The legal considerations of remote working from abroad

Rosie McArdle explains the logistics and limitations both employers and employees may face when requesting flexible working from outside the UK

For many, home working has been the most pervasive impact of the pandemic. As employers consider its long-term implications, flexible working trends have led to questions of remote working from abroad. 

The ‘productivity’ criteria

The Flexible Working Regulations 2014 empower employees who fulfil minimum service criteria (26 weeks) to request changes to their hours and/or place of work. Under this framework, employers have three months to formally approve or deny any flexible working requests. Employers can refuse requests if new arrangements impinge upon an employee’s ability to perform their job productively.

However, measuring productivity has become increasingly tricky. Employers should be mindful of appeals if they reject applications on that account – especially since remote work during the pandemic does not appear to have significantly impacted overall working capacity or quality. To avoid claims of unlawful discrimination as per the Equality Act 2010, employers must not (even unintentionally) disadvantage employees under circumstances arising out of certain ‘protected’ characteristics.

However, what about requests for overseas remote work from a beach or holiday resort? While there are no regulations directly addressing such arrangements, employers can monitor employee productivity and take disciplinary action against under-performers – just as they could if the employee was in the UK. Employers also have a duty to ensure an appropriate work environment – and a beach is unlikely to meet this requirement.

It’s crucial that employers maintain a positive, trust-driven dialogue with employees on this issue. While it is in employers’ interest to maintain adequate control over the process, they should also develop more comprehensive performance indicators as remote working becomes more widespread over the long term. This will allow them to identify the business rationale for their decisions, while fostering inclusion.

Logistical considerations

Some companies do allow overseas remote working, but there are several logistical issues to consider when introducing these provisions, including time differences and foreign travel costs. Employers may therefore benefit from allowing remote overseas work on a trial basis, enabling both employers and employees to determine the most suitable approach to flexible working for their business. However, each jurisdiction is likely to have its own unique laws that employers need to consider, making the process potentially burdensome.

Brexit

Brexit has added another level of jurisdictional complexity. To be eligible for post-Brexit settled status, EEA/Swiss nationals must have lived in the UK for a continuous period of at least five years, having spent no more than six consecutive months abroad.

Current EEA/Swiss employees may be encouraged to apply for ‘settled’ status in the UK, but employers cannot require them to do so before the cut-off date of 30 June 2021. This has ruled out any long-term remote overseas working by those without settled status.

Tax liabilities

Employees are usually exempt from deductions in the country they work from if it has a double taxation treaty with the UK, as long as they are UK tax residents. However, extended stays may inadvertently trigger a permanent establishment (PE) if the company does not already have a presence in that country. This would make the employer liable to pay local corporation taxes. 

Even if a tax liability does not arise, companies and their representation might have compliance obligations – for instance, registering as an overseas employer with the relevant tax authorities. Consistent monitoring and reporting of this status may be a costly process, so employers should bear this in mind.

As a safeguard against these risks, employers should carefully document agreements with employees, clearly signalling where employees may be responsible for additional tax or social security contributions. 

As global businesses navigate a new era of flexible working, a one-size-fits-all approach is unsustainable. Employers should therefore consider employees’ individual circumstances, including seeking advice from legal counsel as appropriate.

Rosie McArdle is a senior associate at LexLeyton