Since the global pandemic took hold earlier this year, many office based employees have been working remotely. For the vast majority of staff this means working from home but increasingly employees have asked to work from other locations, including family residences and holiday homes in other countries. What are the legal implications if an employee either asks to work overseas, or you discover that they have been working overseas without having sought consent?
Location, location, location?
Where an individual works has a number of legal considerations including tax (personal and corporate), immigration, health & safety and employment law. It is therefore important that employers are aware of where staff are carrying out their jobs in order that any risks attaching to overseas working can be identified and managed.
Below is our checklist of issues for employers to consider.
Communicate your approach to your employees
Employees should ask permission first before working overseas rather than seek forgiveness after the event. As we discuss below it raises legal and practical issues. There may also be circumstances where it is reasonable for an employer to refuse a request to work overseas. However, some employees may feel that there is no practical distinction between working from their primary residence in the UK and working from a second home in Spain (or even further afield).
It is unlikely that current policies and procedures specifically address this issue. As such employers need to clearly communicate to staff what is and what isn’t acceptable in terms of homeworking. Clear policies in this respect will help to ensure that employees understand what is expected of them and should minimise the risk of line managers across the business adopting inconsistent approaches to the issue.
Immigration rules
At the very outset an employee who intends to work in another jurisdiction will need to be satisfied that they are able to do so without any form of special permission such as a visa or work permit. “Working” is defined differently across jurisdictions, many of which have their own national visa requirements.
A number of business activities are permitted under visitor type visas, including in the UK, but these are generally fairly narrow and prescriptive, and are unlikely to cover the undertaking of productive work. As far as the UK is concerned, factors such as the nature of the work and the length of time spent in the UK are relevant to determining whether an arrangement is “working” (and therefore potentially requiring a work visa) or whether it is a business trip falling within a visitor visa.
Working in contravention of local immigration laws can have serious consequences for individuals, particularly in relation to possible travel bans, but could also have legal and reputational consequences for their employer.
If the employer is found to have breached local immigration laws this could at worst result in civil and criminal liability, and could also prejudice the immigration status of other employees currently working in that country (or prejudice work permit applications for any future assignments).
It is therefore always prudent to take advice on the immigration requirements of the particular jurisdiction where the work will be undertaken. If special permissions such as visa or work permits are required then this is likely to be a legitimate reason to inform the employee that they cannot work from this location and should only work from their UK home base.
Tax and social security
If an employee is working outside the UK for less than 183 days, this should not affect their tax residency. The UK employer should continue to deduct income tax under the PAYE system. The UK employer should also continue to deduct employee’s National Insurance Contributions (NICs) and account for employer’s NICs. If the employee is working in another EEA country or in Switzerland, the UK employer should also apply for an A1 certificate from HM Revenue & Customs to allow NICs to continue to be paid in the UK (and exempt the employee from local social security liabilities).
Whilst the employee might also become subject to income tax and social security in the jurisdiction in which they are temporarily working, this is unlikely during a short stay: many jurisdictions (including all the countries in the EU) have agreed a “double tax treaty” with the UK which would ordinarily prevent this additional charge to tax where the employee continues to be tax resident in the UK.
If the employee is working outside the UK for a longer period of time (more than 183 days) then this may affect the tax residency status. The tax position then becomes more complex and specialist advice should be sought.
Creation of a permanent establishment
Another factor to consider is whether the employee could be regarded as having a permanent establishment for tax purposes in the jurisdiction in which the employee is working. Although the risk is low, the repercussions are significant in relation to potential corporation tax liabilities.
Obtaining permanent residence status will very much depend on the type of role that the individual is carrying out, but could arise if the individual habitually exercises an authority to conclude contracts in the employer’s name in the foreign jurisdiction. This will be a question of fact and cases are normally determined on a case-by-case basis.
The OECD has issued COVID-19 guidance for relevant countries in their statement entitled: Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 Crisis where they explain: “The exceptional and temporary change of the location where employees exercise their employment because of the COVID-19 crisis, such as working from home, should not create new PEs for the employer. Similarly, the temporary conclusion of contracts in the home of employees or agents because of the COVID-19 crisis should not create PEs for the businesses.”
Data security, data transfer and confidentiality
Homeworking creates a whole host of data protection issues and the move away from a home office increases the risks around data security. In addition to the data security risks, if the employee moves out of the EEA then there may also be issues with the transfer of personal data which trigger the rules about cross-border data transfer and whether the host country has adequate levels of protection. Employers will need to check what personal data the employee processes and whether their data protection policy covers data transfers in this situation. Employees should be advised to ensure they take appropriate care of any laptops or work phones whilst travelling and while working in the host country.
Employment rights
An employee working temporarily overseas may also benefit from mandatory local employment protections including rights in relation to paid leave (e.g. sick pay, holiday pay, etc.) or rights on termination of employment. This is particularly relevant in the EEA where the Posted Workers Directive (PWD) applies to those workers who are posted temporarily abroad. Although the PWD applies to workers who are posted abroad where the organisation has an office or establishment in that other country, and a contract exists between the two undertakings, if the organisation is international and has an office in that host country, then the protections may apply. The PWD says that workers posted abroad on a temporary basis must enjoy the same level of protections as those employees in the host country. These rights extend to working time, pay and health and safety.
Public health guidance
Every country has a different approach to public health measures to stop the virus. Certain countries will have quarantine laws around arrivals from the UK. The Republic of Ireland, for instance currently requires visitors to quarantine for 2 weeks on arrival unless they are on the green list which Great Britain currently is not.
The employee should ensure that they comply with the travel rules which apply in their country and any public health measures which are in place abroad, including for example, any testing requirements or national self-isolation measures which are similar to England’s Test and Trace. Many countries also require that visitors take a coronavirus test before entering the country. In addition, the employee may be required to quarantine when they return to the UK, and as we have seen recently with France the position on this issue is fluid and can therefore be uncertain and disruptive.
Risk assessment
Under the Health and Safety at Work Act 1974 employers are under a duty to do all that is “reasonably practicable” to protect the health, safety and welfare of their employees. There are also a number of regulations which employers must comply with, including the Management of Health and Safety at Work Regulations 1999 (which require employers to conduct risk assessments) and the Health and Safety (Display Screen Equipment) Regulations 1992 (which requires employers to conduct workstation assessments). These duties extend to those working from home regardless of location. Employers also have a duty of care to employees to take reasonable steps to prevent foreseeable harm occurring to them under the common law. An employee working in a location abroad should ideally be completing a homeworking risk assessment to ensure that risks are identified and steps taken to minimise them. There may also be local laws which apply in these situations which also need to be considered.
Insurance
If an employee is working overseas then the employer will need to ensure that group insurances are not impacted (or invalidated). It will be important to speak to insurers or benefits brokers in relation to benefits such as group income protection, death in service, travel insurance and private medical cover.
What should an employer do if an employee requests to work remotely from an overseas location?
This will very much depend on the specific circumstances, including the employee’s personal circumstances, the country they wish to work from and their reasons for travelling there in the first place.
Asking them to return to work at their home base in the UK is of course one option. Another option would be to decline the request (and perhaps require the employee to take unpaid leave or use annual leave entitlement if they wish to spend an extended period overseas).
The topic is likely to be an emotive one, particularly where employees have compelling family or personal reasons to want to work remotely from an overseas location. A clear policy on the issue will help to manage expectations and streamline decision making, thereby promoting fairness and consistency. A blanket approach of declining requests may seem like the easiest and fairest solution. However, this may result in unfair outcomes for vulnerable individuals or even indirect discrimination claims. Employers should have a policy that is clear and consistent whilst also allowing the flexibility to consider each request on its merits.
This Law-Now sets out general considerations for employers to take into account. Please contact your usual CMS contact in the employment or tax team to discuss a specific situation that you are dealing with.
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