to comply with local labor standards. This includes stipulations around termination procedures, severance pay, and statutory benefits. Crafting legally sound agreements that reflect company policy and meet local requirements requires legal expertise that most SMBs won’t possess in-house.
Options to Compliantly Employ Global Talent
Given the legal complexities of hiring internationally, SMBs need to do one of the following to ensure compliance.
Establish a Local Entity
SMBs with long-term plans to hire in a specific country may benefit from establishing a local entity there. This provides full control over hiring, payroll, and compliance, while allowing the business to develop a true local presence in the country, as well as brand recognition.
However, setting up a local entity is a substantial commitment that comes with a lot of responsibilities.
The cost of establishing a local entity in a new country can be considerable — sometimes more than six figures — because it involves costly legal, administrative, and operational expenses. Plus, it can take a lot of time to set up an entity, depending on the country.
For these reasons, the delay in establishing a local presence can severely hinder SMBs, especially if they need to hire quickly.
Partner with an Employer of Record (EOR)
Want to hire internationally without the hassle and expense of setting up a legal entity in every country? SMBs can partner with an EOR to simplify global hiring and stay compliant.
An EOR is a third-party organization that legally employs international workers on behalf of a company, handling everything from onboarding and payroll to compliance with local labor laws and tax regulations.
This allows businesses to quickly and legally engage talent in foreign markets — while avoiding the risks and delays associated with local entity setup.
EORs take on the burden of staying compliant with changing employment laws, managing benefits, and ensuring proper contracts are in place. For businesses exploring new markets, this model offers flexibility, speed, and peace of mind when building and growing global teams.
Why SMBs Should Consider Partnering with an Employer of Record
There’s a lot to consider for SMBs that want to hire global talent, but partnering with an EOR simplifies international hiring without the need to set up a local entity. Here are the benefits of working with an EOR to build your global team:
It’s Fast and Easy to Get Started
Instead of spending months researching compliance requirements, drafting country-specific contracts, and registering a business in a new country, companies can onboard employees in a matter of days — or, in the case of RemoFirst, sometimes in as little as 24 hours.
The EOR acts as the legal employer in the country, taking care of payroll, tax withholdings, employee benefits, and more. This allows SMBs to hire confidently in new regions while focusing on growth instead of the intricacies of local labor laws.
It’s Cost-Effective
Establishing a legal entity in another country can be costly and involves ongoing legal and accounting expenses, often cost-prohibitive for small businesses. An EOR provides a more flexible and affordable alternative, enabling SMBs to hire across borders without the upfront investment and long-term commitment of entity formation.
It Lessens HR and Legal Burdens
Employment law varies from country to country, and mistakes in key areas like tax withholding, employee classification, or benefits administration can lead to significant fines or even legal action. An experienced EOR ensures every aspect of employment aligns with local regulations, reducing legal risk and protecting both the company and its employees.
What SMBs Should Consider Before Hiring a Global Team
Before starting the search for talent beyond their borders, there are a few important factors that SMBs should consider, including:
Best Roles for International Remote Work
Determine which roles are best suited for remote, international hiring. Focus on positions that naturally lend themselves to independent work and require minimal hands-on supervision, like software development, design, or customer support.
Equitable Compensation and Benefits
To attract international talent, SMBs should offer market-competitive salaries and benefits. This includes adjusting pay based on the cost of living in the employee’s location and providing them with benefits similar to those of their other international and U.S. employees. An attractive salary and benefits package will also lead to increased retention.
Cultural Integration and Management
Ensuring a smooth cultural integration is key to building successful global teams. This involves providing cultural training for managers, tailoring the onboarding process to local work cultures, and making materials available in the employees’ primary languages.
Employee vs. Contractor
Sometimes it makes more sense for a business to hire a contractor, especially for temporary, short-term projects. However, an emerging trend among SMBs is converting international contractors into full-time employees. This is primarily driven by the need to retain skills, protect intellectual property, and ensure compliance with local labor laws.
Build Your Global Workforce with RemoFirst
Today, SMBs have unprecedented access to global talent, helping them fill skill gaps, increase innovation, and expand into new markets faster than ever.
But, as we’ve covered, hiring internationally also comes with legal and HR challenges that can be a lot for small businesses to manage alone.
That’s why many businesses partner with an EOR like RemoFirst.
We act as the legal employer of your international hires, handling everything from employment contracts and onboarding to payroll, benefits, taxes, and more. We also ensure you remain compliant with all the labor laws — in 185+ countries — where you have an employee.
Book a demo to learn how we can help you build and grow your global team.
