Remote Work from Abroad – Key Considerations for U.K. Employers

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It has become the norm in certain industries to allow employees to work all or some of their time from home. However, what if the employee’s home is abroad? How should employers consider requests by existing employees to move abroad while continuing to work remotely? The answer, as is often the case, is complicated, but there are several key considerations of which all U.K. employers should be mindful before agreeing to employ someone from abroad.

Requests to change work location to a location abroad should be considered as a flexible working request, which is a protected right in the U.K. Employers must, therefore, give the request its due and adhere to legal obligations, including to consult with the employee before rejecting the request and to reject only based on one of the permissible grounds, which include the burden of additional costs. Please see our recent blogs concerning legislative changes to the rules around flexible working requests at Employment Law Changes in 2024 and Employment Law Updates 2024.

If an employer is inclined to grant a request to work remotely from abroad, considerable care must go into how to structure the employment relationship moving forward. The employer will need to consider the following:

  • Does the employee require any immigration support? Take local immigration advice in the country to which the employee is proposing to move to ensure the employee has the right to live and work there. Employees lacking proper work authorisation can expose their employers to liability, depending on local rules.
  • Who will be the employer? If the company has a subsidiary in the country to which the employee intends to relocate, that subsidiary could become the employer. If not, consider whether the U.K. entity will remain the employer or whether to hire a third-party employer of record who may be able to assist in complying with local obligations.
  • What employment law will apply? This is one of the more complicated questions, but in general the “mandatory” employment laws of the country from which the employee works will apply. U.K. laws may also apply, depending on how the employment contract is drafted and the level of ongoing contacts with the U.K. Critically, local mandatory laws may provide more protection that those applicable in the U.K.; so, it is critical to take advice from a local lawyer to understand and adhere to these laws.
  • Can the employer keep the U.K. employment contract? Yes, it is possible. However, whether to retain a U.K. contract or instead use a contract governed by the law of the new country is a judgment call. Using a U.K. contract will likely mean that the employee will get both the protection of the mandatory local laws as well as the protection of U.K. laws. This may be advisable to try to limit applicability of any non-mandatory local laws when they are particularly burdensome or to retain U.K. courts as the place of jurisdiction over any dispute. On the other hand, selecting the law of the new country may be advisable when the company already has familiarity with and a presence in that country, for ease of application and to potentially avoid imposing U.K. employment law obligations. Regardless of which country’s law is chosen to govern the contract, there will be circumstances in which such a choice can be overridden if there are sufficient contacts with any given country.
  • Where will taxes and national insurance be submitted? Whether an employee will remain subject to U.K. income taxes is a complicated analysis based on factors unique to each employee and their ties to and residency status in the U.K. Likewise, where and how employers must deduct and submit payroll taxes, such as PAYE, and social security or national insurance contributions is also a complicated analysis depending on local law, the employee’s tax residency status, and agreements between the U.K. and the employee’ s new country. Finally, there may be corporate tax implications if the employee’s presence in the new country creates a “permanent establishment.” It is critical for employers and employees alike to take local tax advice alongside U.K. tax advice to fully understand their obligations and options.
  • What else should we plan for? Consider additional legal obligations that may be imposed based on the location of an employee. For example, there may be additional insurance obligations imposed by the new country to cover employee injuries. Data obligations may also apply to the transfer of information between countries. Practical considerations, such IT security, time differences, and agreeing in advance who will bear costs associated with the move, may also come into play.
  • Are there any best practices? Each employer will have its own operational and legal considerations, so one size will not fit all. In general, however, it is best practice to advise employees that they must first obtain permission before moving to another country and to carefully examine each request for remote work, mindful that approving one employee to work from abroad may set a precedent that could make it more difficult to reject future requests by others. Finally, consider whether it is more feasible to approve a fixed term, trial period, or right to recall to the U.K. rather than a permanent move abroad, which would allow employers the ability to review the success, feasibility, and cost of employees working from abroad.

Employers seeking to remain competitive in the recruitment market may soon or already be faced with requests for remote work from abroad, and there may well be operational and employee morale and engagement benefits to providing this level of flexibility. It is critical, however, that employers take the time to fully assess the legal obligations and risks of such an arrangement. MBM and its World Tech legal network of likeminded law firms located throughout the world are well placed to assist companies navigate these and other difficult human resources decisions.

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