Working from home or remote is currently the norm and many people are wondering if choosing a different country to work from could be a possibility. As such, HR professionals have been bombarded with questions about this topic and, while there are definitely possible ways of doing that, there are also many considerations that must be made before taking the next steps.
Depending on the type of employment, there might be taxes that need to be paid to the local government where the employee is based. In the case of subordinate employees, the employer must register their worker with the local government and pay his or her tax contributions. When the employee moves to a different country, these contributions must be paid to the new government, unless the relocation is made under a posting. Whatever the case, it is important to understand the local legislation of both the home country and the destination country, in order to ensure that you are not committing tax evasion, even if by mistake. Moreover, it is crucial that employers differentiate between the temporary and permanent residence of their employees abroad - this becomes extremely important for companies as not only will the employment options differ depending on the situation, but also the tax implications. For instance, many countries consider the 183-day rule to decide whether a person should be taxed as a resident, while others use completely different systems. The best option for employers is to do thorough research on the local legislation of the location where their employee is based.
The same happens in regard to social security, as in order to take advantage of the social security benefits either in their home- or host-country, workers must be contributors. As such, if you decide to temporarily allow your employee to move abroad, it would be necessary to either buy a health insurance cover or register as a permanent resident in the host country, especially if the worker plans to stay there for more than 90 days.
The topic of health insurance is correlated to the social security one. Depending on the destination country, your employee may need to have health insurance in order to be able to see a doctor or have access to medicine. The length of the relocation period is also something important to consider, and will have different implications depending on the new location of the employee - for instance, if your employee is an EU-citizen who is relocating temporarily to another EU-member state, then all he or she will need during that period is the European Health Insurance Card. However, if the employee is relocating permanently to another EU-state, he or she should fill in the S1 form in order to be registered in the local social security. In the cases of relocation to or from non-EU member states, there will be different steps to follow. Something else that you need to consider is that, in case the employer company has already provided the employee with health insurance as part of his or her benefits, it is very likely that this doesn’t cover any medical issues that occur while they are outside their home country.
If the worker is an EU citizen, they can freely travel and live within a Member State or one of the members of the Schengen area. Nevertheless, if they stay for a period of more than 90 days, they are required to register with the local authorities and request a permanent residence card. Moreover, in most cases of relocation, even if for a short period of time, workers who are not EU-citizens and are relocating from a third country to the EU will be required a travel visa and a work permit. With the current global situation, consulates and embassies have doubled down their efforts to grant these documents, especially in the cases where borders are closed.
One of the hindrances that often gets overlooked when a worker moves abroad is the matter of data protection. In the case of European companies, for instance, if the employee is relocating (even if temporarily) to a country that is not part of the EEA, it could lead to investigations on whether the company is transferring data internationally. This is a breach of the data protection laws currently in place in the EEA, and can cause some serious trouble to the company. As such, in case your employee would like to work from a different country, it is important that you ensure that your company is getting proper advice on what type of data can and can not be transferred across borders.
Traveling has become quite a hassle over the past year. While there are still open borders, especially within the EU, many countries are currently requiring that passengers present their negative COVID-19 tests before or during arrival, or are only allowing essential travel. Australia and New Zealand, for instance, have closed their borders for everyone who is not a citizen or a permanent resident, while many other countries have put their Visa issuing processes on hold for the time being. These measures can truly make moving abroad a difficult and lengthy process.
What do I need to know before allowing my employee to work remotely from another country?
The most important thing to take away from this article is that each country is unique and, therefore, has a very specific set of rules and regulations in place. As such, it is crucial that before making the decision you gather advice from specialists who have the expertise on the local legislation of the host country. Some of the important information to consider before making the decision are:
- For how long does the employee want to work from abroad?
- Which country is the employee moving to?
- Is the employee a citizen of that country?
- Is there a tax/social security agreement between the home- and host-countries?
- What are the current immigration requirements?
- Where is the employee going to be paid? What are the payroll requirements in the host-country?
- Will you need to open up a new entity in the host-country?
- Will the company or the employee need to pay taxes in the host-country?
Do your employees want to work from a different country temporarily or permanently?
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