Whether they need to be closer to relatives, or simply spend more time in holiday homes, an increasing number of employees are seeking to work remotely from overseas, for prolonged periods. It’s understandable; the COVID-19 pandemic has certainly proven that many employees can work from home "effectively", so why should the location make any difference to the employer?
There will be day-to-day risks that employers and employees must address if the employee seeks to work remotely abroad.
Unfortunately, it does. Although it may seem like an employee’s location will not impact their employer, there are a number of legal, financial and practical implications that may arise, affecting both employers and employees.
An employee working abroad for a prolonged period could acquire local employment rights, despite having a UK employer. Importantly, this could mean that employees working remotely from abroad have greater employment rights than others working for the same company from within the UK. Not only would this create administrative difficulties, but also it could result in inequality between employees in relation to annual leave, holiday pay, minimum wage, maternity leave and even termination rights.
Therefore, if employers are permitting employees to work remotely abroad, they should seek local legal advice on employees’ statutory rights, especially if they are considering terminating their employment.
Health and safety
It is also important to remember that all employers are legally obliged to take reasonable steps to ensure that they provide a safe workplace for their employees, wherever they are working. Clearly, the further an employee is from the office, the harder this can be. In addition, there may also be local health and safety laws in the host country that will apply to employees if they start working there remotely.
Employers will therefore need to conduct risk assessments in relation to their employees’ remote workspaces and, for employees who have relocated abroad, particular concern should be given to any location-specific risks or hazards. This includes considering the risk of the employee having to travel back to the UK for work, especially in light of the pandemic.
Another critical issue to consider is data protection, as personal data is regularly transferred between employers and employees in the course of work. If an employee relocates abroad, data could be inadvertently transferred abroad on a daily basis, which may not be compliant with the General Data Protection Regulation (GDPR). This is particularly relevant for data transfers to the USA, after the Privacy Shield enabling EU – US personal data transfers was declared invalid by the Court of Justice of the EU earlier this year.
To ensure the protection of personal data within their organisation, employers should ensure they have appropriate safeguards in place to monitor the transfer of data outside the UK.
The risk of working remotely abroad is also very significant for sponsored migrants as this can jeopardise their ability to live and work in the UK. Sponsored migrants are only permitted to travel abroad for short business trips or holidays, and moving abroad could invalidate their sponsorship by effectively demonstrating that their job does not require a UK visa.
Crucially, the immigration risks are not specific to employees. In fact, employers could face compliance action from the Home Office if sponsored employees undertake their UK role from abroad. This, or failure to notify the Home Office of changes in sponsored employees’ circumstances, could result in the suspension, downgrade or revocation of their sponsor licence.
The financial repercussions of an employee working remotely abroad can also be substantial, as the employee may acquire tax residence in another country. This would not only affect their wider tax status, but it could then impact their estate planning and inheritance tax.
Similarly, the employer will have to ascertain what their obligations are in relation to reporting and collecting tax in the host countries of employees working remotely abroad. Other countries will have their own PAYE systems and the employer will be responsible for ensuring the employee’s tax payments are calculated correctly and for complying with any local social security reporting requirements. This could involve checking for any applicable double tax treaties that impact their calculation, such as the Organisation for Economic Co-Operation and Development Model Tax Convention, which exempts an employee from paying taxes in a host country for stays of less than 183 days.
Corporation tax and VAT
UK employers should also be aware that their VAT position can be impacted by an employee working for them remotely overseas. It could also create a taxable presence in the host country on behalf of the company for corporation tax purposes, especially when the employee is senior and conducts client-facing work or business development.
There will also be day-to-day risks that employers and employees must address if the employee seeks to work remotely abroad. Sending equipment and technology to the employee will be more difficult, expensive and may not retain their insurance policy cover once taken abroad. Additionally, as businesses navigate their way through the new government guidelines, any one-off team meeting or a staggered re-entry to the office could cause the employee to be excluded or unable to work efficiently in comparison to their colleagues.
If employees are logging on abroad via unsecured internet connections such as Wi-Fi networks and hotspots, the employer may need to consider upgrading its entire system to deal with the increased data security risk, including implementing virtual private networks (VPNs) and multi-factor authentication.
This article was first published in HRZone, see here.