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Published:
June 9, 2026
Last updated:
June 8, 2026
International expansion is often associated with increasing product or service diversity and business revenue growth beyond the company’s home market.
You might be considering a global expansion plan to Southeast Asia, with 8 out of 10 people among the 700 million population who have made one online transaction in the past year.
While you might be excited to start your borderless hiring approach, what are the common global expansion mistakes often overlooked?
Worker misclassification is against Labor law. One example is hiring a temporary worker as an independent contractor to work on a short-term yet intensive project.
An employee might be misclassified as an independent contractor if hired on a project basis according to a service agreement for a time-intensive project requiring them to devote their full time to the company and indirectly prohibiting them from working with other clients.
In such instances, a “forced entrepreneur relationship” is established as contractors are governed by a service agreement and not protected by an employment contract.
Classifying workers as contractors allows employers to avoid filing taxes. Under section 248 of the tax code in the Philippines, a penalty equivalent to 25% of the amount due in addition to the tax required will be charged to the employer who fails to file the tax.
If your headquarter operates in the United States, you might use the same letter offer template across the entire organization, regardless of where the employees are employed. However, this might lead to possible disputes between you and your employees.
For instance, a 13th-month salary is optional in the US, UK, and most of the Middle east countries. But when your company expands to certain countries like the Philippines where a 13th-month bonus is mandatory by law, an offer letter from your human resources without stating it might be an offense.
Paying employees in the Philippines a 13-month salary before 24th December each year is compulsory. The amount must NOT be less than 1/12 of an employer’s total basic salary in a year.
Employers are also required to file a compliance report to the department of Labor NOT later than 15th January every year.
The technology industry is one of the industries that is expanding fast. Similarly, the turnover rates are the highest among other sectors, with computer games comprising 15.5%, Internet at 14.9%, and 13.3% for computer software industries.
Among the tech professionals, user experience designers had the highest turnover at 23.3%, followed by data analysts and software engineers at 21.7%.
Possible reasons for the high turnover are attributed to tech companies’ rapid innovation and change requirements when new technologies evolve. Companies must continually adapt and restructure their talents according to the skill sets required.
Top talents are also more likely to hop on new opportunities if the industry gets even more competitive. In such a rapidly changing industry, companies can tap into the expertise of an EOR solution provider who can speedily hire and onboard employees from a vast talent pool.
One common mistake contributing to the high turnover rate is without taking proactive actions in retention plans.
According to Investopedia’s findings, it can take up to 6 months or even more for a company to break even on its new hire’s return on investment (ROI)
Generally, a new hire can only contribute 25% of their capacity in the first month of joining. A replacement can cost 1.5 to 3 times the resigned employee’s salary, taking the time to source, hire, and provide complete training.
Remotely working employees might feel isolated in a fast-paced working environment, and the lack of security in such a volatile market could reinforce talents to seek alternative career options. Strengthening connection and engagement is vital in such working conditions.
According to Gallup research with more than 7,000 US employees, one in two had left their jobs due to their superior at some point.
In a fast-paced and highly result-oriented company, constant monitoring to ensure employees are contributing and productive, particularly in a remote setting, can make employees feel untrusted and unempowered, further aggravating employee stress and mental health in the long term.
When managers micromanage, conflicting energies develop, making team building and motivation impossible.
Labor laws vary across countries, such as minimum wage requirements could change annually according to government regulations.
In Malaysia, paying employees “retrenchment or unemployment insurance” (also known as employment insurance) is mandatory. Any employer who fails to pay EIS would be penalized RM 10,000 and /or less than 2 years of imprisonment.
While in Thailand, paying workmen’s compensation fund is mandatory as a form of insurance scheme that provides worker compensation in the event of work-related injuries and illnesses. The contribution rate is based on the employee’s risk of work and the company’s accident records.
Partnering with a local expert, such as a legal employer (EOR), who can share your full employment legal liability will mitigate your risk and ensure a smooth expansion to a country you are unfamiliar with.
Borderless hiring from multiple countries would only be possible with a sustainable global payroll solution.
An automated payroll management system can reduce nearly 70 to 80% of repetitive tasks. How to evaluate whether you should relook into your current payroll system?
Here are the 10 key criteria of a sustainable and effective global payroll solution:
Get your personalized plan and learn what an EOR can provide.
To date, AYP has impacted 500,000 lives to access HR technology more conveniently, including automated compliance, digital onboarding, and payroll in more than 130 currencies.
Worker misclassification is consistently the most costly first mistake. Companies entering SEA markets often engage local workers as independent contractors to avoid the complexity and cost of employment compliance, but local labor law frequently classifies these arrangements as employment — triggering back-payment of statutory contributions, taxes, and penalties. For a clear breakdown of the legal distinction, see our guide on differences between hiring an employee vs. a contractor. The second most common mistake is assuming that the same compliance approach works across all SEA markets.
Each SEA country applies its own misclassification test. In the Philippines, the key factors are control over work performance, economic dependence on the hiring company, and integration into the business. In Malaysia and Singapore, courts and labor authorities look at mutuality of obligation, integration, and control. Indonesia has strict rules on fixed-term contracts that cap their duration and purpose — misuse can automatically convert the worker to a permanent employee. The risk is highest in the Philippines and Indonesia, where enforcement is active and penalties significant.
Southeast Asia encompasses dramatically different cultures, business norms, and communication styles. Vietnam and Thailand have strong hierarchy in workplace relationships; Singapore has a more direct, meritocratic culture. The Philippines has a strong people-first workplace culture where relationships must be built before business is conducted. Malaysia is multicultural, with Malay, Chinese, and Indian business communities each having distinct norms. Companies that apply a single cultural playbook across SEA markets consistently underperform those that adapt their management and communication style by country.
The most common compliance mistakes during SEA expansion include: not registering the company with local authorities before conducting revenue-generating activities (permanent establishment risk), failing to enroll employees in mandatory social insurance schemes from day one, using home-country employment contracts without local law review, missing country-specific payroll tax withholding obligations, and underestimating the complexity and time required for entity registration — which averages 2–6 months across the region.
The entity vs. EOR decision depends on scale, timeline, and commitment level. EOR is typically better for: testing a new market (fewer than 10 employees), moving quickly (hiring within days vs. months), and maintaining flexibility to exit if the market doesn't perform. For a detailed comparison, see entity setup vs professional employment services. Many companies use EOR to enter a market and convert to an entity once operations are validated.
Infrastructure challenges vary by market. Singapore, Malaysia, and Thailand have reliable digital and logistics infrastructure. The Philippines has patchy internet quality outside Metro Manila and a complex inter-island logistics network. Indonesia has significant geographic complexity across 17,000+ islands, with operations concentrated in Java but talent increasingly distributed. Vietnam's infrastructure is improving rapidly but regulatory processes remain paper-intensive. Companies should assess infrastructure requirements specific to their business model — particularly for logistics, customer service, and tech-dependent operations.
Pre-expansion due diligence should cover: legal and regulatory assessment (entity requirements, employment law, tax obligations), market validation (demand for product/service, competitive landscape, pricing dynamics), talent availability and cost (salary benchmarks, skills available locally), operational requirements (office space, technology infrastructure, required licenses), and cultural assessment (business norms, required relationship-building timeline). For a broader framework, see our guide on corporate expansion in Southeast Asia: things to consider.
