Are you considering employing staff overseas?
Employing staff abroad is becoming more popular. Over the last few years, we have had a number of queries from clients who are considering hiring talent that live and work abroad but who are going to stay in their home countries. It sounds ideal: no immigration or visa issues, the employee can stay close to their family and friends. Plus the business might just get a possible foothold in another jurisdiction. All positives. However, here are some things to bear in mind when thinking of employing staff who live abroad:
Some countries’ authorities have registration requirements for individuals who are working for a foreign company.
The first issue to address is what type of contract is this person going to be on? An employee or a consultant/freelancer? Most staff will want to be taken on as an employees and receive all the positives that go with that: a more stable job, attractive pension, paid holiday, benefits. BUT….
Beware of the applicable local labour and employment laws in the country where they reside. If you’re a UK company employing staff overseas a single employment contract may not suffice. Even if your employment contract says it is governed by English law, local laws where the employee lives could also be applicable.
Generally, staff working abroad are not likely to assert rights until things go wrong, such as during an internal investigation, or when the employer attempts to terminate an employee’s contract. At that point, employees do cherry pick: they will rely on the laws that give them the more favourable position if there is ever a dispute.
Companies employing someone from outside the UK should do some due diligence on which laws apply before hiring this person. It’s important to know what you might be up against if things go wrong.
If you’re employing staff abroad, you may need a local contract that sits alongside the UK contract.
Check which social security laws will be applicable to their employment abroad. And you may have reporting obligations that you are unaware of – you’ll need to check in advance. Some countries’ authorities have registration requirements for individuals who are working for a foreign company.
Review any compliance obligations. If the employee is in another jurisdiction then this might have a knock-on effect on compliance: trade and supply chain requirements, code of conduct and ethics compliance requirements. This might mean more training for an employee, or other checks and procedures.
Check rules on tax presence/permanent establishment. If your employee is in a sales role or generating revenue, you should check if their presence in another jurisdiction could be considered a ‘permanent establishment’ (tax presence) in that country, as this could trigger corporation tax liabilities. You do not want to inadvertently set up an office!
Make employees aware of the possible impact on their personal tax situation. In general, it is not usually an employer’s problem to advise or inform staff about their personal tax situation. But you may have withholding obligations on personal income tax and social security. So you need to know what they are and what you are supposed to do in terms withholding pay for these deductions.
Verify the company’s insurance & benefits. Do your current policies provide sufficient coverage to remote workers, including those working remotely in another country? If an employee has private health insurance, the employer should check whether these benefits continue to apply abroad. What other benefits may be more attractive to a candidate who lives and works abroad?
Review and update internal policies. Now is the time to review and update remote working policies that were first issued at the beginning of the pandemic. Must has changed since then and companies have refined many of their remote working practices. It is also a different thing to be hiring a remote worker on a permanent basis and there may be different issues to address. What are the costs associated with remote working and who is meeting those costs? What are the potential liabilities (as outlined above) and who is responsible for them? How do we deal with cost/implications of any travel/quarantine restrictions, etc.
Does the employee process data? Employers will need to have an understanding of local data protection rules and guidelines. This will be relevant to the employee’s personal data but also if the employee is processing data in their role.
Keep track of where your employees are. How do you know where a remote worker is at any time? What happens if they go to a different third country, would your employee have the right to work where they are?
