New forces at work: accommodating international employments

Our new forces at work campaign explores new trends in the workplace and, for example, how employers are using flexible working as a tool to boost output, as well as attracting and retaining staff. As we have remarked, these new working practices create emerging people risks for businesses.

One issue we see with increasing regularity is employees asking to move abroad whilst continuing to work for their original employer. Every situation is different. One recent example involves a French national working in the UK for a UK company who asked to return to France before Brexit. Another involves a young software programmer who wanted to travel across South America, funding his travel with part-time work for his tech start-up employer.

The initial response to such requests is usually for HR to review the practicalities of remote-working from such a distance and for the specific role. Other than managing time differences, the practical considerations do not change all that much and, with modern technology, the practical barriers can be overcome in many cases.

Your thoughts should then turn to compliance and risk – the focus of this article. Here the list of potential problems grows rapidly and can seem overwhelming. Nevertheless, it is often possible to navigate the complexity and come to an arrangement that works for all parties. Let’s look at some of the issues that should be on your list.

Immigration and work permits: your employee may be confident they are allowed to emigrate to the country in question, but will their status permit them to work for a foreign employer?

Labour law: by virtue of living and working in another jurisdiction, the employee may be eligible to bring legal action there in respect of employment disputes such as employment status and rights, minimum wage, maternity / paternity benefits, unfair dismissal. UK best practice will not always protect you from the vagaries of an unfamiliar system.

Payroll: can you continue to pay the individual from the UK and what happens to UK withholding (PAYE and NIC)? Will the company have to set up a payroll in the host country and what would that look like?

Income tax and social security: you might consider this to be the employee’s problem, but if the arrangement is to be successful in the long-term, it is important for the employee to fully understand the implications of their decision. How much tax will they pay? How will they file and pay their taxes (if not via a payroll)? Don’t forget that social security is also a cost to the business: employer contributions vary substantially from country to country and could come as a nasty shock.

Pension and employee benefits: is your employee eligible to continue participating in your UK pension and benefits plans? If not, how would you go about providing, say, medical insurance overseas?

Corporate tax: certain activities undertaken by an employee can create a taxable presence of the UK company in the overseas location, a so-called Permanent Establishment. In practice, the tax exposure can often be mitigated, and it is more of an administrative headache than a significant cost to the business. However, you may end up having a tricky conversation with the FD if your employee’s flexible working ends up giving the company a corporate filing obligation in the USA!

If this type of request lands on your desk, it is best to start by identifying all the risks to the business so that you can prioritise and tackle them methodically. If possible, talk to someone pragmatic who understands international employment matters sufficiently to guide your thought process. 

There is no one person out there who will be able to answer all your questions – there are simply too many topics to cover. However, your first aim is to identify what your deal-breakers will be, then decide whether any areas warrant further consideration. Inevitably, some advice will be needed from the foreign jurisdiction, so ask around for a warm introduction. In today’s global business environment, your colleagues and advisors may be able to connect you with a suitable professional and save you a lot of time searching and evaluating.

Many businesses are prepared to accept some level of risk and will ultimately agree to an international remote-working request without all the ‘i's having to be dotted or all the ‘t’s crossed. What is most important is to identify the major risks and, for the rest, make sure you go into it with your eyes open. Bear in mind, some of the issues affect the employee as much as they do the employer, so it is a two-way conversation. The employee must be prepared to take some of the risk – after all it is their wishes that are being accommodated so they may need to be as flexible as their employer!

This type of international employment would have been almost unthinkable a few years ago. Now there is a good chance you could find yourself handling a flexible working request along these lines. It is impossible to accommodate every request as there are some major practical issues to overcome from a work and HR perspective. However, if you do decide to explore the possibility, with a little planning you can avoid the major compliance pitfalls, manage the risks and help ensure a successful transition.

If you have any questions regarding the above, or about any other types of international employment scenario, please contact Phil Partington.