Employers today are dealing with labor and retention challenges like never before, including an increasing demand for flexible work from employees. In response, some employers have opted to create remote work arrangements allowing employees to reside and work from a country separate from the employer’s physical location. Global remote working, even when in the same role for the same employer, may create legal, social security and tax consequences for the organization. To support working arrangements when multiple countries are involved, employers must create or update existing employment agreements and policies. Employers must consider communication, taxation, visa, and health care and retirement benefits coverage issues when creating global work arrangements.

Communication

If an employee wants to work abroad for their employer, communication is crucial. First and foremost, employees must request and be approved to work remotely from another country. If the employer plans on approving remote working requests, a remote work policy should be issued to all employees, including those who wish to work remotely abroad.

Communication Action Steps:

Create a global work arrangement policy that includes details such as:

• The time limit of the remote working arrangement
• Employee work schedule due to different time zones
• Which country’s holidays the employee is eligible for
• Employee benefit changes
• Compensation changes
• Job duties and work equipment
• Who will pay for travel expenses.

The employer should prepare a specific agreement clarifying each individual employee’s expectations of the remote work arrangement. Neither employers or employees can generally opt out of applying foreign employment and tax laws, even if an employer includes specific language requiring the home country and organization’s policies to continuously apply.

Taxation

Working abroad remotely can raise significant tax issues for both employers and employees. Employers must initially ensure proper classification as either an employee, independent contractor or consultant. Depending on how the foreign country views the classification, a taxable presence could be inadvertently created. For example, if an employee has tax liability abroad, the employer may also be responsible for withholding taxes in the foreign country.

Taxation Action Steps:

• Research the definitions of an employee, independent contractor and consultant in both the home and foreign jurisdictions. Understand how cross-border employees are compensated and what duties they perform to recognize how the employee may be viewed abroad. Limit the employee’s job duties as necessary to avoid creating a taxable presence in the foreign jurisdiction.
• Determine whether an applicable tax treaty exists and whether the employer will have additional tax obligations in the foreign country. According to Grant Thornton, “Under the majority of double-tax treaties, employees may spend up to 183 days working outside their home country without being liable to tax.” Applying the existing rules to remote working, employers “could see increased employee mobility without incurring an individual, employer or corporate tax liability in the country in which they are temporarily working.”
• Figure out the types of taxes that exist in the foreign jurisdiction such as sales tax, business tax and other local taxes. Then, contact the foreign jurisdiction’s tax officials to find out if the employer is exempt from paying local taxes.
• Understand how payroll and tax administration works between both the home and foreign countries. Decide whether to outsource payroll administration to reduce the burden and risk involved in handling the administration and payroll taxes of employees working remotely abroad.

Visas

For an employee to work remotely in another country, work authorization including a proper visa and, possibly, a work permit are required. This allows the employee to reside in most foreign countries for a pre-determined period of time. If the employee is not authorized to legally work in the foreign country, risk is created for both the remote employee and their employer.

According to EPAM Anywhere, every country outlines what employment activities an individual can participate in during their stay. A visa defines the specific classification (e.g., tourist, temporary business, digital nomad, etc.) and includes “restrictions that grant a legal stay in the country (e.g., length of residency, type of economic labor, access to services such as health care, etc.)… Some countries also require work permits and may not allow employment from a foreign employer.”

Generally, if an employee does not have work authorization based on citizenship or permanent residence, they must obtain a work visa. A tourist visa is generally not sufficient to allow working in a foreign country, and a business visa has very limited application. Though uncommon, some countries allow individuals to remain in their countries on tourist visas while working remotely for a foreign employer. Antigua and Barbuda have created a Nomad Digital Residence Program catering to these types of employees with a special visa designation. Other countries have created digital nomad visas that allow an employee extended time within the country. If remote employees are planning to visit several countries, it is important to understand visa requirements in each country they plan to visit to make sure employer sponsorship is not required.

Visa Action Steps:

• Confirm the employee’s citizenship and immigration status to understand the necessary requirements to allow the employee to work remotely abroad and return home when finished.
• Ensure the employee submits and secures the necessary paperwork for a visa and/or work permit, following any set guidelines and laws.

Health Care and Retirement Benefits Coverage

Health care coverage from the employee’s home country may not extend to foreign jurisdictions. The employee should find out whether existing health care coverage will cover expenses incurred abroad. The employee’s current health coverage may not be sufficient and additional coverage for the country where they will be working may have to be purchased. In addition, certain retirement plans may not extend to employees while they are working outside of their home country. Employers should also keep in mind that some employees may believe that they are entitled to the benefits and protections of the country where they will work remotely, which could be complicated and costly.

Benefits Coverage Action Steps:

• Confirm whether the employer’s group health insurance covers an employee outside of the home jurisdiction if the employee were to be abroad for an extended time period. If the current health insurance policy does not cover employees’ foreign activities, the employer may need to find alternate coverage, such as obtaining local or travel insurance.
• Check the language of the retirement plan to see if the plan permits continued contributions in the home country while the employee works abroad. If this is permitted, decide whether to continue to contribute to the employee’s retirement plan in the home country.
• Make sure benefit offerings are inclusive as some benefits offered in the home country may not be suitable in the foreign jurisdiction.

The steps above show how complicated global mobility can be. Communication, taxation, visa and benefits coverage are the top issues for employers considering global work arrangements.

Visit the International Foundation’s InfoQuick on Remote Work under the General Benefits category for additional information.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.