Cross-border remote working has never been easier for employees. However, the same cannot be said when it comes to employer compliance.
First and foremost, employers need to ensure that their employees have the legal right to work in the overseas country. Employees may need a visa or work permit. Also, employees abroad for an extended period may acquire employment rights abroad. This could, for example, lead to future claims by the employee against their employer.
Tax is a major consideration. Where UK employees work overseas for an extended period, there is a risk that their activities unintentionally trigger a corporate presence abroad for their UK employer. This could result in an obligatory corporate registration overseas, leading to additional non-UK reporting and tax. Also, a growing number of countries such as Canada and India have mandatory foreign employer registration and payroll requirements.
There is one key challenge particular to the European Union (EU). The UK is still bound by the EU social security regulations for cross border workers. This means UK employers may be required to operate social security contributions overseas in the EU country rather than UK national insurance. This can come as a shock to many UK employers, especially with the very high rates of employer social security in some EU countries, such as France.
Despite the challenges, many UK employers are permitting some remote work abroad. Normally, it is possible to enable this while also minimising risk by limiting the time employees can work overseas and having a clear and well thought out policy which sets out the relevant conditions and restrictions. As you would expect, there is no ‘one-size fits all’ when it comes to policy, and an effective one will be dependent on the employer’s circumstances.
It is also important that employers clearly set out employee’s responsibilities and obligations. For example, employers should make clear that any personal tax implications of remote working remain the employee’s responsibility. When it comes to long-term globally remote workers, such as those residing indefinitely overseas, the implications can be complex. UK employers will normally need to engage the services of appropriate overseas tax and legal experts. Of course, this can often be a costly exercise.
Globally remote working is here to stay. As employers strive to remain competitive in the marketplace for talent by offering globally remote working, they should take care to make sure that their offering is compliant and costed.
Lee McIntyre-Hamilton is a tax partner at Keystone Law