The increase in hybrid working has changed the way many businesses operate and when employees choose to work abroad, it can come with additional challenges.
Whether employees choose to take short hybrid periods or long-term remote roles overseas, these arrangements can bring employers additional legal risks.
While managing remote-working employees can seem daunting, careful planning and documentation can help employers create a successful global workforce.
What are the risks of international remote working?
While the offer of international working can improve job satisfaction and employee retention, it can also bring difficulties when complying with different countries’ tax rules and employment laws.
When employees work remotely abroad, the income tax implications don’t just affect them but also affect their employers.
Extended overseas work can create a taxable presence for employers and lead to corporate tax and VAT liabilities, even when no office or formal branch exists.
In countries without a double tax treaty with the UK or if an employee spends more than 183 days in 12 months working there, employers could be responsible for deducting and remitting local taxes from the employee’s pay.
If employers fail to handle tax and payroll correctly, they could be at risk of financial penalties and interest charges.
Different countries also have their own employment laws and employers must ensure that their employees are legally entitled to work in the country and comply with labour standards.
It is an employer’s responsibility to track where and how long staff are working abroad so they can accurately manage tax, immigration and compliance risks.
Aside from tax, other legal considerations, such as data protection and cybersecurity, can affect how overseas work runs.
Accessing company data from another jurisdiction may breach data protection rules, such as the UK GDPR, particularly when data is processed outside of approved regions.
This means that employers also have to set up secure systems, VPNs and cross-border data transfer protocols when employees work internationally.
How can employers avoid them?
To reduce the risks, employers should set up internal procedures to manage remote work effectively.
This can include:
- Creating a clear remote working abroad policy that sets limits on the duration, eligible countries and includes an approval process.
- Tracking working days and hours to manage tax and immigration rules.
- Making sure employment contracts comply with working arrangements.
- Verifying insurance and pension contributions remain valid for overseas workers.
How can you prepare when employees work internationally?
International remote working can be an appealing benefit for employees, but it can bring hidden tax and compliance risks for employers.
By staying organised and documenting accurate records of employee travel, tax filings and social security, you can protect your business from potential disputes.
Employers can introduce well-structured policies and seek payroll guidance to allow their business to support flexible working and follow overseas regulations.
Contact our team for help on how to avoid the risks of international remote working.