A critical factor in deciding to set up a European subsidiary is how you plan to staff the new site.

Consider the corporate structure

The strategic objectives of both your company and the new subsidiary will determine the skills set your staff will need to have. If you have a Human Resources Manager then they should help you to create a suitable corporate structure for the new EU office. Make sure the infrastructure is in place to allow staff to work at their full potential before recruiting them. Control growth: fast expansion may lead to cutbacks at a later time.

Evaluate the competencies of existing staff

You may wish to staff the new site with existing employees. However, it is important to consider the competencies of your staff and measure those against what is needed in the new country. Language barriers, cultural differences and working practices are just a few of the issues to consider.

If you decide to transfer staff from head office, evaluate their suitability on pre-determined criteria. Offer staff a trial period, with a reciprocal 'opt-out' agreement to return to head office if things don't work out.

Local recruitment

Recruiting locally will mean that you will need to consider the levels of employment in an area, as well as the cost of leasing property. For example, the cost of living and hence property is much higher in Scandinavia than in the rest of the EU. Similarly, in Dublin there is a very high rate of employment, housing is expensive and office accommodation is limited.

If you decide to recruit locally, you may find it easier to use a local recruitment agency with specialist knowledge of the area and industry. They will be able to advise you on issues such as employment rates and salary levels.

Assess the cost of being an employer in Europe

Employment legislation varies across Europe. Seek legal advice to ensure that you are complying with all regulations. The cost of being an employer in Europe is much higher than it is in the UK. Statutory social security contributions vary significantly across the Union: from 29% of labour costs in Italy, to around 25% in Belgium, France and Spain, to under 5% in Denmark. In fact, the total indirect labour costs, including statutory social security contributions and contributions to private insurance schemes and other charges, is increasingly higher in the EU.

There is no single organisation that can organise a payroll system across the globe. Outsourcing your payroll to a company that can pay staff in EU currency can be an added cost.

Managing across borders

Implement an effective communication channel between the UK head office and the EU subsidiary. A great deal of support will be needed within the first start-up months; clear communication will smooth relations. A sub-culture will develop in the EU subsidiary and it will be important to establish how much power and autonomy lies with the in-country manager. Empowerment should be monitored in the initial stages.