What should employers do when staff request to work from home while overseas?

The global pandemic caused home working to temporarily become the "new normal" to help protect and save lives. However, various research and studies have suggested that this shift to working remotely is here to stay. We are therefore seeing an increase in employees asking to work from home but from a different country, including their family residences and/or holiday homes. This article analyses the legal implications for employers when considering such a request.

Whilst on the face of it home working from overseas may seem like a simple 'yes' answer (provided the role can be performed effectively remotely), this request does give rise to a number of legal implications including tax (personal and corporate), immigration, health & safety and employment law that must be fully considered at the outset.

What does immigration law say about employees working from home in another country?

Employers will need to verify whether the individual has the appropriate permission to reside and work in the relevant country. If the employee wants to live in Europe from now until the end of the Brexit transitional period (i.e. 31 December 2020), the rules are relatively straightforward, as UK nationals have the right to live and work anywhere in the European Economic Area (EEA). Individuals will need to ensure that they've registered in the relevant country to stay beyond 2021, if this is their intention.

The term "working" can often be defined differently across jurisdictions and as most countries have their own national visa rules, the eligibility that applies to one employee in one country may not apply for another in a different country. Employers can't afford to apply a blanket approach as being found to have breached local immigration laws could at worst result in civil and criminal liability and could also prejudice the immigration status of other employees currently working in that country or wanting to work there in the future.

Employers should take advice on the immigration requirements of the particular host country where the employee will be based and the work undertaken. If special permissions such as visa or work permits are required, (even more likely from 2021) then employers are likely to have a legitimate reason to say that the individual cannot work from that location and should only work from their UK home base.

We would also recommend that employers consider the employee's potential return to the UK in the future. For example, EEA nationals should be encouraged to secure settled or pre-settled status in the UK before they travel overseas. Other non-British nationals should be alert to the implications of their absence from the UK on future visa applications, such as indefinite leave to remain or naturalisation as a British citizen.

Do employees working abroad have different employment rights?

Whilst it may seem appropriate to agree with an employee working overseas that their employment contract continues to be governed by the courts of England & Wales, an employer must not forget that certain mandatory local laws cannot be contracted out of and as such, the individual may have the right to sue their UK employer in the overseas country.

This is particularly relevant in the EEA where the Posted Workers Directive (PWD) applies to those workers who are posted temporarily from one undertaking or establishment to another cross-border within the EEA. Although there is no definition of "temporary", the PWD will often be triggered where the parties opt for a formal secondment or trip abroad where productive work is undertaken. The PWD says that workers posted abroad on a temporary basis must enjoy the same level of protections as those employees in the host country to avoid "cheap" foreign labour. Such rights extend to working time, pay, holidays, discrimination and health and safety. For instance, if the EEA country has a higher minimum wage, the UK employer must pay the employee that rate or higher whilst they work from home in that country.

The PWD will continue to apply to the UK until the end of the transitional period but the position following this time, remains unclear. If no alternative arrangement is reached between the UK and EU in relation to posted workers, it is highly likely that the PWD will no longer apply after 31 December 2020. 

In addition, where an employee is working overseas, the employer should check with their providers that all insurances and benefit offerings (such as group income protection, death in service, private medical cover etc.) remain valid.

Data protection when employees are working abroad

Employers receiving requests from employees wishing to work from home in an EEA country should have the systems and technology in place to manage the data security and transfer issues. However, if the request is to work from home outside of the EEA, there is likely to be a whole host of issues surrounding the transfer of personal data and whether the chosen country has sufficient data controls and protections in place. Employers should check their data protection policies and the extent of any personal data that the employee will be processing overseas to help identify what further action is needed to comply with their data protection obligations.

Tax and social security implications of employees working abroad

Any liability to Income Tax will be determined by the residence status of the employee and any double taxation agreement (DTA) in place.  As a basic rule, where presence in another country is short-lived, in most cases primary taxes rights will remain in the UK and the employer should continue to operate PAYE and NICs as normal.

Should the employee become resident elsewhere (certainly if he or she spends more than 183 days there but often even before this) that employee may become liable to local Income Tax and/or Social Security payments as well.  At this point any DTA will come into play and, depending on how much time is spent working for the company and where, this will determine where the primary taxing rights lie.  Credit will be available in most cases where an employee finds him or herself subject to tax in two jurisdictions to avoid double taxation.

Employers should be cautious if an employee advises that he or she is no longer liable to Income Tax and NIC since any failure to properly report through PAYE can result in HMRC pursuing the employer directly and recovering sums from a non-resident can be complex.

Given the current pandemic, employers are likely to want to be flexible, but also will want to minimise the risks. It is therefore important for employers to take advice first before agreeing to such a request. The key message is having clear communication in place so that employees discuss their thoughts with their employer in advance of any flight being booked. Where such requests are increasing, developing a short remote working policy would be beneficial to minimise the risk of line managers across the business adopting inconsistent approaches to this area.

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