Briefing: Should employers allow employees to work from abroad?
With the majority of office workers having worked from home over the past 18 months, some may be dreaming about temporarily, or even permanently, relocating and working from abroad. In this briefing, Employment Law Solicitor Pam Loch discusses the issues employers need to consider.
Aside from the obvious temptation of working from a sunny beach, for some staff it opens up alternative options to where they live and work if their employer will agree that they no longer need to physically attend the office. The difficulty for employers is that there are numerous legal and management issues that need to be carefully considered before agreeing an employee can work from abroad.
One key consideration for both the employer and the employee is that there can be significant tax consequences when working abroad. If the employee is abroad on a temporary, short-term basis, UK employers will still be responsible for deducting the usual tax and National Insurance contributions as the employee could remain a tax resident in the UK. The position changes where an employee is working abroad for an extended period as they may cease to be a UK tax resident. The usual rule is that if an individual will spend more than 183 days in a particular country, they will no longer automatically be considered a UK tax resident. It is always worth getting specific tax advice, taking into account the circumstances and the country the employee is to be based in, as it may be the case that the employee becomes liable for income tax in the country they are working in, and both the employer and employee may be required to pay social security contributions. The UK has an agreement with a number of countries to avoid double deduction of social security taxes, so it is worth checking if the UK has that type of arrangement in place with the country the employee wants to move to. There could also be other statutory payments or regulations employers need to be aware of.
In addition, employees who work from abroad may benefit from local employment laws rather than the laws of England and Wales. This may apply even if the employment contract says that the laws of England and Wales apply. For example, employees in Ireland may acquire the right not to be unfairly dismissed after one year, unlike the current two in the UK. Therefore, it is important to have an understanding of the mandatory local laws too. It could mean that an employee may benefit from enhanced notice rights, National Minimum Wage levels that are higher or rights in relation to termination of their employment. The specific rights that will apply depend on the country the employee will be based in. Again, it is worth seeking specific advice from the country that the employee will be living in.
An employer should also consider the impact of an employee working from abroad from a data protection angle. Are you confident you can comply with the data protection obligations if one of your employees is working in, say, the Bahamas? Some countries also have their own rules. Japan, for example, has implemented strict data protection laws that impact on personal data transferred overseas, which would affect employees whose roles require them to process personal data.
An employer has a responsibility for the health and safety of employees, which includes monitoring the hours worked but also providing a safe working environment when they are working from the office, home or abroad. This essentially requires an employer to ensure that the working environment is compliant with any local health and safety requirements. Employees may have a better work/life balance while living in a different country having the ability to explore new places. However, you would have to ensure that it remains a safe environment to work in to meet your obligations as an employer, which may be more or less extensive than applies in the UK.
It is also worth considering the employee’s pension entitlements and any other employment-related benefits, for example private medical insurance. Can these still be provided if the employee is based abroad? It may be possible for these to continue while the employee is living and working abroad but this will depend on the specific scheme provisions. If it is not possible for a benefit to continue, and the benefit is a contractual entitlement, you will need to consult with the employee to change their employment contract. It may be unlikely an employee will have an objection to this change if they have requested to move abroad; however, they may seek an increase in pay to compensate for the loss of it.
From a practical perspective there are other things to consider as the employer. If employees are working across different time zones, will that impact on the employee connecting with colleagues, or working collaboratively in a team? Managing employees working remotely abroad can be more challenging than if they are in the UK. If you do need to continue to have face-to-face meetings with managers or colleagues or require employees to attend training or team building events, you would need to ensure they understand that and include a contractual clause that requires employees working from abroad to continue to attend meetings or events. You should also think about how the employee will communicate with staff to ensure regular communication. If an employee will be working in a different time zone you may want to consider if any adjustment is needed to their contractual working hours too.
Employers may be keen to agree to a request to work from abroad to retain the best talent, especially if it is a tight recruitment market. However, you may also be tempted to consider alternative ways to continue to work with the individual by perhaps terminating their employment and agreeing they will work as a self-employed consultant. This means the individual would be self-employed and responsible for their own tax and national insurance. This is a risky option as there will need to be a clear distinction between how they were operating as an employee compared to an independent consultant, otherwise they could argue later there was continuous employment and HMRC may determine tax and NICs should have been deducted as they remained employed or a worker.
Having considered the legal implications and potential risks, if you are willing to agree that an employee can work from abroad, whether on a temporary or permanent basis, there are some immediate steps to take. An employer should have a policy to ensure that any requests for flexible working to work abroad are dealt with consistently and fairly. Where an employee has submitted a flexible working request to work from abroad, you may want to consider agreeing to the request on a trial basis to establish if it will work for the employer and employee.
Pam Loch, Employment Law Solicitor and Managing Director of Loch Employment Law and Rosin Kavanagh, Employment Law Solicitor.
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