Nearshore Software Development: HR Challenges for Tech Companies

Introduction

The trend towards nearshoring has gained traction recently as companies, especially in the software development context, reevaluate their business strategies. Nearshoring has emerged as a strategic alternative in how companies approach talent acquisition, bridging the gap between effective collaboration, cost optimization, and efficiency. Organizations can now benefit from cost efficiency, work seamlessly across time zones, and benefit from cultural alignment.

Rethinking how companies manage talent, from recruitment to development and retention is key. As the guardian of the organizational culture, HR plays a crucial role in this process. This article delves into the changes, challenges, and opportunities that a nearshore model brings to HR, as well as the 25Friday journey in this field and the practices that can be adopted to address these changes.

Global Recruitment

The foundation of a successful nearshore setup begins with effective recruitment. Recruiting talent in a nearshore model requires more than just filling roles; the HR role is crucial when developing recruitment strategies considering the regional nuances and cultural differences. Identifying and attracting the right talent in a nearshore model is key - HR must ensure a strategic approach in the selection process to find the best candidates.

At 25Friday, we’ve honed our focus on the Portuguese market, tailoring recruitment strategies to align both local nuances and cultural differences with the Netherlands market. Our recruitment team understands the regional talent availability, salary competitiveness, and local job market trends by doing a yearly benchmarking in the field allowing them to be one step ahead, filter a better search when starting the sourcing process, and craft an appealing employer value proposition (EVP) designed to meet the diverse needs of our employees, providing meaningful career paths and addressing various life stages.

From the first contact with the candidate until the offer proposal, the candidate experiences a fully customized and efficient experience - our in-house back-office platform integrates a diverse range of functions that allow us to provide a seamless experience to the candidates and partners. We combine diverse platforms to find candidates who not only have the necessary hard and soft skills but also fit the company culture, such as LinkedIn Recruiter, our custom-built ATS that supports end-to-end recruitment, and our custom career page - as previously mentioned in our article ‘Scaling Efficiency in Nearshoring: Our Journey to Fully Automated Processes’.

Onboarding Process and Integration

Ensuring nearshore employees feel connected and valued from day one is critical for engagement long-term retention and productivity. Effective onboarding requires a structured approach in a nearshore context where the process is mostly remote.

At 25Friday we designed an effective onboarding program that includes virtual onboarding on the partner side and an engaging and collaborative onboarding from our side. The employee journey starts with a Meet & Greet moment before the first day to meet the team members so that they can feel comfortable, welcome and included when starting their journey. On the first day, the employee embarks on a comprehensive session where we introduce the company culture and values, an overview of benefits and perks, and clear instructions on using all essential tools, ensuring that new hires feel integrated and prepared. After that, the onboarding from the partner side happens and we ensure they have all the onboarding preparations prepared to make this new job as smooth sailing as possible.

We also believe that regular team gatherings are important, and for that, we have our three offices available in different locations - Porto, Aveiro, and Braga - allowing team proximity and effective collaboration. Regular team meetings in the Netherlands and visits to our offices are also part of 25Friday’s strategy to foster collaboration and connection. Bridging cultural differences by helping new employees feel part of the team despite physical distance is crucial.

Talent Management and Retention

Nearshoring requires a structured approach to talent management and retention. This working model can be challenging. Focusing on talent retention strategies, offering clear career paths, learning and development opportunities, competitive compensation packages and benefits, and an attractive work environment is the way to keep employees engaged. HR takes a crucial role in the development and implementation of retention policies based on competitive benefits and long-term incentives to keep the best people on board.

At 25Friday we’re aware that a nearshore setup requires strategic effort and a people-centric perspective. Along the process, we’ve faced quite some challenges but throughout the journey, HR took the initiative to search and invest in programs that allowed us to keep people engaged and motivated while aligned with the company’s goals. Some of the challenges that we faced and how we overcame them:

• Limited Face-to-Face Interaction: Few in-person interactions can create a sense of isolation. At 25Friday, we address this by organizing regular meetups and team-building events to foster stronger connections and a sense of belonging. Additionally, our hybrid work-from-office policy nurtures a positive culture by encouraging employees to collaborate in person, build relationships, and create an even greater sense of community.
• Career Development Opportunities: Employees may perceive fewer growth opportunities in a nearshore environment. Internally, our management team invests heavily in mentorship, training, and clear career progression plans to help our employees thrive - for that to happen we make use of our internal Competence Framework that allows each employee to understand “where am I/to where can I grow”.
• Cultural Disconnects: Differences in work styles and expectations can hinder collaboration. Our HR implemented technological tools - HiBob and our internal BackOffice - that allow us to identify and address concerns promptly by having access to frequent feedback loops, such as pulse surveys. We believe that balancing the integration of onshore and nearshore teams through hybrid dynamics ensures cohesion and synergy.

Local Compliance and Administrative Complexity

Managing HR Operations can be complex, especially when adding different locations considering that labor laws vary significantly from country to country. HR has a crucial role here by ensuring that the company complies with local regulations.

25Friday focuses on nearshore teams in Portugal meaning that we need to be sure that we are adhering to labor requirements (contracts, benefits, tax, and social security policies, to name a few).

• Payroll and Benefits: At 25Friday, we partner with accounting experts and invest in modern platforms to streamline processes, like Spendesk and HiBob, that allow us to handle diverse payroll systems, taxation requirements, and benefits packages. Our compensation policies are aligned with the local market and we take a proactive attitude in this matter by doing a yearly benchmark to ensure a competitive compensation policy - this allows us to maintain a pay structure that is fair to all employees.
• Regulatory Compliance: We’re always looking to improve our labor laws knowledge and best practices. To ensure adherence to data privacy, we leverage secure systems to manage employee data (HiBob) and ensure compliance with privacy laws.

Cultivating Company Culture

Maintaining a unified and vibrant organizational culture in a distributed workforce is a challenge that demands intentionality. In a nearshore working model, there’s the need for strong organizational communication strategies so that employees can have a unified vision of the company values and be a part of the culture that we want to see.

At 25Friday, we believe that a strong organizational culture that resonates with local values is essential for employee retention. Our HR is focused on developing initiatives to promote the company culture by providing regular updates from senior management - with our quarterly Keynote & Beers sessions; conducting on-site meetings and implementing action plans based on feedback; investing in flexible work policies and wellness programs to ensure that employees feel supported; leveraging collaboration tools like Slack to bridge gaps, while encouraging regular travel to the Netherlands to foster proximity and teamwork.

Technology and Remote Work Tools

Nearshoring often involves remote or hybrid work, and implementing technologies and tools that facilitate communication and collaboration is crucial. To ensure that employees can perform their roles effectively, HR must provide the necessary tools, from suitable hardware to relevant software tools to make long-distance collaboration possible. This not only enhances people's productivity but also helps in creating a positive and impacting work experience.

At 25Friday we have established clear protocols for accessing IT support and ensure that our employees know how to seek help when needed. Our HR Ops is responsible for timely assistance and ensuring all the necessary support by maintaining an efficient and effective support system that helps minimize downtime and maintain operational efficiency. There’s also full access to our internal handbook that offers all the necessary information related to this matter, guiding our employees regarding technology and internal tools access.

Conclusion

The role of HR in supporting a nearshore context is multifaceted and crucial to the success of overall business. Nearshoring offers a world of opportunities for companies but it requires careful planning and innovative HR strategies from recruitment and onboarding to performance management and career growth.

At 25Friday we understand the challenges facing the software development industry in the context of nearshoring. Our talent search and leadership expertise allow us to build a thriving nearshore model that benefits parties - our people and partners. With a commitment to continuous improvement and a balanced approach, HR’s role becomes increasingly strategic making nearshoring not just a strategy but a pathway to innovation and success.