42% of people said they’d like to work from abroad. That means new processes for businesses. Different time zones. Video calls. And, of course, the legal side. *gulp*
For the latter, we caught up with In House Legal Consultant, Nick Pritchett from LegalEdge to ask all the questions you’ve been too afraid to ask about managing a team across borders.
A head’s up: This post shouldn’t be considered as official legal advice. It’s more like guidance. As always, it’s best if you speak with a professional.
Do employment rights vary by country?
Yes. In addition to what someone’s contract might say, employment rights are based on where that person works, not just the location of the company employing them. Even if a contract stipulates UK employment laws, your team member could still be entitled to the local employment rights of the country they move to.
These employment rights can impact things like wages, annual leave, maternity leave and health and safety protocols. If your business doesn’t abide by them, you could face legal action from that country’s authorities.
How do I pay someone when they work abroad?
If someone is going abroad for a short time (say, 3 months or less) you should be able to keep them on your current payroll as long as you have a good picture of the risks you’re taking in doing so.
However, if you’re hiring someone who lives in a different country—whether they’re a local, or have moved there for a longer period of time—you’ll likely need to set up a payroll in that country.
You can do this through setting up a corporate entity or engaging an employer or record to employ the individual on your behalf—this also isn’t without its own complications. This is for tax and social security purposes (more on that below).
Again, the laws around paying people can vary by country (and even by state in the US). This will impact things like:
- Minimum wage
- Overtime calculations
- Payroll tax calculations
What should my team know about how they pay tax when working from anywhere?
If they’re working from abroad for a longer period of time (it varies country-to-country), they’ll likely be treated as a tax resident in both the UK and the country they are working from. This could mean that they will need to pay tax in both countries, unless there’s a useful double tax treaty in place.
- Different countries have different taxes—they aren’t a replica of what we pay in the UK.
- There could be different tax brackets in different countries.
- Their social security contributions could be more expensive than in the UK.
What should we, as a company, know about paying tax when our team works from anywhere?
You’ll continue to be responsible for UK income tax and National Insurance Contributions on their behalf. Still, you could also be responsible for employer-related tax issues for the country that your team member now lives in and may need to take local tax advice for this.
Typically, how long can someone stay in a different country before tax issues arise?
At the risk of sounding like a broken record, it can vary by country, and some tax issues could technically be in play from day 1. Where there’s a double taxation treaty in place, there may be a tipping point of 183 days in a country within a 12-month period before someone needs to pay income tax locally. (Just note that this isn’t always the case and could be sooner!)
What happens if my team member starts working with a client from the country they’re living in?
Let’s say Sarah, your Head of Sales, moves to Spain. She has the authority to conclude contracts, and so, she drums up some new business in her new city.
This could create a ‘permanent establishment’ of your business abroad. Having a permanent establishment means that you may have to pay corporation tax and need to make standard corporate filings (like with UK Companies House) in that country as well as here in the UK.
There are workarounds, such as ensuring that contracts are signed off by someone else back in the UK, but it’s not a silver bullet.
How does ‘Working from Anywhere’ impact our intellectual property?
In the UK, it’s typical for contracts to provide for you to own the IP of anything your employees create within their role. This includes patentable products or registrable designs.
If your employees are going to work abroad, it’s important that you’ve got the right coverage in their contracts to protect your business.
What role do we play if a member of our team is emigrating?
Okay, there are two potential scenarios here.
- If you’re a sponsor for someone who has come to the UK and they now work abroad for long periods of time, you have a duty to let the Home Office know. If you don’t, you could face compliance action and lose your employer’s sponsor licence.
- If someone is moving from the UK to a different country, they could need a certain kind of Visa depending on how long they want to live there. These requirements will fall on the employee, so they need to be reminded early on about what they need to do to make the move work.
What should I do to make sure my team and my company are doing everything right from a legal perspective when working abroad?
You’ll probably notice there’s a lot of “it varies” in this blog. That’s because every case is different. So, the best thing you can do is get legal support that’s tailored to your business.
LegalEdge has a team of flexible business lawyers who can help you manage your legal strategy, processes and budgets better, using the latest templates and tech available to get the best results.
They’re an alternative to the many providers out there whose approach is too complex, too expensive or just impractical. They don’t do endless negotiations or overly long contracts and they don’t put the clock on and leave it on. They simply help businesses like yours keep control of workflow, priorities, budget and of course, Work from Anywhere policies.
Once you’ve taken care of the legal side of working from anywhere, it’s onto the next challenge—finding where you and your team can work. Well, look no further than The Hubble Pass. In one flexible membership, you can access hundreds of coworking spaces in over twenty countries.