The pandemic has fundamentally changed the way in which people work and want to work. It has proved that people can work more flexibly than they originally imagined. Indeed, some have taken remote working to a new level and are working from another country, which may seem tempting. However, the reality is that this is not as straightforward as one may think.
By allowing an employee to work remotely from abroad, an employer may trigger additional tax liabilities. For example, the employer (and employee) may be obliged to pay social security contributions in the country where the employee is working, depending on whether a double tax agreement exists between the UK and that country. The employee may also become liable for income tax in the host country. Another risk is that the employer may be regarded as having created a permanent establishment in the host country, meaning they can become liable for local corporation tax.
Secondly, an employee may not have a legal right to work in the country where they are working! This could have serious ramifications for the employee and the employer. It is very important that an employer checks that an employee is entitled to work from another country, and does not require a work visa to do so.
Employers also need to be aware that employees working abroad can acquire employment rights in the country where they are working ‘ for example, in relation to paid leave. It is worth noting that these rights could be very different to UK employment rights and, in some cases, far more generous.
Lastly, if an employee’s role involves the processing of personal data, the employer needs to consider what data protection rules apply if the employee processes that data from abroad, especially if the employee is working from a country outside of the EEA which is not subject to GDPR. It is the employer’s responsibility to ensure that data is accessed securely and legally.
So before allowing employees to work remotely from abroad, it would be prudent for employers to conduct a thorough assessment of what the implications will be. Generally the longer an employee stays in and works from another country, the more likely the risk of legal, tax and reputational consequences for the employer.