Can I ‘Work From Home’ in Another Country?

This question has arisen for many businesses since the lifting of lockdown.

Employees have been keen to take a summer break and for some, a 14-day quarantine period may now apply and therefore have to be added to any holiday time abroad. So, when UK employees are abroad, are they able to work from home?

Firstly, in the UK an employer has a duty to protect the health, safety and welfare of their employees in accordance with health and safety laws. This duty continues whilst the employee works away from the office. Whilst abroad an employer will need to familiarise themselves with any local health and safety requirements. There may be more onerous local requirements, for example, a financial contribution may be required for any equipment that the employee needs to set up to work safely.   

There are numerous other implications which an employer should consider if an employee requests to temporarily work abroad.

Is it a Permanent Establishment?

There is a risk that a permanent establishment may be created in the host country by an employee working there. The risk is likely low, however, if that employee habitually exercises an authority to conclude contracts in the name of the employer whilst there, then a permanent establishment may be created. This might have serious implications for a business’ profits as they could be subject to corporate tax in the country where their employee is working. Customer contracts which are negotiated by that employee abroad, are an example that tax authorities could consider, especially where the contracts are not significantly amended by UK employees, but only rubber-stamped in the UK. 

Although the risk is low, it must be minimised as taxation of profits abroad will be unsustainable for a UK business also being taxed in the UK. 

Employment Protections:

In certain countries, it is possible for an employee working temporarily abroad to benefit from employment rights such as annual leave, minimum rates of pay, and termination rights even from their first day of work or even taxes being lower. This is the same as employees gaining the UK’s minimum statutory rights from their first day. Because of this it is possible that when a dispute arises on termination the employee could assert employment rights gained working in that other jurisdiction, making a resolution messy and costly. 

Additionally, for employees who work from another EEA country, the Posted Workers Directive (PWD) may be engaged. The PWD allows an employee who is posted to another EEA country (usually from one establishment to another) to be paid the same pay as a comparable employee in that second country. The PWD is not intended to cover the situation where an employee is simply working from home abroad, however, it is possible that it may be engaged if there is a secondment to a local group company or the employee works on a local client’s contract or at an international office of the company or firm. 

GDPR and Transferring Data: 

Where an employee working abroad is transferring data or personal data, the GDPR will be engaged for EEA countries. This will become more complex where the employee works from a non-EEA country which is not subject to EU privacy laws but still the GDPR can apply depending on how data is being transferred and handled. 

Transferring data outside of the EEA requires the company/employer putting appropriate safeguards in place which can be standard model clauses or binding corporate rules or confirming that the country in question is one approved by the Information Commissioners office the ICO.

Employee Tax:

The UK tax position should not be affected unless the employee intends to remain out of the country for so long that their tax residency is affected. Therefore, for short trips, the employees usual PAYE code should still be used for the deduction of taxation. Nation Insurance contributions will also remain unchanged for the employer and employee.

A host country generally has primary taxing rights over employment income earnt whilst an employee is physically in a country, however, this is affected by any double tax treaty (DDT) that exists between the two countries. Currently DDT’s cover all 27 EU countries and most other significant economies. The DDT’s may result in the employee being exempt from paying tax in the host country. 

An employee will need to take care that they do not surpass the time threshold (usually 183 days) in the host country. If they do, they or their employer may become liable for income tax in that host country. Each DDT is different and advice should be taken on the local position. 

Social Security Liability:

Social security liability is generally payable in the country that the employee physically undertakes their work, however, this is a complex area that differs depending on the agreements between countries. In the EEA and Switzerland, this assumption is reversed; a UK employee can continue to pay National Insurance contributions without having to pay social security contributions in a host country. This arrangement, however, is due to expire on 31 December 2020 at the end of the current Brexit implementation period. 

Immigration Implications:

Currently, UK and EEA nationals can live and work in another EEA country, however, this will also change after 31 December 2020 when the Brexit implementation period is over. Where an employee is not an EEA national, or requests to work from a non-EEA country, there could be visa requirements, and again, this will depend on the host country’s immigration laws. Some countries have implemented emergency COVID-19 legislation, such as the UK’s extension to visas for those who have been unable to leave or unable to renew their visa’s, but many countries may not have similar emergency legislation. 

Additionally, employers and employees should consider how time out of the UK may affect an employee’s immigration status. There may be implications for EU nationals on their return if they have not applied for settled or pre-settled status. For non-British nationals, extensive periods abroad will affect applications for Indefinite Leave to Remain and naturalisation as a citizen.

There are many possible risks that need to be considered when an employer receives a request to work from home whilst abroad. Where your business is likely to receive many requests, then drafting a policy for this and amending employment contracts could help you to deal with the requests fairly. You should ensure that it is clear from the outset that any extra tax is paid by the employee and any further liabilities also rest with the employee before a request is approved.

If you require legal advice on any aspect of employment or commercial law, please contact A City Law Firm.