**Real talk alert***
We’ve all done it at some point. We’ve all dreamt about working abroad for longer than a week or two. Just think, that favourite beach hut, sipping on your favourite beverage, the sun shining bright, that feeling of warmth on your skin, the sound of the sea and you tapping away at your laptop. Yup – I’ve been there, too! Ok – I’m getting carried away here, but you get the point.
What are the legal & tax implications of allowing your employees to work remotely overseas?
Turns out (as with most things in business) there’s quite a bit to think about, especially if employees are going to be working abroad for prolonged periods. How long is too long? It’s difficult to say and the rules very much depend on the country in which your employee is working but let’s take a quick look at some of the legal & tax implications if you find your business in this situation:
Local employment law rights
Your employment contracts might stipulate that the governing law is England & Wales. Despite that, it is possible for your employees who work abroad to acquire local employment rights in their host country, which could result in inequality between your UK based employees and those working abroad. Sounds like it could quite quickly become an administrative nightmare, if you’ve more than a few employees in a number of different locations.
The kinds of issues you might find yourself having to deal with could relate to holiday entitlement and pay, minimum wage, paternity or maternity leave, health and safety rights and other rights such as termination which can vary quite a lot. The differences in any rights largely depend on the country in question but often, it’s really the termination rights that can be the most challenging – especially as some countries offer employees greater protection against dismissal, for example. As a result, you could quite easily find yourself having to deal with employees who seek to rely on their enhanced rights in the host country.
Can the employee’s location be considered a fixed place of business in another country, in which the business of your company is wholly or partly carried on? Potentially, yes. This might not be an issue if you’ve already set up a corporate base in the country in question but if you haven’t and your employee is out there country long enough, your business may become subject to various local income and corporate tax implications which could be more onerous than the tax payable in the UK i.e., corporation tax and VAT.
Right to work
Did your employee enter the country as a visitor on business but then switched to remote working out there for a prolonged period? That’s quite a common scenario. It may be the case that you need to ensure the employee has the right to work in the country and you might be required to make local filings or seek a right to work visa to ensure all local immigration rules are being followed. There could be quite significant penalties for your employees and your business if you get this wrong and it could severely impact an employee’s ability to visit, live and work in the host country in the future.
Have you thought about the data protection implications if your employee spends a lot of time in a specific country and what that might mean for your data? Did you think that by accessing data in the host country, your employee could be transferring data in a way that might not be compliant with GDPR? Again, the rules depend on the country in question, but it’s vital that, as an employer, you ensure there are appropriate monitoring processes in place for all data that is being ‘transferred’ outside of the UK and what impact that might have.
The advice in relation to your employees working abroad is very simple. It’s important to seek expert legal and tax support in the host country as soon as you are aware that an employee is planning on working abroad.
We know a lot of businesses who use global HR solutions for distributed teams, which is a great way to handle things, but it’s still important that you have the right experts overseeing things to ensure your business and employees are always fully compliant.
Neelam Narshi, Tend Legal