In theory, European companies have access to a single market of 450 million consumers – the second largest economy in the world. But under that stat, the story’s a little different.
Creating and operating a cross-border European company is a nightmare, plagued with bureaucracy and fragmentation that stifle growth.
Creating and operating a cross-border European company is a nightmare, plagued with bureaucracy and fragmentation that stifle growth.
According to Política Exterior, the EU’s GDP has grown by 21% over the past five years – compared to 72% for the US and 290% for China. The legal environment isn’t the only reason but it’s certainly a contributor.
It’s very early days but as currently proposed, EU Inc seems like a definite step in the right direction. But it’s not a magic fix for the complexities of international growth, particularly cross-border hiring.
Here’s what you need to know.
Here’s what you need to know.
What is EU Inc? What we know so far.
EU Inc is a proposal from the European Commission to create a single, optional EU-wide company structure – the so-called “28th regime”. (Imagine a pan-European layer sitting over the 27 member states).
The core concept is simple: instead of creating and maintaining separate legal entities in multiple countries, EU companies could create one single EU entity that can operate “as easily as in uniform markets like the US or China”, to quote President of the European Commission, Ursula von der Leyen, speaking at Davos earlier this month.
The core concept is simple: instead of creating and maintaining separate legal entities in multiple countries, EU companies could create one single EU entity that can operate “as easily as in uniform markets like the US or China”, to quote President of the European Commission, Ursula von der Leyen, speaking at Davos earlier this month.
Why has EU Inc been proposed?
In a nutshell, because the EU’s economic growth is hamstrung by a fragmented, convoluted legal environment that complicates and repels innovation.
Consider the fact that Europe has around 80% fewer scale-ups and 85% fewer unicorns than the US, and EU VC investment remains 6–8x lower. Despite producing more tech start-ups.
Europe is a fizzing cauldron of ideas. But the legal environment makes it “extra hard to build and grow” and that’s driving companies away.
The same is happening with top talent. For instance, EIT say Europe boasts 30% higher per-capita concentration of AI professionals than the US but experiences a ‘brain drain’ of skilled people into markets like the US, Canada, the UK, and Asia. Streamlining bureaucracy is pivotal for the EU’s long-term innovation.
As President von der Leyen put it:
“…capital and data can cross Europe in a second. And business must be able to move just as freely. But as things stand, too many companies have to look abroad to grow and scale up […] That acts as a handbrake on the growth and profit potential of companies.”
This is what EU Inc is proposed to solve: to “build Europe’s future in Europe”.
Excellent.
But there is a but. And not just that this is an infant-stage concept that, depending whether it’s a Directive or Regulation, could take several years to effect change. Bureaucracy, hey.
Consider the fact that Europe has around 80% fewer scale-ups and 85% fewer unicorns than the US, and EU VC investment remains 6–8x lower. Despite producing more tech start-ups.
Europe is a fizzing cauldron of ideas. But the legal environment makes it “extra hard to build and grow” and that’s driving companies away.
The same is happening with top talent. For instance, EIT say Europe boasts 30% higher per-capita concentration of AI professionals than the US but experiences a ‘brain drain’ of skilled people into markets like the US, Canada, the UK, and Asia. Streamlining bureaucracy is pivotal for the EU’s long-term innovation.
As President von der Leyen put it:
“…capital and data can cross Europe in a second. And business must be able to move just as freely. But as things stand, too many companies have to look abroad to grow and scale up […] That acts as a handbrake on the growth and profit potential of companies.”
This is what EU Inc is proposed to solve: to “build Europe’s future in Europe”.
Excellent.
But there is a but. And not just that this is an infant-stage concept that, depending whether it’s a Directive or Regulation, could take several years to effect change. Bureaucracy, hey.
What would EU Inc change – and what would it ignore?
Operating across borders has lots of moving parts. It’s a compounding stack of different rules, authorities, risks and consequences that gets complicated fast.
Where do you incorporate?
A Berlin-based SaaS wants to hire in Spain and the Netherlands. Do they set up three legal entities? Incorporate in one country and operate elsewhere? Or delay growth because setup will take months and cost thousands?
How will you raise money?
A start-up from Belgium attracts interest from Germany’s explosive venture capital scene. But conversations stall because investors are wary of local rules, edge-case liabilities, and tax exposure that create friction and derail trust.
How do you manage the company?
A company incorporates in Ireland and has employees in Spain, Germany, and Poland. It’s one company on paper but behind the scenes, each hire triggers different local labour, payroll, tax and reporting laws. The operating burden is orders of magnitude larger than the company’s scale justifies.
How will you attract the talent to grow?
A fast-growing AI scale-up wants to use share options to win cross-border talent – a major lever for competitive hiring. But tax timing, vesting rules and employee risk vary across Europe, leading to a fragmented, inconsistent offer that feels muddy, both for employees and the company. So great people go elsewhere.
One centralised EU registry.
Incorporate once, fast, for a fraction of the cost, and operate across the EU.
One set of investor contracts.
Approach investors with standardised investment contracts, promoting cross-border financing.
One ESOP framework.
Gain EU-wide consistency around employee share plans. Not mentioned in Von de Leyen’s speech but widely seen as crucial.
Where EU Inc doesn’t seem set to help is with the complexities of hiring people across borders.
Where EU Inc stops – and why that’s OK.
To grow, European companies need to hire and manage people from different countries. And that’s true both ways round, given catastrophic and worsening skills shortages across almost every sector.
But global hiring is astronomically complex, as companies navigate a jumble of national laws and obligations around employment, tax, payroll, benefits, and HR compliance.
The chances of 27 member states agreeing on one protocol across all these areas seem vanishingly small – and that’s a major limitation to EU Inc’s single, simple, seamless messaging.
But EU Inc doesn’t really need to solve these issues. Mature solutions to this problem already exist, with Employer of Record and Direct Hiring already standard operating procedure for many of the world’s best global companies.
EOR lets companies hire across borders without setting up a local entity, by outsourcing employment, payroll, tax, and labour-law compliance to a national legal employer. It’s about speed and simplicity, with complete compliance confidence.
Direct Hiring empowers companies to hire globally directly under their own name but with local registrations, payroll, tax, and compliance handled by local experts. It’s about control and long-term presence, without building everything from scratch.
With that in mind, EU Inc does have clear limits – but they’re limits global companies are already navigating successfully today.
Where the proposed 28th regime shows real promise is in tackling the long-standing structural friction around starting and financing European companies. These are real, meaty issues, particularly for startups and scaleups.
Much depends on how the proposal takes shape. But as an attempt to unpeel red tape at European level, EU Inc is absolutely a step in the right direction.
But global hiring is astronomically complex, as companies navigate a jumble of national laws and obligations around employment, tax, payroll, benefits, and HR compliance.
The chances of 27 member states agreeing on one protocol across all these areas seem vanishingly small – and that’s a major limitation to EU Inc’s single, simple, seamless messaging.
But EU Inc doesn’t really need to solve these issues. Mature solutions to this problem already exist, with Employer of Record and Direct Hiring already standard operating procedure for many of the world’s best global companies.
EOR lets companies hire across borders without setting up a local entity, by outsourcing employment, payroll, tax, and labour-law compliance to a national legal employer. It’s about speed and simplicity, with complete compliance confidence.
Direct Hiring empowers companies to hire globally directly under their own name but with local registrations, payroll, tax, and compliance handled by local experts. It’s about control and long-term presence, without building everything from scratch.
With that in mind, EU Inc does have clear limits – but they’re limits global companies are already navigating successfully today.
Where the proposed 28th regime shows real promise is in tackling the long-standing structural friction around starting and financing European companies. These are real, meaty issues, particularly for startups and scaleups.
Much depends on how the proposal takes shape. But as an attempt to unpeel red tape at European level, EU Inc is absolutely a step in the right direction.
For the growing pains EU Inc doesn’t address, international companies like Stepstone, Heinz, Sumup, Axel Springer and IONOS trust WorkMotion to make global hiring fast and safe. Book a demo
