As many employers are discovering, working “from home” does not necessarily mean working from home in the UK; some employees have decamped to somewhere else either with or without their employer’s knowledge.
The relocation of an employee to a different legal and tax/social security jurisdiction has important implications for employers. Here are some of the key ones:
- Contractual issues Employment contracts nearly always specify the “place of work”, but for office workers who can work from home compliance with this has been rendered impossible with a consequential short or permanent variation of the employment contract. Where an employer discovers that an employee is now working abroad without their consent the employee may be in breach of their employment contract, but this may not be clear. Many employers have acted promptly to close the contractual gap by issuing policies on working abroad including requiring employees to obtain the employer’s consent to this. The employee may argue that it does not make any difference to the employer where they are, but as the following points demonstrate this is very much an issue for the employer. In addition, there is a risk that working from home abroad becomes a sufficiently widespread practice amongst staff that it becomes a contractual right, and therefore is difficult to revoke when the return to the office is nigh.
- Tax and social security Some employees have now been working away from the office for months and if this time has been spent abroad they may now be subject to tax and social security contributions in the country in which they are based and the employer may be required to deduct and account for tax and social security contributions in that country; how this fits with the employer’s obligations under the UK PAYE rules will also need to be investigated. Even where there is no change in the way in which the employee’s income is taxed the relevant form(s) (C3821 and potentially others depending on the circumstances) will need to be filed with HMRC to inform them of the move overseas.
- Local employment law The employee may now be subject to the local employment laws of the overseas territory. Depending on how long they have been working overseas they may acquire the rights and protections of the country in which they are based, which could be very different to the UK’s rules on employment. For example, the employee may have rights to additional holiday, severance/redundancy payments, employment protection and be covered by industry wide collective and consultation agreements.
- Notifications Some overseas territories require employers to notify certain governmental departments (or similar) of any employees working in that country.
- Data protection and security Will the employee and employer be able to comply with data protection laws? We recommend that employers consider the role of the employee and their handling of personal data as well as confidential information. The employer will need to be satisfied that this information can still be protected overseas. The employer should consider undertaking a data privacy risk assessment on a case by case basis to ensure this requirement can be met.
- Insurance Is the business covered by employer’s liability insurance whilst the employee is working in the overseas territory? Employers will need to ensure that they have adequate protection in place to cover overseas employees; insurance cover that is limited to overseas business trips is unlikely to be adequate.
- Health and safety The employer will need to ensure that they take all steps as reasonably necessary to ensure the health and safety of their employees, even when working from home overseas. See our related article on this.
- Quarantine Will the employee be required to quarantine when they return to the UK? The list of countries in respect of which quarantine is required it now very long. We have previously provided guidance on dealing with employees required to quarantine, which you can find here.
- Risk of creating a permanent establishment There is a risk that the tax authorities may deem that the employer has set up a permanent establishment overseas. Whilst the risk is generally fairly low, it will depend on the facts and circumstances of the situation. Employers should pay close attention to the activities conducted by their staff overseas and consider the approach at the time of local tax authorities.
We recommend that employers receiving such requests consider the underlying reasons approach all requests consistently. Handling these requests with care is important in order to avoid adverse consequences including claims of discrimination and/or breach of contract. Where employers expect to receive a number of these types of request we recommend they develop a short policy for handling the requests, which includes a non-exhaustive list of principles and factors (such as the matters discussed above) which will be relevant to the employer’s decision. There are also a number of practicalities which could be raised in the policy and factored in decision-making. Employees in far flung places will be operating on a completely different time zone from those who remain in the UK. Whilst a couple of hours each side of GMT is tolerable for both employer and employee, any more than that makes it impractical, particularly where the firm’s clients are on the opposite side of the Greenwich Meridian Line, as the time difference will be exacerbated. Additionally, it would be harder for any specialist equipment or replacement IT devices to be sent to the overseas worker.
We have found some of our clients have received requests from employees to work overseas permanently or refusing to travel back to the UK. Each employee’s case is likely to vary and a difference should be recognised between situations where an employee has been, through no fault of their own, stranded overseas, to a situation where the employee has seen the remote working set-up as an opportunity to move abroad. Employers will have to decide whether the employee’s actions or omissions at this stage constitute a breach of their employment contract, which in some cases may result in disciplinary action. Caution should be exercised particularly if there may be unknown mitigating factors which explain the employee’s refusal.
If you have any questions about these issues in relation to your own organisation, please contact a member of the team or speak to your usual Fox Williams contact.