with no restrictions in place that are perhaps less aware of the tax implications. There are other pitfalls for employers, including their
obligations around employment law, social security, cyber security and immigration rules. For example, one area that can be easily overlooked
when a UK employee works abroad is the individual could trigger a corporate presence (permanent establishment) for the UK company in that country, meaning the business may be subject to corporate tax and associated administration. “Current labour shortages are a real concern for
businesses, so looking overseas may be their only option,” says Joanne Webber. “Hiring employees from outside the UK and allowing
them to work from overseas won’t necessarily be a simple fix to labour shortages, as it will trigger the same risks that apply when allowing UK employees to work abroad.” There will be different tax rules depending on the
staff abroad to live and work, you have to issue a completely separate contract, which must cover repatriation, how the employee will be paid and in which currency, and whether the employer will pay for flights home and how often. “This is a legal requirement under Section One of
the Employment Rights Act, which requires employers to have a detailed contract for employees who are being sent abroad.” She explains that you will need to look at the contract
of employment because if there is any intention that the employee will have to spend more than two months of the year outside of the UK, then that needs to be written in. “One client shortly after the pandemic had a very
senior employee who announced that they had moved to the Republic of Ireland and wanted to work from there. That caused all sorts of problems, not least because they wanted to be paid in euros and there was no facility to pay them. “We had to engage with Irish lawyers to ascertain what
rights the employee had and draw up an Irish contract to comply with the law. The clients had to take advice on that, all of which costs money.”
OUTSOURCING LABOUR OVERSEAS TO CUT COSTS COULD BE PROBLEMATIC IN SOME CASES Indeed, businesses that are allowing employees to work flexibly overseas could find themselves in hot water if they are not aware of the tax requirements, says Joanne Webber of RSM UK. According to RSM UK’s latest ‘The Real Economy
Report’, a third (33%) of businesses have allowed existing employees to work remotely outside of the UK in response to staffing challenges. Labour shortages are being felt across the board,
with well over three-quarters (88%) of businesses finding employee turnover a challenge. Of those that have offered hybrid working options to attract or retain employees, 31% of businesses have set restrictions on the length of time employees can work abroad. While this suggests that some businesses are
considering the tax risks associated with working overseas, it also raises concerns over the two-thirds of businesses
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country an individual chooses to work from, so employers venturing into ‘work for anywhere’ arrangements need to set parameters for staff and have a clear company policy in place, so everyone understands the risks, she says. Beverley Sunderland warns that employers run the risk
that whatever country their staff are living in, the employee may be required to pay tax. The foreign country may also decide to start taxing the profits of the employer, even though the company is based in the UK. “If the person who has relocated is quite senior and
is significantly contributing to the business and driving the company forward, the tax authorities could make that connection,” she says. “Each individual right at the start needs to take advice in each individual country to see what is available to them, whether there are double taxation, tax treaties or digital nomad schemes in place and understand what the implications are. This can be a significant burden for the employer to sort out.”
GETTING TO GRIPS WITH THE INTRICACIES OF EMPLOYMENT LAW OVERSEAS There are differences between an employee voluntarily moving to another country and the company sending an employee to work in a different location. Employers face challenges when their employees relocate, as they may gain additional rights and protections under the laws of the country they are working in. Beverley explains that when an employee works in a
foreign country, they may be covered by the employment laws of that country, even if they are employed by a company from their home country. She says it can be both difficult and expensive to end
employment contracts for employees from these countries. In addition, tax implications arise when employees work in foreign countries, potentially leading to the individual and the employer being subject to taxation in the host country. There is the thorny issue of data protection. As well as
GDPR, which is a regulation in EU law on data protection and privacy in the EU and the European Economic Area, separate countries have their own privacy rules. Employers need to check what the data protection requirements are for specific jurisdictions. “For example, Spain has a rule that no personal data is
to be exported from Spain to another country,” Beverley explains. “If you have an employee living and working in
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