if you’ve followed me for a while, I know this headline sounds strange. Especially because I always encourage people to work from anywhere
. But I’ve also mentioned that you need a well-thought out approach. And that’s where I see gaps right now.
Why? Four reasons: legislation, taxation, liability and privacy. I’ll cover them briefly in this intro with select examples. The articles below provide further guidance, including a list of countries that are allowing remote workers to reside there legally.
Be aware that there will be additional issues because of your company’s unique circumstances. I recommend you seek professional guidance to ensure you tick all the boxes.
Let’s start with legislation: as long as your employees work from anywhere within the country where they are contractually based, you shouldn’t have a legal issue. But when they move abroad for a longer period, there are obstacles.
When you cross the border into another country, you do so under a Waiver or a Visa. A visa is clear: it stipulates if you also obtained a work permit. But many people travel using waivers: they can visit a country or region for a period of e.g. 90 days under tourist waivers - which means they are not supposed to work while they are there.
Even if you enter a country on a business waiver, that typically has a specific purpose (training, event) and you are not supposed to stay and work.
And then there are regions like the European Union, where there is freedom of movement for workers. EU citizens don’t need a visa, permit or waiver to work in EU countries. But when they move to work across the border, the local rules apply, and you’ll need to know their residence.
The second reason, taxation, not only applies when your employee is moving to another country, but can also play a major role on payroll when employees are moving within a country. If you only have a national taxation system, you’re usually fine, but when your country uses a tiered taxation including state and/or local taxes, you need to change the location of your employee in the system to ensure you’re good.
The employee is at risk as well - if they overstay a certain period, their guest country could consider them a resident and tax them accordingly, even if they are already taxed in their home country. And in some countries a bill might be sent to their employer too.
Thirdly, liability. When your employees work in another country and they stay for a long period, they could be considered local workers and you will be liable for social security and taxes. Plus adhering to all other local regulations like e.g. enforcing health and safety standards.
Be also very careful with independent contractors - as example, in the Netherlands, a person is considered independent when they work for 3 or more companies. If you are their only client in the year, they might retro-actively be labeled as an employee by the tax authorities and you could be liable for the consequences.
And finally: privacy. If your country falls under a privacy protection law, and an employee moves to a country that is not covered by it, your employee can’t access data that they normally could. If they do, even accidentally, your company can be accused of transferring data internationally and be in breach of the privacy act.
Questions and Answers
You’ll have to consider many more topics when you allow your employees to work from anywhere: Will they receive the same pay if they move to a low cost location? And if not, is that fair towards other employees in these locations? Will you treat them like an expat? Do they need a new contract and terminate their existing one?
The list above is by no means exhaustive and many exemptions exist. I recommend that you take some time to think the approach through at the corporate level, while also seeking legal and tax advice. Then share a policy so everyone knows what’s allowed.
Finally - make sure you know at all times where your employees are based and impress on them the need to let you know when they are moving. It can save you a lot of headaches.