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Enabling overseas working

Dear Colleagues,

I am reaching out to ask if anyone has had experience of setting up overseas working for individuals? This is in the context of it being a flexible working option to ensure retention as opposed to an business need for an overseas service/branch . In particular I am interested in experiences around taxation, securing,running and costs of an overseas payroll and the contractual considerations. I would appreciate any advice/guidance as it appears to be a highly complex area.

Thank you Lorna Wiggins

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  • Ooph! I've had to do a couple off these and running a separate payroll for each individual in their prospective countries is quite tiresome.
    You have to consider taxation and the employment rights in the countries and whether the rights stipulated in their UK employment contract clashes. You also have to consider their health and safety of working elsewhere and how their pension contributions would be handled.

    When the arrangement was temporary we stipulated that the employee would be responsible for their tax and social security payments in the country they reside in, as they would not be required to pay them in the UK. (subject to double taxation rules) They would have to contact HMRC to notify them of their move so we can be issued a new tax code for them.

    When the arrangements are more permanent we have to engage a tax consultancy company overseas to handle the processing of payroll to the relevant tax authorities each month. This meaning additional cost and admin for each case. Then we have to make sure we pay the owed taxes and social security payments each month by each country's specific payment date, whilst also tracking these in our internal systems. You also have to consider BIK and if these apply in their residing countries.

    For pension we had to check whether they can continue to receive pension contributions to the UK provider we use, and that this meets minimum requirements in the country they reside in.

    Residing elsewhere also affects residency status and their right to work in the UK after a certain time. This is one to keep an eye on for those with 'settled status'. I believe they can be out of the country for 5 consecutive years only.

    We also stipulate in their agreement that their employment will be governed by the jurisdiction of UK law.

    I hope that helps some.
  • Hi Lorna,

    Is this going to be a temporary or permanent setup? If it's temporary and depending on the country and the length of the assignment (usually a maximum of 6 months), you may have the option to 'post' them to the overseas location. In this case, they will continue to pay tax, National Insurance, etc., in the UK. Importantly they will continue to be subject to UK employment law.

    However, permanent placements are lot more complicated, and I really do understand the difficulty you're facing. This is a highly complex situation, and the consequences of mishandling it can be significant. To simplify, we consistently advise the following:

    1) The employer will be responsible for paying the applicable employer costs in the country where their employee is based.
    2)The employee will be taxed in the country where they work.
    3) Both the employee and employer will be governed by employment laws in the country the employee works in.

    Emily - Eeek I'm really sorry but specifying their employment contract is under UK jurisdiction won't hold up if disputed. It's analogous to your employer writing in your UK contract that US jurisdiction applies, allowing you to be terminated at will, as they can be in the US. This approach is unworkable. In fact, a similar topic was recently discussed here:

    community.cipd.co.uk/.../us-company-introduced-a-contract-clause---causing-alarm

    There are easy solutions out there to the problem you and Emily face - you're not alone, we come across this exact problem almost daily. 

  • In reply to Scott Winter:

    Hi Scott,
    I appreciate the jurisdiction point. Our solicitors drafted this and it essentially asks whether the employee agrees to this and by signing they do.
    I know there is a risk that they can ultimately use their local jurisdiction though, and they're within their rights to. Luckily in our particular situation we have local advisors in case they were to do this for any reason.
  • Many orgs in EU + ours are considering a quota of floating home office abroad days so long as within EU/EEA/CH + probably an A1 form. Place of work as in contract doesn't change. The landscape around this is changing rapidly since this article was written www.heuking.de/.../mobile-working-from-other-eu-states-during-the-corona-pandemic.html
  • Steve Bridger

    | 0 Posts

    Community Manager

    26 May, 2023 14:08

    Hi Lorna,

    Welcome to our Community and thanks for posting this. This area is certainly full of hidden potential traps. 

    Some relevant articles - not right up to date though.

    The cross-border pitfalls of ‘working from anywhere’ - Financial Times (ft.com)

    Employees working abroad: your complete guide - Bates Wells

    The post-pandemic world of work: can you let employees work from anywhere? - PwC UK

  • Hi Lorna,

    We've partnered with a company called Deel (although there are many others) who will basically be your Employer of Record (EOR) internationally and they can set up all the contractual side of things, run a local payroll and also advise on employment law for the area that you're working in. I believe the service they don't provide is advice on international taxation but the practical side of things they handle rather well.

    Thanks,

    Alys
  • Steve Bridger

    | 0 Posts

    Community Manager

    31 May, 2023 09:53

    Hello again, Lorna.

    There's a very relevant session on Day 1 at the Festival of Work at Olympia next week.

    https://www.festivalofwork.com/line-up

  • I recently joined a new company as Head of HR and they already have 3 employees working in Europe with another planning to live and work from South Africa. The finance team manage their pay but I have concerns that it's not handled correctly so interested to watch responses.
    Under HMRC rules it's 2 years post leaving UK to get the coding for no tax, they also pay local taxes and social security with the employee taking responsibility for continuing NIC's in the UK if they wish. I have 2 employees reaching their 2 year point soon so will need to be acting on these soon. I'm looking at a global payroll provider that may help support this and provide compliance.
    Another concern is that they are all on UK contracts and no adjustment for in country legislation. Also have London as their primary place of work.... eek!
  • Steve Bridger

    | 0 Posts

    Community Manager

    31 May, 2023 15:58

    In reply to Helen:

    * Watch this space * Wink

  • In reply to Helen:

    Good luck with it Helen!
  • The level of complexity will depend on the number of employees and the region you’re interested in. But if you don’t have any legal entities in this particular country, I suggest you start by reaching out to the companies like WeConnect or GoGlobal. I used both of them for employees based in Japan and Thailand and I highly recommend their services.
  • In reply to Steve Bridger:

    Thank you, really useful for reference. I’m currently dealing with a request for someone to work remotely in Switzerland to accompany their husband (not our employee). The business wants to retain them but the issues are complex and I’ve given an overview of the issues and risks. I’m also tasked with writing a remote working overseas policy so any advice or examples would be appreciated!
  • In reply to Scott Winter:

    Hello, This makes very interesting reading! Can I clarify whether the above only applies to British employees working overseas or whether this would also apply to European employees working in their home country for a UK based company? Also whether the employee becoming self employed and invoicing us each month may be an easier option..?
  • In reply to Scott Winter:

    Interesting , please expand on the easy solutions Scott :-)