Original content provided by BDO United Kingdom.
Historically, international remote working arrangements have been widely frowned upon by employers, wary of the potential additional compliance costs and other immigration and employment law risks.
However, the COVID-19 pandemic caused a shift in working behaviour and global mobility, which has ultimately been seen across all sectors of the global economy. Sudden border closures and quarantine requirements led to a displacement of workers across the globe on a scale never seen before, and employers suddenly had little influence over the location of their employees.
Implementing a work from anywhere policy
A huge number of employers have introduced a range of new policies to accommodate their employees’ wishes to work truly flexibly. However, some employees now want to work remotely in a different country, and some are even taken the risk of keeping this from their employer.
This situation can open both parties up to a whole raft of obligations, costs, and taxes, depending upon where the employee works, where the company is based, how long the arrangement is going to last, and even the importance of the individual to the business.
Listen to the latest podcast featuring BDO’s Global Expatriate Tax and International Tax experts, and hosted by Advanced Workplace Associates. Here they delve into the reasons why employers should make conscious choices about what is right for their organisation and employee/s and make that clear. A policy framework is recommended to protect from surprises and confusion in this area as well as potential additional cost and compliance issues in the future.
What are the risks of international remote working?
- Income Tax and Social Security – Will the proposed arrangements create an overseas income tax or social liability, or can these be mitigated through the numerous Double Taxation Treaties or social security agreements? Will employers agree to become liable to a potential costly overseas employer social security charge?
- Permanent Establishment – Is there a risk of a creation of an overseas permanent establishment and corporate tax exposure in a foreign jurisdiction?
- Payroll and compliance costs – Overseas corporate registrations and operation of a foreign payroll can be extremely costly and administratively burdensome. Some remote working arrangements may result in dual withholding so an employer may consider offering a loan to the employee to assist with cash flow issues.
- Corporate Criminal Offence (CCO) - UK businesses can be considered to commit a criminal offence if they have not taken reasonable steps to ensure that overseas tax liabilities are met. Are employers comfortable that a CCO is not being committed?
- Immigration – Do your employees have the right to work in the host country?
Looking to the future
Many employers have suggested that remote working is here to stay, whether through a hybrid model of office and home-based work, or via permanent office closures creating 100% working from home arrangements.
Trends within global mobility and remote working are also quickly changing. Employees who have found themselves working from home have fast become empowered and found a greater voice to dictate their preferred working patterns. Employers are quickly quantifying the benefits of a more permanent remote working approach, with potential cost reductions and productivity increases among other benefits.
Separately, remote working offers the ability to increase diversity and help plug any gaps in attracting and retaining talent. Hiring outside the major cities within the UK or from overseas can assist with this. However, companies need to carefully consider other factors such as whether remuneration will be adjusted for location, legal issues and whether the employee will be insured for injury overseas.
How we can help
Whatever the stance of your business towards international remote working, it is important that a robust internal policy is formalised to guide the business with its approach to sanctioning continuing or approving future international remote working requests. This will help ensure that the business can be pro-active in reviewing their business priorities and checking on the implications of any potential decisions to ensure that unintended compliance consequences are avoided.
Please reach out so that we can discuss how we can support your business.