Remote working from abroad
Legal and practical considerations for employers.
This year we have witnessed a significant increase in homeworking and an inevitable by-product has been a number of people working remotely from overseas.
The introduction of a cross-border element in the relationship between employer and employee gives rise to a range of issues, not just limited to the potential difficulties of time differences and recalling employees to the workplace for any reason.
In this article we consider some of the main legal and practical considerations which employers should be aware of before agreeing to their employees working remotely from overseas.
The implications and considerations will vary depending on the individual circumstances, in particular the terms of the employment contract.
Generally, if an employee works remotely from abroad, the territorial scope of any UK legislation they may wish to rely upon should be assessed to determine if it will apply to the employee, regardless of whether their employment contract is governed by English law.
The territorial scope will vary between statutes and depend on case law, and if the relevant right is derived from EU law. For instance, case law has suggested that an employee’s right to unfair dismissal under the Employment Rights Act 1996 should depend on whether “the connection with Great Britain is sufficiently strong.”
Another important consideration is the applicability of local laws. An employee living and working abroad may become entitled to local employment law rights of the country in question, which may be more generous than those afforded under domestic UK laws. These might include increased annual leave, enhanced maternity and other family friendly rights, a higher minimum wage, as well as additional termination rights.
Tax and Social Security
In addition to local laws, an employee may become subject to local income taxes. Consequently, employers may have tax reporting and collection obligations in the host country as well as those under PAYE. An employer may also need to comply with local social security reporting and collection obligations.
Furthermore, an employee who is working remotely from overseas may cause local tax authorities to query whether their non-resident employer has created a “permanent establishment” in that jurisdiction for corporation tax purposes. In these circumstances, the employer could become liable to taxation in two jurisdictions, depending on whether a double tax treaty applies. The employer’s VAT position may also be impacted.
Employers should be aware that their UK sponsorship licence may be invalidated if a sponsored migrant works remotely from overseas, and the employee may no longer be permitted to return to live and work in the UK. The employer, as the employee’s sponsor, would be expected to know the location of their sponsored workers. Employers should also assess whether each individual case of working remotely is due to COVID-19 and note this on the employee’s HR file for audit purposes. If a sponsorship licence is invalidated, it may lead to the Home Office taking compliance action against the employer.
Where an employee works remotely from abroad, their personal data will still be covered by UK data protection laws. However, an employer should consider whether the employee will be located outside the EEA and has access to any personal data about others, including customers, colleagues and suppliers. In these circumstances, there may be overseas data transfer obligations that apply.
There may also be increased security risks of an employer working overseas and so an employer may wish to consider whether any additional security is required.
Health and safety and insurance
An employer’s health and safety duties will extend to employees working remotely from abroad and should therefore conduct risk assessments in respect of such employees and their working arrangements. Additionally, an employer will also be responsible for complying with any local health and safety requirements. Employers may wish to check that their insurance policies would provide cover in circumstances where an employee is injured or becomes ill while working abroad.
Employers should also ensure that any employees working overseas comply with any public health guidance issued in both the UK and the local territory.
Where an employer receives any requests to work remotely from overseas, they should enter into a written agreement with the employee, which can be in the form of a side letter to the employment contract. Within the agreement, the employer will want to set out the how long the arrangement will last and under what circumstances it may be terminated. The employer may also wish to agree additional terms relating to equipment, confidentiality, health and safety and tax etc.
There are therefore a number of issues that employers should have regard for when considering employee requests to work remotely overseas. To mitigate these issues, employers should ensure that their policies and employment contracts are updated accordingly, and every request should be decided on an individual basis.
If you have any questions about the contents of this article, or you have received a request from an employee to work remotely from abroad and you need advice in respect of their immigration status or documenting the arrangement, please contact [email protected] in the immigration team or [email protected] in the employment team at FSP.