Looking for software engineering talent? You’re not alone. Many companies are expanding their search into Eastern and Southern Europe, drawn by the prospect of high-quality tech skills at lower staffing costs. According to Precedence Research, the IT services outsourcing market is expected to hit around USD 1065.10 billion by 2030 with a CAGR of 8.06%. This growth indicates that more and more companies are turning to offshore and nearshore software development, primarily driven by cost considerations. But, as straightforward as it might seem, hiring across these regions comes with its own set of challenges.
At Teamed, we’ve seen firsthand how companies approach hiring in these cost-effective European markets. Often, the expectation of abundant technical skills at competitive costs meets the reality of navigating cultural, operational, and logistical complexities.
“When recruiting tech talent overseas, one of the biggest challenges is aligning expectations with the realities of emerging markets. For instance, Eastern Europe offers a rich pool of technical talent, but trying to transfer existing culture and working practices while expanding to new regions can pose challenges. What works culturally and professionally in a company’s home market doesn’t always translate easily into new regions,” explains one of our hiring experts at Teamed.
This article explores the most common hiring strategies and how businesses can effectively build and manage international remote teams.
The Expectation:
Companies often look abroad for top-tier engineering talent as they scale. Regions like Eastern and Southern Europe are attractive due to their deep pools of highly skilled professionals and relatively lower costs compared to Western Europe or North America.
The European IT outsourcing sector is constantly growing, making it an attractive offshoring destination. According to Clutch, there are currently 3,016 firms specialising in software development in this region, including 913 IT firms in Ukraine, 1064 in Poland, and 112 in the Czech Republic. However, accessing this talent pool as a direct employer is fraught with challenges.
The Reality:
Numerous challenges prevent businesses from effectively accessing global engineering talent. The most common issue faced by companies looking to supplement their engineering teams with talent from countries like Poland, Lithuania, Romania, and North Macedonia is making the right logistical and strategic choices. In simple words, the way you look to engage talent. A key challenge is choosing the right hiring approach, which often was narrowed down to three traditional options: building local entities, partnering with software houses, or hiring local contractors.
The traditional routes: Building entities vs. partnering with software houses and hiring freelance contractors
Companies looking to tap into these markets typically face a decision: build their own local entities, partner with local software houses, or hire local contractors. Each option comes with its own draw-backs and benefits:
Building local entities:
Establishing a local presence can be costly and time-consuming. It involves navigating foreign legal systems, adhering to local employment laws, and managing operational risks. While scaling up is feasible, scaling down can be equally challenging and expensive, making this option less flexible and more of a long-term commitment than some businesses are prepared for.
The downside: Establishing a local presence can be costly and time-consuming. According to McKinsey, setting up an entity can take upwards of 6-12 months and cost over $50,000 in legal and administrative fees alone.
The upside: Statista reports that Poland, for example, has over 500,000 ICT specialists, with a growing influx of over 13,000 IT graduates entering the market annually. These markets are filled with highly skilled talent, making them attractive locations.
Partnering with software houses:
This approach, while quicker and less burdensome in terms of initial setup, due to there being no need to source talent or build local entities, often results in less control over the quality and management of the workforce.
The downside: Companies can find themselves paying higher rates for the talent, yet they lack direct oversight and integration of these teams into their core operations.
The upside: Due to the ease of delivering outcomes without the need to acquire new talent or investing the time and cost involved in setting up local entities, this is a very popular method of acquiring staff for projects. E.g. N-iX reports that in Ukraine, 60% of tech professionals work for IT outsourcing and outstaffing companies, highlighting the prevalence and reliance on software houses.
Hiring local contractors:
Directly engaging with local freelancers and contractors can help you get set up fast and without the need of building local entities, offering flexibility and potentially lower costs but holding the risk of the unknown. Whilst it is more expensive than hiring your own resources it can be cheaper than using software houses.
The downside: There’s the element of the unknown, as it can be harder to vet contractors overseas. This can occasionally result in a lack of control and quality assurance if not managed properly. Additionally, hiring contractors often limits integration with your core team, and building trust can prove more challenging.
The upside: Hiring freelancers and contractors directly is cost-effective and can achieve cost savings of up to 20-30% services compared to using software houses (Deloitte Global Outsourcing Survey) and allows the flexibility to scale your team up and down quickly as needs require.
“One of the most common scenarios we encounter is companies looking to tap into global talent and income, but hesitating due to the complexity of establishing local entities and the risks of non-compliance. Some businesses even consider taking shortcuts by hiring contractors where they know they need employees, exposing themselves to significant risks,” says Tom, Co-Founder of Teamed.
“Luckily, there’s a better solution that sidesteps these challenges. By using an Employer of Record (EOR), businesses can hire both long- and short-term employees with minimal risk while retaining full control of their workforce. It’s a smarter, more sustainable approach that combines flexibility with compliance, ensuring companies can focus on growth without unnecessary complications.”
The maybe less thought option: Employer of Record (EOR)
Amid these well-known approaches, the Employer of Record model offers a streamlined alternative. EORs simplify the process of building global remote teams by managing everything from local contracts to talent hiring, along with providing expert support and payroll services. They already have legal entities established in various countries, which means they can hire employees on behalf of another company.
Here’s how it addresses the core challenges related to hiring global remote talent:
- Cost-Effectiveness and Efficiency: An EOR eliminates the need for your own legal entity, drastically reducing overhead costs and setup times. With some EORs like Teamed you can hire and onboard new talent even within 24 hours.
- Compliance and Risk Management: EORs manage all aspects of legal compliance, payroll, and HR, greatly reducing the administrative burden and mitigating risks associated with international employment laws.
- Operational Control: While the EOR handles the legal and administrative responsibilities, the client company retains day-to-day management of the employees, ensuring that the team aligns with the company’s standards and objectives.
- Support and Local Expertise: The best EORs provide more than just administrative service; they offer human support and act as an extension of your team. By understanding local regulations and cultural nuances, EORs ensure that employees feel valued and trust their employer whilst reducing stress on your HR and finance teams.
Conclusion
Making the most out of the global talent pool requires more than just the intent to expand internationally; it demands a deep understanding of the options available and the strategic use of the right hiring models. Here at Teamed, we can show you firsthand how our service as an Employer of Record (EOR) can transform the process of integrating global talent into your operations.
“Many companies approach global hiring as a strategic way to access high-quality talent at a lower cost,” says Tom.
“However, without fully understanding their options, they often default to contracting through software houses. While this can be a viable solution, it often creates a disconnect between the company and its team. An Employer of Record provides a better alternative, enabling businesses to expand their teams globally without the complexities or high costs of setting up local entities.”
At Teamed, we encourage you to look beyond traditional hiring frameworks and explore how an EOR can offer a seamless, compliant, and cost-effective way to manage your global workforce. Whether it’s mitigating risks, simplifying compliance, or retaining control over your international teams, an EOR can be a strategic ally in your global expansion efforts.
Ready to streamline your international hiring and ensure your global teams thrive under one corporate culture? Let’s chat.
This topic was initially brought to us by our partners, Ernest Hunter Green, during early discussions about global hiring challenges their clients face. While we originally decided to co-author this piece, the timing didn’t align, so we’ve decided to publish it as a Teamed insights article. We appreciate their input and thank them for sparking this important conversation.
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