One of the positive things about the advancement of technology is that it’s enabled us to do business from literally anywhere we want. This has become more apparent over the last few years, when working remotely in locations that were not a main office has become the norm. It’s not hard to see why either. Giving employees the freedom and flexibility to work from anywhere, whether that’s from Morocco or their home, has had a positive impact on productivity, mental well-being, and work-life balance.
But before you go and green light working from anywhere throughout your business, it’s important you know the pitfalls that can come with it.
Legal and Tax Issues
There are a number of areas an employer must consider first:
Payroll: Payroll can be tricky at the best of times but getting it wrong with an employee working abroad can expose your business to a financial risk. If a tax liability were to arise in the other country, then you may be required to ‘withhold’ the tax by operating an entirely separate payroll in that country.
Permanent Establishments: If an employee works in one location abroad for too long, you may inadvertently create a permanent establishment for your business in that location. This can cause a lot of problems with corporation tax and VAT, and potentially local employment laws your business would be committed to.
Immigration: If, an employee is considered to be working abroad for too long, then they will need the relevant working permits for that country. Without them, both employer and employee risk expulsion from that country. So you need to ensure all relevant work permits are in place, and ensure you as a company are compliant with the country’s local labour laws.
Tracking: In order to make sure all of these things are in order, you need to be able to track the movements of your employees. This might mean investing in new monitoring systems if yours aren’t up to the task.
In other words, allowing a work-from-anywhere approach without appropriate oversight could lead to your business trading illegally entirely by accident!
Working Outside Of The UK
One of the questions we are asked is whether companies could allow their employees to work from other countries. For example, say an employee was based in the UK, but they had a holiday property in Spain. They may want to spend more time out there, and ask to work from that holiday home for periods during the year. On the surface, there doesn’t seem to be much wrong with that, and it would certainly improve the work-life balance for that employee!
However, the UK government has very clear and strict rules on employees working abroad, and what that would mean for your company. This includes complexities on how to calculate PAYE and tax (since employees who do most of their work overseas across a year can claim full UK tax relief), how to calculate NI contributions (which varies depending on which country the employee is working in) and how long an employee can work in another country before obtaining rights in that country, or being liable to pay income tax in that country. For example, for countries that do not have a Double Tax Treaty with the UK, an employee must not work in that country for over a certain number of days in a 12-month period, or else that country gains primary taxing rights over their income. It can be a real headache!
This particular issue has only got worse since Brexit, as there are now strict limits on how long you can be in another European country before you automatically gain employment rights.
The Big Three
If your business is considering allowing a work-from-anywhere approach, there are a few different areas you will need to address first. These should come before you look at the legality of where employees will be working and form the foundation of any successful work-from-anywhere effort.
Flexible Working: Defining what is expected from flexible working hours, and any limitations there are on timings, deliverables and location is incredibly important. Even if your employees are only working in the UK, this is still a policy you should have in place and reviewed regularly.
Home Working: Working from home has become incredibly common in recent years, but there are still some things you need to bear in mind when allowing employees to do this. Mainly, the security of your company assets and data. Making sure that company computers and devices are kept secure in a home is more difficult than you think, and ensuring the confidentiality of data is even more tricky. Especially when you consider that when at home people are more relaxed and may not be as vigilant with other people around, whether that’s family, friends, or tradespeople.
Data Protection: This is an area that a lot of employers don’t think about, GDPR is a comprehensive framework for processing personal data in the EU, data protection laws in the US for example has a different scope. Employers should review where employees could work and how this may impact on the data policies and what level of protection is provided and any potential risks.
Guidance Is A Must
We do strongly recommend that you seek guidance about “a work anywhere approach”. There are many things that can go wrong, and so many pitfalls you can fall into without even realising. There are a number of different laws to take into account, and your approach will have to depend on exactly where and for how long each employee is working. This is often far too difficult for employers to figure out and manage on their own, which is why you need a professional to guide you through the minefield. Even if you choose not to seek advice, it’s important to think carefully before you act.
At Guildford HR we’ve been working with our legal partners, helping employers understand the risks and put systems in place to protect their business. Contact one of our experts to get advice that’s tailored to you and your business or telephone us on 01483 362732.
References
- PWC
- gov.uk
- Moore Kingston Smith