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Working remotely from overseas — how employers can minimise the risk of legal consequences

Can your employees work from home when they live in a foreign country? We outline some steps that you can take to assess and minimise the risk.

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Can employees work remotely when home is overseas?

We have seen an increase in enquiries from employers looking for an answer to this question. The Covid-19 pandemic led to an increase in homeworking, with some employees working temporarily outside the UK. As restrictions have eased and many are moving back towards workplaces, some employees are asking if they can work from home permanently.

But what if home is abroad? Can your employees work from home, temporarily or permanently, when they reside in a foreign country? While this is obviously more complex than having employees based in the UK, there are some steps you can take to assess and minimise your risk of legal consequences relating to matters such as immigration, employment law, data privacy, tax and social security, intellectual property and regulatory issues.

Immigration

If an employee wishes to work from any host country, they must have the relevant permission to live and work in that country. For example, a French national is permitted to work in France, but would require permission if they were living and working in China.

Similarly, a British national no longer has permission to live and work in the EEA and Switzerland. So, British employees who want to work from the EEA or Switzerland must have the correct immigration permission from the relevant country.

You should also consider an individual’s immigration status in the UK. If an employee is not a British national, they must think about how absences from the UK may affect their visa or may break the continuity of their residence. This is important for those acquiring or retaining settled status under the EU Settlement Scheme (EUSS) and those who wish to apply for an immigration route where absences are assessed, such as Indefinite Leave to Remain (ILR) or naturalisation as a British citizen

Employment law

Employees may become subject to the jurisdiction of the country in which they are living and working. This means they may benefit from the relevant local mandatory employment protections, including minimum pay and annual leave. This is unlikely to cause an issue while relations are amicable. However, in the event of a dispute, it may have a more detrimental effect, for example, there may be differences to rights on termination of employment.

If you have an employee who will work in another country for an extended period, you should consider taking legal advice in that country, with a view to transferring them to a local contract of employment. This is to make sure you are complying with local obligations and that the contract is suitable for the jurisdiction.

You must comply with your duty to protect employees’ health, safety, and welfare. This includes ensuring they have a safe working environment when working from home. If they are working from home abroad, you are still obliged to ensure that there work environment complies with local health and safety requirements.

Data privacy

You must ensure that you are not breaching data protection laws by transferring data to an employee working from home, particularly when they are overseas. Technical and administrative measures must be in place to protect and keep data secure. It is your responsibility to make sure equipment used meets the required standards to ensure data security.

Tax and social security

From a UK point of view, if your employee is working overseas on a temporary basis, you should continue to deduct the relevant income tax under the PAYE system. The situation is more complex for longer stays. The period for tax residency is generally 183 days in a country in a 12 -month period, however there are caveats and specialist tax advice should be sought in advance.

You must consider whether an employee’s stay in the host country creates risks of income tax or social security liability in that country. There is also a risk that you are deemed as having created a “permanent establishment” in that country for corporation tax purposes. To minimise risk, you should carefully assess this issue. This is less of a concern if you have already established in the host country. You should take expert advice on what rules are in place in the relevant country.

Intellectual property

It is important to ensure that your employment contracts are carefully drafted to ensure appropriate provisions covering intellectual property (IP) created by an employee. As long as the contract of employment specifies that all IP rights in material developed in the normal course of an employee’s role are owned by you (the employer), then it should not matter where that IP is developed.

In the event that the contractual IP provisions are not explicit, in general UK legislation provides that IP created by an employee in the usual course of their employment belongs to the employer. So, if the employment contract is governed by English law, you can rely on UK legislation. You may face difficulties if the contract of employment does not state the applicable jurisdiction, or if there is no contract in place. So, we strongly advise that contracts of employment state that all IP rights in material developed in the normal course of an employee’s role are owned by the employer.

Regulatory considerations

There are additional factors for regulated businesses when determining whether it is acceptable for employees to work from home in a foreign country. The various considerations will vary across sectors and will differ depending on the nature of the individual’s role. in these circumstances, you must ensure your business can prove how their professional and regulatory obligations are being met and appropriate insurance must be in place to cover overseas work. These extra concerns may lead regulated businesses to be more hesitant in granting requests for overseas remote working.

Minimise your risk

These issues identified above can be daunting for employers who have not previously needed international advice. Now that employees know they can work from home, many may consider that home need not be in the UK and request to work from abroad, whether short or long term. Understandably, you may sympathise whilst also wanting to ensure that you stay on the right side of the law and avoid any pitfalls, with as little administrative burden as possible. In general:

  • the shorter the period of remote working, the less likely the risk. You may decide to consider requests only for a brief, time limited period
  • consider on a case-by-case basis – is it possible for the role to be carried out effectively from the host country
  • check if the employee will be processing sensitive data
  • take local expert advice e.g., on immigration, employment tax and social security obligations in the host country
  • ensure it is possible to meet regulatory obligations
  • check insurance is adequate
  • in the event that any overseas remote working arrangements are agreed, these should be recorded in writing.

If you have received similar requests, you may consider a short policy to cover these situations and enable a fair and consistent approach.

If you need help, we can provide advice and support you to put in place policies to deal with such requests. We can help with employment contracts, covering work from overseas. We are part of an international network of legal experts, who can also advise you on any particular jurisdiction.

Get in touch with our team of specialist solicitors to learn more. We are ready to use our legal expertise to assist you in the best way, with solutions to suit your business needs.

For any further information or expert advice, contact our employment law solicitors.