Spotlight on... Working Abroad

The pandemic has undoubtedly changed the way life was before anyone had ever heard the words ‘coronavirus’, ‘covid’ and ‘furlough’. One of the biggest shifts we’ve seen is in the world of work – employees want (and often, expect) much more flexibility in the way they work. Many employers are also embracing the flexibility changes, taking the opportunity to downsize office space.

Combined with the impact of Brexit, we’ve seen a steady increase in employees wanting to move and work abroad. As we’ve gotten so used to working remotely, whether you’ve got your laptop set up in a spare room in Slough or a beach in Barbados doesn’t seem like such a big deal. If an employee can perform their job from anywhere, does it really matter where they physically are?

Unfortunately, like anything in life, it isn’t quite that simple, and employers (and individuals) could find themselves in hot water if they don’t fully think through and plan before an employee starts working abroad.

Don’t get banged up abroad

If a non-British national wants to work in the UK, they will usually require a visa. They can’t just set up a laptop and start working for their employer back home – that would be in breach of our immigration laws. 

The same principle applies the other way around. For example, a British employee of a UK based employer can’t simply go on holiday abroad, take their laptop and decide to stay for a few months and work there. Each country will have its own immigration laws that the employer and employee will need to take into account before any work is carried out in that country. The employee may require a work visa or even sponsorship in order to carry out business related activities. The last thing the employee will want is to find themselves on the wrong side of immigration control in another country.

Of course, if the employee who wants to move abroad is a national of the country they’re going to (or an EU national moving to another EU country) then there are unlikely to be any right to work issues.

Tax implications

Regardless of whether there are any right to work issues, the employer must always consider the tax implications and obligations of having an employee working abroad.

For example, if you are going to have an employee based permanently in an EU country, then it is usually necessary to run your own payroll in that country and register as an employer with the local tax authorities. There can be significant implications if those authorities determine that the employee working in their jurisdiction results in your company having a permanent establishment there. Specialist tax advice should always be sought.

As a minimum, if an employee is going to be based abroad long term it will usually be necessary to withhold social security contributions in order to pay those to the local authorities. HMRC confirms that an employee would only carry on paying National Insurance in the UK for the first 52 weeks they are abroad if all the following conditions are met:

• you have a place of business in the UK
• your employee is ordinarily resident in the UK
• your employee was living in the UK immediately before starting work abroad

This means that if your employee makes a permanent move abroad (i.e. they are not ordinarily resident in the UK) it is likely that you will need to make immediate arrangements for appropriate tax/social security deductions in the local jurisdiction.

Employment law implications

Employers should also take into account the fact that local employment laws are likely to apply to an individual who is permanently working in another country. Just as someone who works in the UK would benefit from our statutory laws. 

Particularly in some EU countries, like Italy, this could mean the employer is stepping into a world of national collective labour agreements and some quite rigid codified rules limiting their freedom to contact on matters such as notice periods, holidays, sickness and maternity benefits. It is usually advisable to have an employment contract prepared by a local lawyer to ensure these items are covered off, and any other quirks – in Germany, if you’re preparing the contract in English, you’ll need to ensure that it is also translated and presented in German.

How can employers navigate this?

Definitely take advice from experts – it isn’t worth risking it.

Some accountants provide global mobility services and can assist employers with, for example, establishing a payroll abroad and ensuring the appropriate social security contributions are paid. With a network of lawyers in various jurisdictions, we can help with ensuring you have the right contractual documents in place, and obtain advice about employment rights in different countries.

There are also organisations that provide an employer of record service – they usually employee the individual via an established entity in the relevant country, deal with all of the paperwork, payments, obligations and then charge you the salary plus a fee for their service.