The workplace response to the COVID-19 pandemic has transformed from crisis management to a more nuanced, likely longer-term change of working arrangements.

With ongoing travel restrictions and tourism impacted as a result, some governments are looking to encourage visitors through schemes that would allow them to remain in the country for longer periods and potentially work remotely from there.

Depending on the nature of the role, it may, in many cases, be operationally possible for a worker to work remotely abroad. However, there are wider challenges. Considerations include the interplay between employment law, tax and social security requirements, regulatory requirements, and immigration law. We explore some of these below.

Applicable employment/labour laws

Whether local employment laws will apply to remote working arrangements (and, if so, the nature of any rights afforded to the worker) will be critically important. The starting point is that, as long as the choice is expressed or demonstrated with reasonable certainty, the parties have freedom to choose the applicable law. However, this freedom is usually limited by legislation, with many jurisdictions having conflict of law rules that require the application of local employment law in certain circumstances where they are more favourable to the employee.

Regardless of the governing law of the contract, there will be certain ‘mandatory rules’ of the country where the worker works that automatically apply. These typically include statutory employment rights, such as protection against termination of employment and discrimination (for example, on grounds of sex, age, disability, etc).

Employing entity

The identity of the employing entity should be clarified. Will the worker remain employed by the original entity, or will they be employed by a separate legal entity in the country where they will be working or a ‘branch’ of an overseas entity?

Even in those jurisdictions where there are no legal requirements for a local legal entity, which is the case in much of Europe, there may be practical reasons why a local legal entity or the local registration of an entity is necessary. For example, in Greece, in order to dismiss an employee, the employer must be registered with a state-run electronic system, which generates the termination process.

In several countries, there are restrictions on employees being employed by an entity, either within the same country or elsewhere, and then also working for another entity. In some cases, this restriction will apply even within the same group of companies. This ‘employer of record’ model may require the legal employer to hold an official licence to be able to operate as such. Or there may be restrictions on the duration of such labour supply or on the types of roles into which workers can be supplied.

Taxation and social security

Where workers are working outside their usual country of work, there are likely to be complex cross-border tax and social security issues to consider. These will be governed by domestic tax laws in the relevant countries and double tax treaties that provide which country has tax jurisdiction.

Interpreting double tax treaties (and, more importantly, a particular jurisdiction’s approach to interpreting that double tax treaty) is often complicated and can vary between jurisdictions. The key issues that workers and employers will need to consider are:

1. i) workers’ individual residence;
2. ii) which country has taxing rights in relation to employment income; and

iii)  whether workers/employers will need to make social security contributions in the jurisdictions from where the worker works.

Additional considerations include whether special tax rules apply to workers performing certain types of roles (such as directors) and the risk of remote workers creating a permanent establishment in another jurisdiction, with consequent corporation tax implications. Great care should be taken to ensure that local tax laws are not breached and that the arrangements are routinely monitored.

Immigration

Since days within a jurisdiction count for immigration purposes, the period that an individual is outside the country in which they habitually work is a concern, particularly if they intend to apply for permanent residency or citizenship.

If a worker is a national of the country in which they wish to work, immigration issues will often not arise. However, where the immigration issues do arise, either for the worker or their family, it will be important to take early immigration advice and factor the timescale for this into the plan. Careful and agile planning will be necessary as the implications for illegal working can be serious for both the worker and employer, including criminal liability in some cases.

Formalising arrangements

In some jurisdictions, there will be specific legal requirements for the formalisation of a remote working arrangement and further government regulation is likely to be required to regulate these arrangements.

Employers should consider whether to introduce the arrangements on a trial basis to determine whether, outside the extreme circumstances of a pandemic, wider remote working proves to be successful. Whether to include flexibility in the arrangement, for example, to provide a right for the employer to require the worker to return to the workplace for specific events or periods, in specific circumstances or after a specific time will also be a key consideration.

Any rules connected to the remote working arrangement, such as the location of the home office, recording of working time, absence, communication and conduct should also be reviewed. How do employers manage conduct and culture, for example, when they do not have visibility of staff? While agility will be a key concern for employers, in the longer term, a dispersed workforce will require close and careful management. Cultural communications and engagement with staff must be embedded into any new working arrangements.

Additional concerns include confidentiality of information and data protection. Laws will vary, but the central principles of protection of information and data are core. With a dispersed workforce, widespread reliance on remote connectivity and use of personal devices is likely to mean that the employer’s control systems are stretched. It is essential that policies and procedures are adapted for remote working and regularly tested for robustness. Monitoring and surveillance should be adapted to local laws, but strong enough to mitigate the risk of a confidentiality breach.

Contractual variation

Unless there is appropriate flexibility built into existing contracts of employment, working arrangement changes are likely to require variations to the existing contractual position, which will usually require consultation and consent. This often requires detailed planning and time, particularly where workers are spread across multiple jurisdictions. When varying contracts, employers should reserve the right to change the terms should new working arrangements prove unsuccessful in the medium term.

Local employment laws may apply and override any intended laws governing the relationship, which will impact on any changes to the intended contractual position. Where changes are to be made, an analysis should be undertaken of the individual circumstances to establish the employment and regulatory laws that will apply. Often, it will be more beneficial to ensure that the stated contractual position is aligned with applicable local employment laws, to ensure clarity.

In many cases, it will be necessary to obtain the consent of workers and/or work with works councils, unions, or employee representative bodies to ensure that the contractual change is effective and/or to avoid financial penalty. In some instances, it will be necessary to reissue the employment contract; in others, a side letter or annex to the existing contract will suffice.

What if the employee refuses to accept the change? Can the employer terminate and re-employ on altered terms? Again, the answer to these questions will vary across jurisdictions, presenting a challenge to a harmonised global approach. There will likewise be very different penalties for breach of contractual terms across different countries.

Health and safety

Different health and safety rules apply depending on the location of the worker. Often mandatory local rules apply, irrespective of what is stated in any contractual document. The specific rules in each location will therefore need to be understood and applied. However, the employer will generally be under an obligation to provide a safe place of work, often extending to a remote location.

In many jurisdictions (such as within the EEA), employers must undertake a risk assessment in relation to working arrangements and take measures to address any identified risk. There are obvious practical difficulties in carrying out risk assessments in respect of workers based in another country, which is often addressed by requiring employees to undertake a self-assessment (assisted by technology) of the remote working environment.

In some countries, such as Spain, a health and safety evaluation for remote working is mandatory. Additional steps are also often legally required or taken voluntarily, including notifying employees of (and requiring compliance with) regulations, guidance and policies concerning health and safety.

Employers should review health and safety policies to ensure that they remain fit for purpose in view of new working arrangements, including remote working, and track regulatory guidance where it is anticipated there will be a move to introduce more stringent and robust policies for home workers (currently, the Health and Safety Executive, which governs safety in England and Wales, does not place such duties on employers for ‘temporary’ home workers).

Expenses

In many jurisdictions, employers will not be legally responsible for incidental expenses (such as utility costs), but may nonetheless fund these in order to maintain goodwill. In others, payment of certain expenses or a specified lump sum will be a legal requirement. For example, in Taiwan, expenses such as phone and internet costs must be reimbursed by the employer where the worker is working remotely. In Belgium, a specified lump sum payment should be paid or an indemnity will be applicable.

To ensure certainty on the issue of expenses, employers should take steps to understand the mandatory legal position and be clear in contractual documentation to avoid ambiguity and dispute. They will also wish to ensure consistency across similar employees, subject to local laws.

Summary

Employers should develop policies to meet the challenges summarised in this article. The policy should ensure that employees are required to obtain their employer’s consent to work overseas. It is vital that employers are aware of where their employees are and how long they have been there. Policies often grade jurisdictions by the risk/complexity level.

Employers should formalise new arrangements and future-proof (as much as possible) existing ones. Local requirements (including employment, regulatory, tax and immigration issues) should also be considered.

Those employers who are taking the time now to analyse their existing arrangements with workers and utilise lessons learned from the pandemic are likely to be better placed in the long term by ensuring arrangements are fit for purpose on an enduring basis and thereby reducing costs and risk.

About the author

Mark Hammerton, Partner, Human Resources Practice Group, and Amanda Dodsworth, Legal Director, Tax Team, Eversheds Sutherland